Scott v Southern Pacific Mortgages Ltd
Promises made by a purchaser to a vendor before completion were only personal rights until the purchase was completed, so they could not bind a lender whose charge was created at the same time.
Facts
Mrs Scott was one of many homeowners who sold their homes to investors under sale and leaseback schemes, on the promise that they could remain in their homes as tenants for life or for a long period. The purchasers financed the purchases with mortgages from lenders such as Southern Pacific, who did not know of the promises and lent on the basis that the properties would be let on short tenancies. The purchasers defaulted, and the lenders sought possession. Mrs Scott argued that her rights bound the lender because she was in actual occupation.
Legal principle
The Supreme Court held that the lender took priority. Lord Collins said that, before completion, the purchaser had no interest in the property, so the promises made to Mrs Scott gave her only personal rights against the purchaser, which could not bind the lender. The purchaser acquired the legal estate and granted the charge at the same moment, applying Abbey National v Cann, so Mrs Scott's equitable rights, which could only be fed by the purchaser's acquisition, took effect subject to the charge. Lady Hale expressed sympathy for the vulnerable vendors.
Related cases on registered and unregistered land
- Abbey National Building Society v Cann [1991] 1 AC 56
- Baxter v Mannion [2011] EWCA Civ 120, [2011] 1 WLR 1594
- Chhokar v Chhokar [1984] FLR 313
- City of London Building Society v Flegg [1988] AC 54
- Ferrishurst Ltd v Wallcite Ltd [1999] Ch 355
- Hodgson v Marks [1971] Ch 892
- Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783
- Link Lending Ltd v Bustard [2010] EWCA Civ 424
Studying land law? Our tutors help you understand and apply cases like this in essays, problem questions and exams. Request a quote or browse our law notes.
This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
