1. Nature of Land Flashcards
Legal estates and interests
Estate = Right to own and enjoy land for a particular length of time (FH estate can last indefinitely)
Interest = A right affecting someone else’s land
Legal Estates:
1. Freehold
2. Leasehold
Legal Interests:
1. Legal easements and profits
2. A legal rentcharge
3. A charge by way of legal mortgage
Only legal estates and interests are capable of being registered under the land registration act
Equitable interests
Any interest in land that is not classified as a legal estate or legal interest = equitable interest
- The benefit of a restrictive covenant or contract
- The interest of a beneficiary under a trust
Equitable interests are not capable of substantive registration at the LR, but may be protected on the register by notice or registration
Trusts and co-ownership
Trust of land = where 2 or more people are entitled to possession of land at the same time. Legal estate is vested in the trustees, and the persons with co-ownership are the beneficiaries.
Implied trusts:
* Co-ownership arising in favour of someone even though their name does not appear on the register of title or in the deeds
* Arises where one requires an interest in land, for example by contributing to the purchase price or paying for improvements to the property
* 2 types of implies trust: 1. Resulting, 2. Constructive
- Resulting trust
* Where the legal estate is transferred into the name of one person following the payment of some or all of the purchase price by another person - Constructive trust
* Arises where it would be unconscionable for the legal owner of the land to deny the equitable interest of another.
* Needs to be evidence of a common intention between the parties that the property will be jointly owned and that the non-legal (equitable) owner relied on that agreement to their detriment
Overreaching:
* Payment of capital money to at least two trustees pull over reach the interests of the beneficiaries under the trust
* This means that a buyer or mortgagee making the payment will not be bound by the interest of the beneficiaries, as those interests will attach to the proceeds of sale
* Once overreaching has occurred, the beneficiaries will no longer be entitled to remain in possession of the land. Instead, they will obtain interest in the proceeds of sale which will be held on trust for them by the trustees, for instance the sellers of the legal estate
Co-ownership:
* Two types: 1. Joint Tenancy, 2. Tenants in Common
* Legal estate can be held under a JT but not a TiC
* On death of a JT = Land immediately passes to the surviving joint tenant(s) - does not pass under the deceased’s will or intestacy
* Under TiC = survivorship principle does not apply and deceased’s share passes under their will or intestacy
- Joint tenancy
* The co-owners own the whole of the land together an old joint tenants have the same interest in the land irrespective of their respective contributions to the purchase price. Four unities must be present between the co-owners: - Unity of possession (all JT’s are entitled to possess every part of the land)
- Unity of interest (the land is all freehold or all leasehold)
- Unity of title (title acquired under the same document or transaction)
- Unity of time (all co-owners acquire their interest at the same time)
- Tenancy in common
* Only the equitable estate can be held as a tenancy in common.
* Each co-owner on specific shares in the land, either equally or unequally.
* Only unity of possession is necessary.
* Where co-owners of registered land holders tenants in common, the land registry will enter the following restriction in the proprietorship register of the title: “no disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by order of the court.”
Severance of a joint tenancy:
* Joint tenancy in equity can be severed and thereby converted into a tenancy in common.
* In this case, the right of survivorship no longer applies.
* If there are more than two joint tenants, severance operates only on the share of the party affecting the severance. The other parties remain as joint tenants as between themselves.
