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Commercial Litigation: Chaudhary V Yavuz [2011]

February 9, 2012

The Commercial Litigation case of Chaudhary v Yavuz [2011]EWCA Civ 1314 involved two neighbouring buildings, number 37 owned by the Claimant, Mr Chaudhary, and number 35. The two properties were separated by an alleyway which belonged to number 35. The stairway which had been paid for by Mr Chaudhary allowed access to both properties. This was used by Mr Chaudharys tenants to access the upper floors of the property.

  • The Claimant heard that his neighbour was trying to sell the property and attempted to have a formal deed drawn up and signed for a grant of an easement of the stairway, unfortunately this never happened.
  • Mr Chaudhary failed to register a notice at HM land registry which would mean any buyer would have taken the property with the easement.
  • The property at 37 was sold to Mr Yavuz, Mr Yavuz then refused to allow Mr Chaudhary, or his tenants occupying the first floor of the property to use the staircase and as a result no.37 was effectively landlocked.
  • Mr Yavuz argued that the equitable easement was not binding as it had not been registered. The Claimant argued that the easement was binding as an overriding interest by virtue of his actual occupation of the stairway. He also he argued that the sale contract by which Mr Yavuz acquired the property provided for him to be subject to all incumbrances discoverable by actual inspection and that this had the effect of making the easement binding upon him
  • On appeal it was held that Mr Chaudharys right to an overriding interest could only be by virtue of actual occupation under paragraph 2 , schedule 3 of the Land Registration Act 2002. The court found that there was no actual occupation of the staircase, Chaudharys tenants only had the use of the staircase and landing, not occupation.
  • The contract for sale did not make any reference to Chaudharys rights, the sale contract had a standard condition which was to provide for the sale to be subject to existing rights which had not been disclosed. The court found that whilst there may be exceptional situations where it might be unconscionable for a purchaser not to be bound by 3rd party rights, this was not one of them.

This is the first time that the Court of Appeal has considered what is meant by actual occupation for the purposes of overriding interests, and made clear that use is not to be confused with occupation.  The case also highlights the importance of protecting an interest by registration, the Claimant could have registered a unilateral notice against the title but failed to do so. That would have prevented all the subsequent problems.