Land Law Flashcards
Where can the legal definition of land be found?
Broadly defined in s205 LPA 1925. Includes ‘land of any tenure, and mines and minerals, whether or not held apart from the surface, buildings or parts of buildings and other corporeal hereditaments; also a manor, advowson, and a rent and other incorporeal hereditaments and an easement, right, privilege, or benefit in, over or derived from land.’
It is said that land extends upwards to infinity and downwards to the centre of the Earth, but modern limitations to this principle (e.g. relating to the use of airspace where a landowner’s rights only extend to a height needed for ordinary use and enjoyment).
What is the difference between fixtures and chattels?
Fixtures are included in the definition of land, whereas chattels retain their characteristic as personal property.
When a landowner sells land, any fixtures must be passed to the buyer (unless the seller has made provision in the contract to remove such fixtures), whereas the seller is entitled to retain and remove any chattels on the land.
What is the 2 stage test to determine whether an object is a fixture or a chattel?
1) The degree of annexation
2) The purpose of annexation
Explain the degree of annexation test?
If the object cannot be removed without causing significant damage to the land, this implies a fixture (e.g. fireplace, panelling).
As objects can become fixtures over time, the degree of annexation is an initial test which raises a rebuttable presumption that the item is a fixture.
Explain the purpose of annexation test?
Key Q - Why has the object been attached to the land?
- If to enhance the land or create a permanent improvement = fixture.
- If for the better enjoyment of object = chattel.
N.B. The onus of proof is on the person claiming that the object has ceased to be a chattel.
Give some examples of common fixtures?
- Kitchen units
- Split-level cooker with built-in oven
- Items installed by builder e.g. wall tiles
- Bathroom fittings (basins, baths, toilets)
- House
- Pictures, vases and ornaments if part of overall architectural design.
Give some examples of common chattels?
- Free-standing cooker connected via a flex
- Kitchen appliances (attached by weight and flex)
- Carpets and curtains
- Light fittings attached by screws
- Mobile home (resting on its own weight)
- Ornamental items
What are the 2 categories of rights in land?
Estate in land = a person has the right to enjoy, possess, control and dispose of it and receive any income produced from the land.
Interest in land = a person has a right against land owned by another person e.g. a right of way.
What is the distinction between legal and equitable property rights?
All property rights are capable of being equitable, only some can ever be legal and to be so it must;
- Appear in s1(1) or 1(2) of LPA 1925, and
- Meet the necessary formalities.
Which 2 estates in land are capable of being legal? (s1(1) LPA 1925)
- The estate in fee simple absolute in possession (freehold) and
- The term of years absolute (leasehold)
Define what is meant by a freehold estate in land?
Fee - the estate is capable of being inherited.
Simple - the estate can pass to any class of heir so the estate is capable of lasting forever (assuming you die with an heir, or property reverts to the Crown).
Absolute - the estate is not conditional on any event.
In possession - there is an immediate right to possession.
Define what is meant by a leasehold estate in land?
An estate in land where the tenant is granted exclusive possession of land for a fixed period (cannot last forever).
Exclusive possession means the ability for the tenant to control the land and exclude everyone from it, including the landlord.
A term of years - lease can be of any duration.
What are the 2 types of lease?
1) Fixed term - can be for any period, provided that the maximum duration is certain e.g. 1 day, 999 years, academic year.
2) Periodic - for a fixed period (e.g. monthly, yearly) which extends automatically until either the landlord or tenant terminates the lease by notice, usually be for the period of the tenancy.
List some key interests in land that are capable of being legal? (s1(2) LPA 1925)
- Easements (only if for duration equivalent to a freehold or leasehold)
- Legal mortgage
List the main ways in which equitable property rights can be created?
By contract to create or transfer a legal estate or interest (Walsh v Lonsdale) for equity to recognise.
By trying to grant a legal estate or interest but failing to comply with the relevant formalities (court finds a contract to prevent transaction falling through, but contract must comply with s2 LPMPA and ‘clean hands’ from C - specific performance equitable remedy will then be available).
By grant of an estate or interest by a person who owns only an equitable right (e.g. a person holding an equitable lease can only sell an equitable lease, not a legal lease).