* Methods of severance =
- Written notice under s36(2) LPA given by one or more JT’s to all the other JT’s
- Selling or charging the beneficial interest (including a charging order made by the court)
- Bankruptcy - the bankrupt’s severed beneficial interest vests in the trustee in bankruptcy
Easements
Easement = Rights attached to one piece of land (the dominant tenement), which gives the owner of that land a right to use another persons land (the servient tenement). The owners of the dominant and servant tenements must both have estates in the land. E.g. Rights of way or drainage, rights of tenants to use common parts in a block of flats
Characteristics of an easement (Re Ellenborough park test):
1. Must be a dominant and servient tenement (public right of way is not an easement)
2. The dominant and servient tenements must be owned or occupied by different persons
3. The right must benefit the dominant tenement (cannot be purely a personal right in favour of the occupier)
4. The right must be capable of forming the subject matter of a grant (granted by deed and sufficiently definite, also not exclusive possession may be conferred)
Creation of an easement:
* First satisfy Ellenborough park, then must be created either through a grant or a reservation
* Grant = where an easement is given to a buyer over land that is retained by a seller (e.g. a right of way or drainage). May be express (by deed) or implied, may be presumed (prescription)
* Reservation = where an easement is retained by a seller over land that is sold to a buyer. May be either express or implied by necessity or common intention only
* Express easement may be legal (if by deed), or equitable - in writing, contains all the agreed terms, signed by both parties)
* Easement created impliedly or by prescription is a legal easement
Implied grants
May be created by one of the following:
- Necessity
* e.g. where land is landlocked
* mere inconvenience is insufficient to create an easement of necessity - Common intention of the parties
- On a sale of part
* Where some land is sold off. Conditions to be met:
- one person owned and occupied the whole of the land
- the owner previously exercised a quasi-easement over the land
- the right is continuous and apparent (i.e. obvious)
- the right is necessary for the reasonable enjoyment of the land - S62 LPA converts mere permissions into easements if following conditions met:
- there should be usually diversity of ownership and occupation (e.g. landlord and tenant)
- there was a ‘conveyance’ (i.e. a transfer of legal title to the occupier, e.g. a lease)
Implied reservations
If an easement is not expressly reserved, it can only be implied by necessity or common intention, namely, not the rule in Wheeldon v Burrows or S62 of the LPA 1925. However, courts are generally reluctant to employ reservations of easements on the basis that a seller should not derogate from its grant
Presumed or prescriptive easements
Presumed or prescriptive easements = Grant of an easement through long usage. Applies only to freehold land - except easements of light. Can be acquired in three ways:
1. At common law
2. Through the fiction of ‘lost modern grant’
3. Under the Prescription Act 1832
Claimant must also satisfy the following criteria:
* Easement must have been exercised as of right (not by force, not in secret and not with permission)
* There must have been continuous and unbroken use of the easement for the prescribed period
* The use was by a freehold owner of the dominant tenement against a freehold owner of the servient tenement
Grant of easements (in favour of buyer) - methods of creation:
* Express
* Implied (necessity, common intention, the rule in Wheeldon v Burrows), presumed (i.e. prescription)
Grant of easements (in favour of seller) - methods of creation:
* Express
* Implied (necessity or common intention only)
Easements in registered land
- Registration of title includes the benefit of any appurtenant easements, whether or not
expressly referred to on the register. - An express easement over registered land must be completed by registration. This applies even in respect of estates not capable of substantive registration, for example a lease for a term not exceeding seven years. In this case, the easement must be registered even though the lease itself cannot be registered.
- The easement is not a legal easement until it has been registered; namely, it takes effect only in equity.
Easements that are overriding interests:
* Any legal easement arising through implied grant or reservation or prescription is an overriding interest binding on a buyer, only if:
* it is known to the buyer; or
* it would have been obvious to the buyer on a reasonably careful inspection; or
* it has been exercised in the 12 months prior to the disposition.
In registered land, equitable easements can be protected by the entry of a notice under s34 of the LRA 2002. In unregistered land, equitable easements can be protected by registering a class D(iii) land charge against the name of the estate owner.
Profits à prendre
A profit à prendre is different from an easement in that it is a right for one person to remove something from land belonging to another person, such as wood, grass or fish.
The person enjoying the profit does not need to own land that is benefited by the profit. This is known as a profit ‘in gross’.
Profits can be created in the same way as easements except that they cannot be acquired by implied grant or reservation. The benefit of a profit in gross is capable of substantive registration under the LRA 2002.
Freehold covenants
Covenants affecting freehold land can be either restrictive or positive in nature.
