4. Proprietary Rights

Question 1

Easements

Answer 1

An easement is a right attached to one piece of land (the dominant tenement), which gives the owner of that land a right to use another person’s land (the servient tenement).

The owners of the dominant and servient tenements must both have estates in the land.

Examples of easements are rights of way or drainage, and the rights of tenants to use common parts in a block of flats.

Question 2

Characteristics of an Easement

Re Ellenborough Park [1956]

Answer 2

1. There must be a dominant and a servient tenement.
2. The dominant and servient tenements must be owned or occupied by different persons.
3. The right must benefit the dominant tenement, namely (ie it 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 (ie granted by deed and sufficiently definite. In addition, no exclusive possession must be conferred).

Question 3

Creation of an Easement

Answer 3

If the right satisfies the Re Ellenborough Park test, it does not become an easement unless it is created either through a grant or a reservation.

Grant: easement is given to a buyer over land that is retained by a seller.
- E.g. Right of way, drainage
- A grant may be either express (ie by deed), or be implied by various methods or it may be presumed (ie by prescription)

Reservation: A reservation occurs where an easement is retained by a seller over land that is sold to a buyer.

An express easement may be legal (if it is created by deed) or equitable (in writing, contains all agreed terms, signed by the parties)

An easement created impliedly or by prescription is a legal easement.

Question 4

Implied Grant

Answer 4

An implied grant may be created by the following:

1. necessity,
   - for example where land is landlocked (see Nickerson v Barraclough [1981] Ch 426). Mere inconvenience is insufficient to create an easement of necessity;
2. common intention of the parties (see Liverpool City Council v Irwin [1977] AC 239);
3. on a sale of part—namely, where some land is sold off—the rule in Wheeldon v Burrows [1879] 12 Ch D 31 applies if the following conditions are 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 (ie obvious);
   - the right is necessary for the reasonable enjoyment of the land;
4. s62 of the LPA 1925.
   - This converts mere permissions into easements if the following conditions are met:
   - there should usually be diversity of ownership and occupation (eg landlord and tenant);
   - there was a ‘conveyance’ (ie a transfer of legal title to the occupier, eg a lease (see Wright v Macadam [1949] 2 KB 744)).

To avoid uncertainty, it is standard conveyancing practice for the parties to agree to exclude the operation of the implied grant rules. If any easements are required by the buyer, then they should be granted expressly in the transfer deed.

Question 5

Implied Reservations

Answer 5

If an easement is not expressly reserved, it can only be implied by necessity or common intention; namely, not by the rule in Wheeldon v Burrows or s62 of the LPA 1925.

However, courts are generally reluctant to imply reservations of easements on the basis that a seller should not derogate from its grant (see Walby & another v Walby & another [2012] EWHC 3089 (Ch)).

Question 6

Presumed or Prescriptive Easements

Answer 6

This is the grant of an easement through long usage. - It applies only to freehold land, except for easements of light.

It can be acquired in three ways:
- at common law;
- through the fiction of ‘lost modern grant’ or
- under the Prescription Act 1832.

In addition, a claimant must satisfy the following criteria:
- the easement must have been exercised as of right; that is, 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; and
- the use was by a freehold owner of the dominant tenement against a freehold owner of the servient tenement.

Question 7

Grant/Reservation of Easements - Methods of Creation

Answer 7

Grant of easements (in favour of buyer)—methods of creation:
- Express
- Implied (necessity, common intention, the rule in Wheeldon v Burrows or s62 LPA 1925), presumed (ie prescription)

Reservation of easements (in favour of seller)—methods of creation
- Express.
- Implied (necessity or common intention only).

Question 8

Easements in Registered Land

Answer 8

Registration of title includes the benefit of any appurtenant easements, whether or not expressly referred to on the register.

Section 27(2)(d) of the LRA 2002 provides that an express easement over registered land must be completed by registration. - Even in respect of estates not capable of substantive registration

The easement is not a legal easement until it has been registered; namely, it takes effect only in equity.

Question 9

Easements that are Overriding Interests

Answer 9

Under Sch 3 to the LRA 2002, since 13 October 2006 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.

Protection of easements:
Registered land: equitable easements can be protected by the entry of a notice under s34 of the LRA 2002.
Unregistered land:
- Equitable easements can be protected by registering a class D(iii) land charge against the name of the estate owner.

Question 10

Profits à Prendre

Answer 10

Different from an easement in that it is a right for one person to remove something from land belonging to another person

E.g. Wood, grass, 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.

Question 11

Freehold Covenants

Answer 11

Covenants affecting freehold land can be either restrictive or positive in nature

A restrictive covenant restricts a person’s use of land (eg not to build or not to run a business)

A 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.
- E.g. ‘not to allow land to become infested with rabbits’ requires positive action, such as shooting the rabbits, and is therefore a positive covenant.

Covenantee: Person with the benefit of the covenant
Covenantor: Person with the burden of the covenant

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.

Question 12

Enforcing Covenants

Answer 12

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 and the burden of the covenant has passed to the buyer of the burdened land

Question 13

Covenants:

The benefit at common law

Answer 13

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.

Question 14

Covenants:

The burden at common law

Answer 14

The burden of the covenant will not run at common law (Rhone v Stephens [1994] 2 AC 310). 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.

Question 15

Covenants:

The benefit in equity

Answer 15

The benefit of the covenant may run in equity in one of three ways:

1. Annexation of the covenant to the land.
   - This is implied by s78 of the LPA 1925;
2. Express assignment of the covenant to the buyer of the benefiting land;
3. Through a building scheme (see Elliston v Reacher [1908] 2 Ch 374).

Question 16

Covenants:

The burden in equity (Tulk v Moxhay (1848))

Answer 16

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.

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.

Question 17

Discharge or variation of covenants

Answer 17

A covenant may be discharged or changed in one of the following ways:

1. 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));
2. deed of release or variation entered into by the parties entitled to the benefit and burden of the covenant;
3. where both the benefited and burdened land has come into common ownership (unless the covenant remains enforceable under a building scheme);
4. where the covenant is void for non-registration as a class D(ii) land charge.

Question 18

Mortgages

Answer 18

A mortgage is a right of a lender (mortgagee) over land that guarantees the payment of a debt.

Mortgagor = Borrower

Mortgages can be created expressly or arise under statute

They can be either legal (by deed) or equitable (arise inadvertently due to some defect in a legal mortgage - rare)

Question 19

Mortgages

Registered and Unregistered Land

Answer 19

Registered:
- 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:
- 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.

Question 20

Company Mortgagor

Answer 20

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.

Question 21

Rights of the Mortagor

Answer 21

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 (see Barclays Bank plc v O’Brien [1994] 1 AC and CIBC Mortgages plc v Pitt [1994] 1 AC 200). In Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773, the House of Lords gave guidance to lenders as to the steps they should take to guard against the risk of being affected with notice of undue influence (see 8.10).
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 (see Fairclough v Swan Brewery Co Ltd [1912] AC 565).
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.

Question 22

Rights of the Mortgagee

Answer 22

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.

Question 23

Application of Sale Proceeds

Answer 23

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.