By grant of an estate or interest which can only exist in equity (e.g. RC’s).
By express trust.
N.B. All of the above must be created by a signed written document (s53(1) LPA 1925).
What is the Walsh v Lonsdale doctrine?
For equity to recognise the arrangement there must be a contract, complying with s2 LPMPA 1989, and clean hands.
What is the exception to the above rule that all equitable property rights in land must be created by a signed written document?
Implied trusts - arise without any formality, simply as a result of the parties conduct.
What is the defining characteristic of an express trust?
Legal title to the property is separated from the equitable interests (trustee holds the legal title for the beneficiary).
Equity intervened to protect the beneficiary through the trust device as common law only ever recognised the rights of the person holding the legal estate.
Can be created by self-declaration or self-declaration and transfer.
What are the 2 forms of implied trust?
1) Resulting - a person who is not the legal owner contributes directly to the property purchase price and acquires an interest proportionate to their contribution.
2) Constructive - a person who is not the legal owner acquires an interest in the property due to their contributions e.g. contributing to mortgage payments (other than a direct financial contribution at the time of purchase) which is quantified on various factors.
List some interests that are equitable by nature? (do not appear in s1(1) or (2))
- A beneficial interest under a trust (whether express, resulting or constructive)
- A restrictive covenant
- An estate contract - includes contracts for the sale of a freehold or leasehold estate, an option to purchase, a right of pre-emption, the grant of a lease, and the grant of an easement/profit.
What is a home right?
Statutory right of occupation of the matrimonial home for a non-owning spouse or civil partner that does not create an interest in land.
Must still be legally married, and the house has been or is intended to be his matrimonial home.
Do not create an interest in land and require no formalities for creation.
Define a licence?
A personal right that does not create an interest in land, binding only between the original parties and would not bind a successor in title.
Capable of authorising anything, from simple access rights to temporary occupation as a lodger.
Can be revoked at any time.
What are the formality rules for the creation or transfer of a legal estate or interest?
s52(1) requires a deed which must be;
- In writing
- Clear on its face that it is a deed
- Signed
- Witnessed (by one witness) and
- Delivered
What are the exceptions to the formality rules?
Short-term (parol leases) require no formalities for creation.
N.B. Easements (as a consequence of their method of creation) may also be created without deed in limited cases.
What are the criteria for a short-term (parol lease)?
- The lease must be for three years or less (includes monthly periodic lease).
- The lease must take effect in possession (has immediate right to possess and enjoy the land).
- The tenant must pay market rent (best rent that can be reasonably obtained).
- The landlord must not charge a fine or premium.
What are the requirements for contracts to be valid for the creation/transfer of rights in land?
Must comply with requirements in s2 LPMPA 1989;
- Contract must be in writing
- Contract must incorporate all agreed terms in one document (or where contracts are exchanged in each document) and
- Contract must be signed by or on behalf of all parties.
N.B. Contract variations must also comply with above.
What does the buyer have when contracts are exchanged?
An equitable interest in the land (an estate contract).
Define an easement?
A right of one landowner to make use of another nearby piece of land for the benefit of their own land e.g. a right of way.
Define a profit?
A right to go on somebody else’s land and take from that land something which exists naturally e.g. a right to fish/graze cattle.
Define a mortgage?
An interest over property granted by the borrower to the lender as security for a debt or the discharge of some other obligation.
Define a restrictive covenant?
A promise made by one landowner (covenantor) in favour of another landowner (covenantee) that the covenantor will not use their land in a particular way.
What is co-ownership?
Where more than 1 person owns land concurrently. s1 TOLATA 1996 creates a trust of land.
Main 2 types = Joint tenancy, tenancy in common.
In what 3 situations will a trust of land arise?
1) A landowner intentionally sets up a trust of their land by transferring title to the land to trustees for the benefit of others (express trust, following s53 formalities).
2) A person acquires an interest in land owned by another due to their conduct (implied trust).
3) Land acquired by more than 1 owner jointly (co-ownership).
How is the legal estate held?
Must be held as a joint tenancy that cannot be severed.
What is the minimum age for legal and equitable owners?
- Legal = 18+.
- Equitable = no minimum age.
