RES exam question on Land Law: Two buyers each hold an unregistered option over the same land
Two buyers each hold an unregistered option over the same land. The later one lodges a caveat; the earlier one does not. Who prevails?
- AThe earlier option holder, priority between equitable interests running from creation
- BNeither, the two interests cancelling out and leaving the seller free
- CThe earlier holder, provided he can show the later one knew of his option
- DThe later holder, whose caveat gives his interest priority over an unprotected one
Show answer & explanation
Answer
D. The later holder, whose caveat gives his interest priority over an unprotected one
Explanation
Issue: the caveat race. Rule: section 49(1) of the Land Titles Act gives an unregistered interest protected by caveat priority over any other unregistered interest not so protected at the time the caveat was entered, and lodging an instrument for registration counts as entering a caveat on that date. The priority is lost if the caveat lapses or is withdrawn, and the caveat gives the interest no greater effect than the instrument creating it. Application: knowledge does not save the earlier holder, because section 47(2) provides that knowing of an unregistered interest is not of itself fraud. Conclusion: the later holder, by his caveat.
Study the concept behind this question: Restrictions on Capacity to Hold Land — Minors, Companies, Societies & the Mental Capacity Act
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