Restrictive covenant = restricts a person’s use of land (eg not to build or not to run a business).
Positive covenant = imposes an obligation to perform a specific act and normally involves doing work or spending money (eg erecting and maintaining a boundary wall).
Courts will consider the substance of the covenant in determining whether it is positive or negative. So ‘not to allow land to become infested with rabbits’ requires positive action, such as shooting the rabbits, and is therefore a positive covenant.
The person with the benefit of the covenant = covenantee
Person with the burden of the covenant = covenantor
The benefit and burden of restrictive covenants can run with the land. The benefit of positive covenants can run with the land but the burden of positive covenants cannot run with the land either at common law or in equity.
Enforcing covenants
A covenant is always enforceable between the original parties because of privity of contract
But if either piece of land is sold there is no longer privity of contract between the current owners of the two pieces of land. Whether the covenant can be enforced will now depend on whether the benefit of the covenant has passed to the buyer of the benefiting land (A in the figure) and the burden of the covenant has passed to the buyer of the burdened land (B in the figure).
The benefit at common law:
* The benefit of the covenant will run at common law if the following requirements are
satisfied:
1. the covenant ‘touches and concerns’ the land of the covenantee; that is, it benefits the land and is not purely personal;
2. the covenantee owns the legal estate in the land to be benefited when the covenant is made so that the benefit can attach to it;
3. the original parties intended that the covenant should run;
4. the assignee derives title from the original covenantee.
The burden at common law:
* The burden of the covenant will not run at common law. However, this rule can be circumvented by:
* a chain of indemnity covenants in which each successive buyer agrees to
indemnify their predecessor in title (see 4.9);
* the conveyance containing the covenant reserves a rentcharge with a right of entry to make good any breach of covenant;
* the rule in Halsall v Brizell [1957] Ch 169, which says a person cannot take a benefit unless they observe a related obligation (eg to use a road provided they contribute towards its maintenance);
* creating commonhold land.
The benefit in equity:
* The benefit of the covenant may run in equity in one of three ways:
* annexation of the covenant to the land. This is implied by s78 of the LPA 1925; * express assignment of the covenant to the buyer of the benefiting land;
* through a building scheme (see Elliston v Reacher [1908] 2 Ch 374).
The burden in equity:
* The burden of the covenant will run in equity if the rules derived from Tulk v Moxhay
(1848) 2 Ph 774 are satisfied:
* the covenant is restrictive in nature (see 2.5.1);
* the original parties intended that the burden should run. This is implied by s79 of
the LPA 1925;
* the covenantee owned land capable of benefiting from the covenant at the time it was created;
* the party to be bound has notice of it, namely if created after 1925, the covenant has been protected by registration either as a notice in registered land (s34 LRA 2002) or a class D(ii) land charge in unregistered land.
* Importantly, where the burden passes in equity, a buyer of the benefiting land must show that the benefit has passed in equity as well. In these circumstances, it is not enough to show that the benefit passes merely at common law.
Discharge or variation of covenants
A covenant may be discharged or changed in one of the following ways:
- Lands Tribunal Order (s84(1) LPA 1925) if the covenant has become obsolete or impedes the reasonable use of the land (see Derreb Ltd v Blackheath Cator Estate Residents Ltd and others [2017] UKUT 209 (LC));
- deed of release or variation entered into by the parties entitled to the benefit and burden of the covenant;
- where both the benefited and burdened land has come into common ownership (unless the covenant remains enforceable under a building scheme);
- where the covenant is void for non-registration as a class D(ii) land charge.
Leases
Leases:
* A lease (or tenancy) is a right for a person to occupy and use land for a term with a fixed commencement date and a fixed maximum duration.
* This includes fixed-term leases and periodic tenancies that automatically renew themselves at the end of each period of the tenancy.