What happens if land is conveyed to a minor and adult?
The land is vested in the adult in trust for the minor.
What are the maximum/minimum number of trustees allowed?
- Maximum 4; where property conveyed to >4, the first 4 adults will be the named trustees.
- No minimum but usual to have 2 trustees to ensure overreaching mechanism can work.
Explain the key features of joint tenancy?
- The right of survivorship
- Undifferentiated ownership - joint tenants are jointly entitled to the whole of the property, and cannot point to a particular ‘share’ as they own nothing individually.
Explain the key features of tenancy in common?
- No right of survivorship - share passes to deceased’s estate via will or intestacy rules.
- Undivided shares - each owner has a distinct share (equal or unequal) which can be sold or mortgaged individually.
What 4 tests are applied to work out whether the equitable interest in a property is held as joint tenants or tenants in common?
1) Are all four unities present? (if so, joint tenancy in equity but if not, may suggest tenancy in common).
2) Does the deed transferring the land to co-owners contain an express declaration? (complying with s53(1) formalities as strongly encouraged by Land Registry). If not, go to consider 3rd test.
3) Does the deed transferring the land to the co-owners contain words of severance? (any words in transfer document to indicate co-owners are to have distinct shares; e.g. ‘To A and B in equal shares’). If not, consider 4th test.
4) Does equity presume a tenancy in common?
What are the 4 unities?
1) Unity of possession - each co-owner has the right to possession of all of the land.
2) Unity of interest - each co-owner must have identical rights over the land.
3) Unity of title - each co-owner must have acquired their interest from the same document (e.g. same transfer/conveyance).
4) Unity of time - each co-owner must receive their interest at the same time.
When can the presumption that co-owners will be joint tenants in equity on the basis that ‘equity follows the law’ be rebutted?
- When the property is acquired for business use (interest to go to estate on death instead of business partners).
- Unequal contributions to the purchase price.
- Post-acquisition money management (exceptional circumstances where one co-owner has provided greater share of finance for e.g., courts can intervene).
When does severance apply?
To equitable interests only (not possible to sever the joint tenancy of the legal estate).
N.B. Must be done inter-vivos (during the co-owners lifetime) as a will cannot affect severance as it only takes effect on death.
How can severance be effected?
- Formal severance by written notice
- Informal severance.
Explain the requirements for severance by written notice?
- Done by a joint tenant giving written notice to ALL other co-owners stating their intention to sever, either expressly or impliedly.
- No specified form for the notice and need not be signed.
- Does not require consent of other joint tenants but must use appropriate wording (expressing a desire to end the joint tenancy immediately) and
- Be received/deemed to be received by all other joint tenants.
How do the postal rules apply for serving notice?
- Registered post: deemed to be sufficiently served if the letter is not returned (via the post office) undelivered.
- Ordinary post: deemed to be sufficiently served if left at the last known place of abode or business in the UK of the person to be served.
List some methods of informal severance?
- Acts operating on the joint tenant’s share (alienation).
- Mutual agreement (oral agreement will suffice, merely has to show intention to sever)
- Course of dealing.
- Bankruptcy.
- Homicide (PP to ensure wrongdoer does not benefit from crime).
- Post-acquisition money management.
How can acts operating on the joint tenant’s share be a form of informal severance?
- Unilateral act of a joint tenant in equity disposing of their equitable interest by sale, gift, lease or mortgage.
- Such a disposition must follow s53(1) rules as it relates to an equitable interest and means that the four unities are no longer present between the joint tenants.
- Such a disposition can be to either a stranger, or a fellow joint tenant.
How can severance occur by post-acquisition money management?
Where the parties show that they had a different common intention at the time of acquisition (not equity follows the law) or that they later formed the common intention that their respective shares would change.
What is the effect of severance?
- Joint tenants become tenants in common.
- Where 2 joint tenants in equity, they both become tenants in common in equal shares.
- Where 3+ joint tenants in equity, only the co-owner who severs their joint tenancy becomes a tenant in common, and the other joint co-owners continue to hold joint tenancy in equity of the remaining interest in equal shares.
What is required for co-owned land to be sold?
All the trustees execute the deed transferring the legal estate.
