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The editor of this section of the site is Nigel Clayton of Kings Chambers, Leeds and Manchester. Nigel also maintains the specialist website dealing with mortgages at www.legalmortgage.co.uk

Sale and rentback

Overriding interest

Scott v Southern Pacific Mortgages Ltd (North East Property Buyers’ Litigation)
[2014] UKSC 52


On a sale and rentback arrangement the vendor only acquired a personal right against the purchaser when she agreed to sell her property subject to being granted a lease -back. Such a right only became proprietary in nature on completion but since the acquisition of the legal estate and the grant of the mortgage were one indivisible transaction it did not take priority over the mortgage.


S owned a property subject to a mortgage and subsequently put the property on the market for sale. She was approached by a group called the North East Property Buyers (NEPB) with an offer to buy the property and rent it back to her at a discounted rent. Following payment of her mortgage and payment of a substantial sum to NEPB she received the balance of the sale proceeds. She also understood that if she stayed for 10 years she would receive a further lump sum from NEPB. She was also assured that she could stay in the property as long as she liked.

NEPB nominated an individual (W) as the purchaser, who obtained a buy-to-let mortgage from a lender (SP). S entered into a contract to sell the property. On completion, the transfer and charge were registered at HM Land Registry. NEPB subsequently granted S a 2-year assured shorthold tenancy (in breach of SP’s mortgage).

Three years later, W defaulted on the mortgage and an order for possession was made. On receiving a warrant for possession, S applied to set it aside, arguing that she had an overriding interest binding on SP under the Land Registration Act 2002.

S’s case was selected to go before the Supreme Court as one of ten similar test cases involving transactions concerning NEPB heard by the High Court.

Relevant overriding interest

Broadly, an overriding interest for the ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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