Acquisition & Priorities Flashcards
Coatsworth v Johnson [1886] 54 LT 520
doctrine of anticipation - specific performance available w2
Specific performance was denied as C had not adhered to the agreement to pay rent
Principle= An equitable lease is specifically enforceable only if the lessee has not breached terms of the lease contract
(linked to ‘He who comes to equity must come with clean hands’)
C tenant entered into a lease of 21 years with the landlord
He failed to pay rent and the defendant ousted him, considering him to be no more than a tenant-at-will
C moved to court seeking specific performanc
Walsh v Lonsdale (1882) 21 ChD 9
doctrine of anticipation
- this is the case when it emerged - the doctrine of anticipation is also called the doctrine of Walsh v Londsdale
Held (Court of Appeal)
The landlord was entitled to claim the rent in advance because the lease is subject to the terms of the executory lease agreement
Commentary
An executory lease agreement is an agreement to grant a lease by deed but does not amount to a legal lease, which must be granted by deed
Facts
A factory was rented from a landlord under an executory lease agreement where rent is paid for a year in advance
A deed was never executed but the tenant was given possession and paid quarterly rent
Landlord (Lonsdale) sought payment of one year rent in advance
Tenant (Walsh) sought injunction on the basis that he had a implied tenancy at law and was not bound by the agreement
(Baker v Craggs [2017] Ch 295 (Newey J)
actual occupation - overriding interests
also emphasised that (vii) Occupation needs to be distinguished from mere use = Chaudhary v Yavuz [2011] EWCA Civ 1314
The court laid down factors which should be used to analyse whether there is AO:
*1 - Actual occupation requires physical presence, not merely a legal entitlement
*2 – Occupation means different things depending on the nature of the property
*3 – Occupation requires some permanence and continuity
*4 – Occupation does not necessarily require physical presence of the person arguing that they occupy
*5 – Intentions and wishes of party are relevant
*6 – Length of any absence from property and reason for it
A beneficial owner of farm land had been in actual occupation of the land when a right of way over it was granted to a purchaser of a separate part of the land. However, a delay in registration of his title until after the grant of right of way had been made meant that his interest in the land had been overreached and was subordinate to the right of way.
Hypo Mortgage v Robinson [1997] 2 FLR 71 (CA)
actual occupation - overriding interests
Minor children (under 18) cannot be in actual occupation
*Link Lending v Bustard (2010) CA
actual occupation - overriding interests
The authorities lay down no single legal test for determining whether a person is in actual occupation but they require a number of factors to be weighed, including:
- the degree of permanence and continuity of presence of the person concerned;
- the intentions and wishes of that person;
- the length of absence from the property and the reasons for it;
- the nature of the property; and
- the personal circumstances of the person
C was in actual occupation and had an overriding interest
Current case
In the instant case, there was a special feature in the psychiatric problems of the person claiming actual occupation.
There was evidence of a sufficient degree of continuity and permanence of occupation, of involuntary residence elsewhere, which was satisfactorily explained by objective reasons, and of a persistent intention to return home when possible, as manifested by her regular visits to the property
A transfer of C’s property to H had been organised by C’s solicitor and C received none of the purchase price
H later defaulted on a mortgage secured on the property, the mortgagee, D, sought possession of the property
C claimed that the transfer was voidable on grounds of undue influence or incapacity and that her right took precedence over D’s charge as an overriding interest held in actual occupation when the charge was executed
At the date of registration of the charge, C was detained in a mental institution
Lloyd’s Bank v Rosset [1989] Ch 350 (CA)
Actual occupation - overriding interests
AO established.
Nicholls LJ (in the Court of Appeal) considered that the presence of a builder engaged by a householder to do work for him in a
house is to be regarded as the presence of the owner when considering whether or not the owner is in actual occupation.
party had builders working on land before moving into property
Thompson v Foy
actual occupation
this is only obiter + only a high court judgment
Lewison J was tasked with determining whether Mrs Thompson was in “actual occupation” of Valley View (residential property) at a time when she was not physically present at property. He suggested (as one of his points) that an individual can be in actual occupation of a property despite their physical absence provided that during their absence they have a continuing intention to occupy the property. Lewison J therefore held that Mrs Thompson was not in actual occupation: but, had there been a continuing intention to occupy, Lewison J would have reached the opposite conclusion
*Party must be in actual occupation at the time of disposition
*Unclear on current law whether this means at time of purported grant or at time of registration or both
=> Obiter comments favouring actual occupation on both times: Thompson v Foy
State Bank of India v Sood [1997] 1 All ER 169
overreaching under s 2 LPA
Comments on Sodd: at the time of the transaction the bank did not pay any money over, The argument is that there was no money. The court: there has to be consideration (here increase of overdrafts) , but overreaching does not rely on the passing over money. Could Indicate that if there is merely an increase of overdraft, you only need one trustee. But this interpretation may be a bit incoherent with the rationale behind the rule.
Principle: If security in land is granted in relation to a pre-existing debt, beneficial interest can be overreached despite no payment to trustees
Possession granted to C, Ds interests were overreached.