How can disputes between co-owners be resolved when one or more want to sell the property and others want to retain it?
Using s14 and 15 TOLATA 1996.
What does s14 TOLATA provide?
Allows trustees or any person with an interest in the property to make an application to the court who have wide discretion to make an order;
- Relating to the exercise by the trustees of any of their functions; or
- Declaring the nature or extent of the person’s interest in property.
List the common categories that s14 applications fall under?
- Disputes regarding the size of co-ownership interests e.g. in the absence of an express declaration of trust.
- Disputes regarding the occupation of trust land.
- Authorising transactions without the consent of all the trustees.
- Disputes as to whether co-owned land should be sold.
What does s15 TOLATA provide?
Lists some factors for courts to consider in exercising its powers under s14;
- The intentions of the person(s) (if any) who created the trust.
- The purposes for which the property subject to the trust is held.
- The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
- The interests of any secured creditor of any beneficiary.
N.B. Above list is not exhaustive, but weight will always be given to a secured creditor (mortgagee) over interests of needs of a child or ill co-owner in absence of exceptional circumstances.
What 4 options are available for the court?
1) Refuse a sale (likely if the purpose of acquisition can still be fulfilled).
2) Order a sale (usually adopted where the purposes for which the property was created have clearly failed e.g. property acquired for business that has failed).
3) Refuse a sale, but make an order regulating the right to occupy the property (rare).
4) Partition the co-owned property (exceptional circumstances).
What is the difference between servient tenement and dominant tenement?
- Servient tenement (the land over which the easement is exercised - burdened land).
- Dominant tenement (the land that enjoys the right - benefitted land).
What is the difference between a grant and a reservation?
- Grant (the land owner creates an easement in favour of the buyer).
- Reservation (the land owner creates an easement in favour of their own land when selling to a buyer).
What 4 characteristics must be present for a right to exist as an easement?
1) There must be a dominant and servient tenement.
2) The easement must accommodate the dominant tenement.
3) The dominant and servient tenements must not be both owned and occupied by the same person.
4) The easement must be capable of forming the subject matter of the grant by deed.
What are the key features of 1) There must be a dominant and servient tenement?
- Easement must be attached to the dominant land as when an easement is created, it becomes part of the land.
- Any attempt to create an easement without an identifiable dominant tenement will create a licence only.
What are the key features of 2) The easement must accommodate the dominant tenement?
- The right must be connected with the normal enjoyment of the dominant tenement, but need not join each other (sufficient closeness needed).
- The right must benefit the land itself and not just the owner in their personal capacity. Consider whether the right improves the marketability of the land and/or would any owner of the land see it as a benefit.
- N.B. The right to use a communal garden has been held to be a valid easement, but a right to put pleasure boats on a canal for an independent boat business is not.
What are the key features of 3) The dominant and servient tenements must not be owned and occupied by the same person?
- Satisfied in relation to landlord and tenant situation.
- Rights exercised by the sole owner of 2 separate properties over 1 of them are called ‘quasi-easements’.
What are the key features of 4) The easement must be capable of forming the subject matter of the grant?
a) An easement must be capable of reasonably exact definition.
b) An easement must not involve any expenditure by the servient owner.
c) An easement must not be so extensive as to amount to a claim to joint possession of the servient tenement.
d) The law is very cautious when it comes to a claim for a new type of negative easement.
Expand on requirement 4a) An easement must be capable of reasonably exact definition?
- Can be no easement for vague and indefinite definitions e.g. general flow of air to a timber drying shed.
- No general right to light. Can only exist where it is sufficiently definite and the light is enjoyed via a defined aperture e.g. window/conservatory.
- No easement for right to a view.
Expand on requirement 4b) An easement must not involve any expenditure by the servient owner?
A positive obligation on the owner of the servient tenements to do something is inconsistent with the existence of an easement (e.g. maintaining a right of way).
Limited exception in easements of fencing which amounts to a right to require the owner of the adjoining land to keep the boundary fence in repair where it is of importance to maintain stock proof fences to restrain farm animals.
Expand on requirement 4c) An easement must not be so extensive as to amount to a claim to joint possession of the servient tenement?