Formalities:
* A legal lease must be made by deed. However, a legal lease may be created orally or in writing if it is for a term of three years or less and takes effect immediately, reserving the best rent reasonably obtainable (s54(2) LPA 1925). If not legal, the tenant will have an equitable interest provided the lease complies with s2 of the Law of Property (Miscellaneous Provisions) Act 1989; namely, it is in writing, contains all the agreed terms and is signed by the parties.
* The tenant (or lessee) must hold a term that is shorter than that held by the landlord (or lessor). Although quite normal, payment of rent is not an essential element of a lease.
* The tenant must have exclusive possession; that is, the right to use the premises to the exclusion of all others, including the landlord (Street v Mountford [1985] 2 All ER 289). If not, the agreement will not create a legal interest in land and be merely a licence.
* A lease for a term of more than seven years is compulsorily registrable at the Land Registry. If such a lease is granted on or after 19 June 2006 it must contain prescribed clauses
Leasehold covenants:
* The obligations of the landlord and tenant under the lease
* There is privity of contract between the original parties to the lease (L1 and T1 in Figure 2.2) so there is little problem with enforcement if the lease or reversion has not been assigned. However, if assignment of the lease or reversion has taken place, then one set of rules applies to ‘old’ leases granted before 1 January 1996 (LPA 1925) and another set of rules applies to ‘new’ leases granted on or after that date (Landlord and Tenant (Covenants) Act 1995).
Rules for ‘old’ leases:
* An assignee of an old lease (T2) is liable for breaches of covenant under the principle of ‘privity of estate’ (ie the relationship between the current landlord and the current tenant).
* For the burden to run, however, the covenant must ‘touch and concern’ the land (ie relate to the land itself (Spencer’s Case (1583) 5 Co Rep 16a)). This applies to most tenants’ covenants in leases.
* The original tenant (T1) will remain liable throughout the term of the lease for any breach of covenant by their successor (T2). Thus, the original tenant can still be sued by the landlord even after the original tenant has assigned their lease. If the current tenant has disappeared or been made bankrupt, the landlord can therefore pursue the original tenant.
* The original landlord (L1), after assigning its reversion, also continues to remain liable under the landlord’s covenants.
Rules for ‘new’ leases:
* Under privity of estate rules for new leases, the ‘touch and concern’ test no longer applies. The burden of all covenants will pass to the assignee of the lease (T2) unless in the lease the covenants are expressed to be personal only.
* The key difference for new leases is that once the original tenant (or assignee) has assigned their lease they are released from the tenant’s covenants and cannot be sued by the landlord. However, the landlord may, where the landlord’s consent to the assignment is required, require the tenant to enter into an authorised guarantee agreement (AGA) under s16 of the 1995 Act. Under an AGA the tenant agrees to guarantee their immediate assignee’s performance of the covenants.
* Unlike tenants of new leases, landlords are not released automatically from their covenants when they assign their reversion. However, they can apply to their tenant to be released or, failing that, to the court.
Sub-leases:
* There is no privity of contract or privity of estate between a head landlord (L1) and a sub- tenant (ST) so on the face of it neither can sue the other directly. However, restrictive covenants in a head-lease may be enforced against a sub-tenant if the sub-tenant has notice of them.
Termination of leases:
* Leases can be brought to an end by forfeiture, effluxion of time (or expiry), notice to quit, surrender, merger, disclaimer, repudiation and frustration.
* The lease should contain an express clause providing for forfeiture on breach of a tenant’s covenant.
* Surrender occurs when the tenant, with the landlord’s agreement, gives up the leasehold estate to the landlord. Surrender can be by express deed or operation of law (eg the lessor takes back possession and agrees that the lessee will be under no further liability).
* A merger takes place when the lessee acquires the immediate reversion to the lease or a third party acquires both the lease and the reversion. The lease effectively ‘merges’ into the reversionary estate.
Mortgages
- A mortgage is a right of a lender (mortgagee) over land that guarantees the payment of a debt.
- Borrower = mortgagor
- Mortgages can be created expressly or arise under statute. They can be either legal or equitable.