Peter Gibson LJ
s2(1)(ii) LPA 1925 did not provide that capital money had to arise at the time of execution of the legal charge for overreaching to occur
Trustees charged a property to a bank to give the bank security for their existing debt to the bank, no capital money was advanced to the trustees
The trustees defaulted and the assignee of the bank, C, sought possession
The beneficiaries, Ds, argued that their beneficial interests had not been overreached as their was no payment of money to the trustees when the charge was executed
City of London BS v Flegg [1988] AC 54
overreachiing s 2 LPA
Lord Templeman
The right of occupation ceased when Ds’ interests were overreached by legal charge
The fact that Ds were in actual occupation on date of legal charge did not create a new right or transfer an old right to make the right enforceable against Cs
S14 LPA 1925 and s70 LRA 1925 (now replaced by s29 LRA 2002) cannot have been intended to frustrate the compromise between securing freely marketable land and interests of beneficiaries under trusts
Lord Oliver
S14 LPA 1925 cannot preserve equitable interests in land which are overreached by exercise of the trustees’ powers
S70(1)(g) LRA protects only the rights in reference to the land of the occupier at the material time. Once the beneficiary’s rights have shifted from land to money, there is no longer an interest in land to which the occupation can be referred or which it can protect: [91]
Possession granted to C; Ds’ beneficial interest in the property was overreached
An elderly couple (Ds) lived together with their daughter and son-in-law. The house was registered in the joint names of the daughter and son-in-law, but all 4 had beneficial interest in the property. The daughter and son-in-law remortgaged the house without the couple knowing to City of London BS (C). C sought possession against Ds; Ds were in actual occupation and sought to claim an overriding interest
Williams and Glyn’s Bank v Boland [1981] AC 487
s 2 LPA overreaching
Distinguishing Boland from Flegg
The interest of the wife was not overreached because the mortgagee advanced capital moneys to a sole trustee, if there had been 2 trutees there would have been nothing to justify the wife remaining in occupation as against the mortgagee
Overriding interest = interest + actual occupation, actual occupation is not an interest in itself
Order for possession denied as the wife had an overriding interest
Land was in the sole name of husband. His wife had contributed to the purchase and mortgage thus becoming an equitable tenant in common to the extent of her contribution
The husband obtained a mortgage on the house without the knowledge of the wife. The husband defaulted; the bank sought possession
Abbey National v Cann [1990] 1 All ER 1085
acquisition mortgage rule - priority
Where a person purchases property with the aid of a mortgage, any person deriving an interest as a result of that purchase only does so because the title-holder is able to rely on the mortgage to assist in the purchase. As a result, whatever the precise timings with regards to the creation of such interests, the mortgage will take priority over the derivative interest.
D did not have an overriding interest; she was never in actual occupation
= under the AM rule : when you have an acquisition mortgage the bank will take priority.
D, together with her son, bought the house using mortgage from C. The son could not repay and C sought possession. D argued that she had an equitable proprietary right that arose before the charge was completed (based on her financial contribution and promises from her son) and that she moved in the carpets 35 minutes before the charge was completed and was thus in actual occupation.
Scott v Southern Pacific Mortgages Ltd [2015] A.C. 385
acquisition mortgage rule - priority
Commentary
This case creates an exception to the ordinary rule that the beneficiary under a trust can create a sub-trust of his beneficial interest
Based on the ordinary rule, N would have had a equitable title to the property under a constructive trust arising from the contract of sale, which he could hold on a sub-trust for D should one have arisen by proprietary estoppel
However, there is good reason for the exception as well as the scintillia temporis rule: without them, borrowers can defeat a mortgage granted to their lenders by entering into possession of the relevant property right before the completion of sale and in doing so obtaining a overriding interest protected by actual occupation
D did not have an overriding interest protected by actual occupation
Prior to completion of sale, D only had a personal right under proprietary estoppel
There was no scintillia temporis between the completion of sale and the execution of mortgage during which D could have obtained a proprietary equitable interest that could be protected by actual occupation
Background
In a ‘sale and lease back’ transaction, Mrs Scott (D) agreed to sell her house below market value to N, with the promise that she could stay indefinitely at discounted rent
N borrowed the purchase money from Souther Pacific Mortgages (C) and agreed to grant C a mortgage over the house
The completion of sale occurred right before the execution of the mortgage on the same day
Dispute
Subsequently, N defaulted on payment of its loan with C
C sought an order of possession of the house
D sought to argue that she had an an overriding interest in the property
She had equitable lease in the property arising from from proprietary estoppel due to N’s promise
Her equitable interest was overriding due her being in actual occupation on the date of execution of the mortgag
City Permanent Building Society v Miller.
schedule 3 - overriding interest
although the provision of sch 3 does not mention the word “legal”, it has been interpreted as such by the Courts bc of the use of ‘grant’.
Paddington Building Society v Mendelsohn (1985) 50 P & CR 244
waiver & consent
Where a person waives their priority or consents to the creation of a right, they will not be able to assert priority regardless of the rules as expressed in section 28 and 29 LRA 2002.