Judged both temporally (the amount of time taken) and spatially (the amount of space used), causing problems for easements of storage and parking.
Question of fact and degree - the greater the intensity of the use claimed, the less likely the courts will be to recognise the existence of an easement.
Case law has found that there could be an easement to park vehicles on a piece of servient land provided that the servient land was sufficiently large. But, the right would not be an easement if the effect of it was to leave the servient owner without any reasonable use of their land.
Expand on requirement 4d) The law is very cautious when it comes to a claim for a new type of negative easement?
Only negative easements recognised at law are those of light, air, and support.
Caution exercised as negative easements may prevent the owner of the servient land from enjoying their land to the full and would mean they are not free to develop etc.
What did the Re Ellenborough Park case establish a right to?
Use the land for recreational purposes (on the basis that use of a communal garden was analogous to use of a garden attached to a house).
List the different methods by which an easement may be created?
- Express grant/reservation.
- Implied by necessity (applies to grants and reservations).
- Implied by common intention (applies to grants and reservations).
- The rule in Wheeldon v Burrows (applies only to grants, not reservations).
- Section 62 LPA 1925.
- Prescription.
What is the difference between an express grant and reservation?
- Express grant: involves the servient owner executing a deed granting the dominant owner an easement over land owned by the servient owner. Agreement made knowingly and willingly.
- Express reservation: involves the seller reserving/retaining rights over the land they are selling. The land retained becomes the dominant land, and the land sold the servient land.
How can an easement be implied by necessity?
Limited circumstances - look for land that has NO means of access other than the right claimed e.g. land-locked parcel of land.
A claim would be defeated if an alternative means of access existed, no matter how dangerous.
How can an easement be implied by common intention?
Look for a common purpose known to the parties. The right claimed is needed in order for the common purpose to be fulfilled.
E.g. easement implied when ventilation shaft needed in restaurant to ensure lease obligation (no noxious smells to be emitted) could be complied with.
Explain the rule in Wheeldon v Burrows?
Has the effect of converting ‘quasi-easements’ into legal easements when a landowner sells part of their land, provided the following conditions are met;
1) The existence of a quasi-easement prior to the sale (Rights exercised by a land owner over their own land; have the characteristics of an easement save for the fact that there is no diversity of ownership).
2) The right must be continuous and apparent.
3) The right must be necessary to the reasonable enjoyment of the land sold (the standard of necessity is less stringent than for an easement of necessity; the presence of an alternative right may not necessarily defeat a claim).
4) The right must be in use at the time of the sale.
What to look for in a set of facts to apply the rule in Wheeldon v Burrows?
The land was in common ownership and the owner exercised quasi-easements over their own land. The land owner then sold part of the land.
What is the effect of the Section 62 LPA 1925 provision?
Word-saving provision; operates to automatically pass to a buyer all existing rights, without the necessity of formal words in the conveyance.
What are the 4 conditions required for the operation of Section 62?
1) There must be a conveyance as defined in s205(1)(ii) LPA 1925.
2) There must be some diversity of occupation of the 2 parts of the land at the time of the grant. However, the requirement for some diversity does not apply;
- to easements of light or where the rights were continuous and apparent.
3) There must be an existing privilege at the date of the conveyance.
4) The right must be capable of being an easement or profit.
What to look for in a set of facts for Section 62 to apply?
An existing licence/permission and a subsequent conveyance. There must be diversity of occupation (but diversity is not required if the right is continuous and apparent).
Explain how an easement can be created by prescription?
Where the dominant owner can show use of the right for 20 years, the court will uphold the legal right by presuming that it had a lawful origin.
What are the 3 types of prescription?
1) At common law
2) The doctrine of lost modern grant
3) The Prescription Act 1832.
Whichever method is relied on it will be necessary to show that the right has been exercised by or on behalf of a fee simple owner against a fee simple owner;
- Continuously and
- As of right (without force, secrecy, or permission).
Explain prescription at common law and how it can be rebutted?
Grant of an easement is presumed if it has been enjoyed continuously as of right since 1189. Presumed that a user of 20 years or more is proof of use since 1189 but this presumption can be rebutted (fairly simply) by showing;
- the right was not exercised
- the right could not have been exercised
- the dominant and servient tenement were vested in the same owner.