- A legal mortgage must be by deed.
- An equitable mortgage will normally arise inadvertently due to some defect in a legal mortgage, such as where the document has not been executed as a deed. (RARE)
Registered land:
* A legal mortgage of registered land must be completed by registration if the mortgagee wishes to exercise its statutory powers, including the power of sale.
* Once registered, it has priority over other interests unless they are protected on the register or are overriding interests.
Unregistered land:
* A mortgagee with a first mortgage will hold the title deeds as security.
* A first mortgage protected in this way has priority over all other mortgages.
* Second and subsequent mortgagees should protect their mortgages by registering them as class C(i) land charges.
Company mortgagor:
* Mortgages by companies must be registered at the Companies Registry within 21 days of creation of the mortgage. If not, the mortgage will not bind the liquidator or creditors if the company subsequently goes into liquidation.
Rights of the mortgagor:
1. Undue influence.
* The court can set aside a mortgage that has been obtained through undue influence on the mortgagor.
* The principal ground for setting aside a transaction is the notice that the mortgagee had or ought to have had of the undue influence
2. The Consumer Credit Act 2006
* Allows the court to reopen a credit agreement to do justice between the parties, for example if the interest rate is extortionate.
3. There must be no clog or fetter on the mortgagor’s right to redeem the mortgage.
* Thus, any provision in the mortgage that prevents the mortgagor from redeeming is ignored by equity and is void (see Jones v Morgan [2002] 1 EGLR 125).
4. There must be no postponement of the right to redeem that would effectively make it impossible to redeem the mortgage
5. There must be no collateral advantage to the mortgagee.
* For example where an owner of a public house agrees to buy all their beer from a brewery mortgagee.
Rights of the mortgagee:
1. to sue for the debt;
2. to take possession of the property;
3. foreclosure.
* This is the judicial procedure by which the mortgagee acquires the land free from the interests of the mortgagor. It is now rarely used;
4. to appoint a receiver to manage or sell the property.
* This is more common in commercial mortgages. The receiver acts as the agent of the mortgagor;
5. to sell the property;
* namely, the mortgagee’s power of sale. This is the right most frequently used by a mortgagee. It may sell if:
* the power of sale exists. This is implied in a mortgage made by deed unless, unusually, the deed expressly excludes it;
* the power of sale has arisen. This occurs once the contractual date for redemption of the mortgage has passed (usually about six months after creation of the mortgage);
* the power of sale has become exercisable. Under s103 of the LPA 1925, this occurs when:
– interest payments are more than two months in arrears; or
– there has been a written request for repayment of the capital and three months have elapsed without payment; or
– there has been a breach of some other term of the mortgage.
* The mortgagee can choose when to sell and the mode of sale but must obtain the best price reasonably obtainable
* A sale by mortgagee is subject to any prior mortgages but will be free of the mortgagor’s interests and of any estates or interests over which the mortgagee has priority (s104(1) LPA 1925), such as subsequent mortgages.
Application of sale proceeds:
* Under s105 of the LPA 1925, after paying off any prior mortgages the money received
from the buyer must be held on trust by the selling mortgagee to pay:
* all expenses incidental to the sale;
* itself the principal sum, interest and costs due under its mortgage;
* any surplus to the next mortgagee in line or, if none, to the mortgagor.
Third party rights, overriding interests:
Notices
A notice is the appropriate way to protect rights that are intended to bind third parties (s32 LRA 2002). It may be either an agreed notice (ie with the consent of the registered proprietor) or a unilateral notice.
Examples of interests that may be protected by notice are:
* a restrictive covenant;
* an easement;
* a right of occupation under the Family Law Act 1996;
* a lease affecting a reversionary title;
* charging orders made against a sole registered proprietor.
Transfer of the freehold estate
Transfer of an estate is a legal process.
Formalities:
* If, for example, a freehold owner decides to sell (or indeed gift) their land then how does the buyer become the owner? This is the process of conveyancing in practice.