Explain prescription under the doctrine of Lost Modern Grant?
The grant of an easement is presumed if it has been enjoyed continuously as of right for 20 years or more on the basis that there is a presumption that there was a grant of the right since 1189 but that the grant has been lost.
Last resort; relied upon where not possible to rely on prescription at common law or under the Prescription Act 1832. This would be the case where the dominant and servient tenements have been in common ownership since 1189 or where the user is not next before the action brought.
Explain Prescription under the Prescription Act 1832?
If the dominant owner can show user as of right for 20 years (30 for profits) then they will obtain a prescriptive easement even though the user clearly commenced sometime after 1189.
The claimant must prove uninterrupted enjoyment for a period of at least 20 years which immediately precedes and which terminates in an action. The period of 20 years is counted backwards from the date of action.
Short interruptions to the user are permitted. Any interruption in use lasting 1 year or more stops time running and the claimant would then have to restart the 20 year period.
What formalities are required for covenants?
In writing and signed as covenants are equitable by nature.
N.B. Possible to create a covenant by contract but usually by deed as they tend to be created on sale of part of land and are included in the transfer.
What is the difference between a covenantor and covenantee?
Covenantor - the person who makes the promise and who has the burden of the covenant.
Covenantee - the recipient of the promise and who has the benefit of the covenant.
What is the difference between servient land and dominant land?
Servient land - the land burdened by the covenant.
Dominant land - the land with the benefit of the covenant.
What is the difference between positive and restrictive covenants?
Positive covenants require some effort or expenditure to perform the obligation whereas restrictive covenants do not.
Can the burden of a covenant pass at common law?
No; otherwise would be enforcing a personal obligation against a person who has not covenanted.
What are the requirements for the burden of a restrictive covenant passing in equity under the doctrine in Tulk v Moxhay?
1) The covenant must be negative (restrictive) in substance.
2) The covenant, must, at the time of creation, have been made to benefit dominant land retained by the covenantee.
– Often requires the seller to retain some land.
3) The covenant must touch and concern the dominant land.
– Must benefit only the dominant owner for the time being so that, if separated from their land, it ceases to be advantageous to them.
– The covenant must affect the nature, quality, mode of user or value of the land of the dominant owner.
– The covenant must not be expressed to be personal (given only to one specific dominant owner).
4) The covenant must be made with the intent to burden the servient land.
– Express intention (set out in the document creating the covenant) or implied intention in the absence of express words.
5) The owner of the servient land must have notice of the covenant for it to bind them.
– How this is given depends on whether land is registered or unregistered.
Can the burden of a positive covenant run in equity?
No.
What alternative methods can be used to enforce a positive covenant?
1) Create a lease (both restrictive and positive covenants are binding on a successor in title to a tenant. Ensures positive covenants are enforceable but N.B. leases are less attractive to buyer than purchase of freehold land).
2) Indemnity covenant.
3) The doctrine of mutual benefit and burden (Halsall v Brizell).
How do indemnity covenants work?
Upon the sale of the servient land, common conveyancing practice requires the buyer to enter into an indemnity covenant promising to observe positive covenants and indemnifying the seller for any loss incurred as a consequence of breach.
An indemnity covenant is then sought from each subsequent buyer of the servient land, creating a chain of indemnity covenants.
In the event of the original covenantor being sued for breach of a positive covenant (by the original covenantee or their successor in title), this enables the original covenantor to sue their successor on the indemnity and so on down the chain.
Do indemnity covenants allow the original covenantor to sue the current owner who is in breach?
No (no privity of contract between them).
What happens if one person in the chain of indemnities cannot be found or is insolvent?
The chain is of little value and the entire burden would fall on the last person in the chain.
Explain the doctrine of mutual benefit and burden - Halsall v Brizell?
Dictates that a person who wishes to take advantage of a service/facility which benefits their land must also comply with any corresponding obligation (e.g. to contribute towards the cost of providing and/or maintaining the service or facility).
N.B. Not a direct method of enforcement of a positive covenant, but enables the owner of the benefitted land to prevent the exercise of the rights if the costs of maintenance have not been paid.
What are the 2 pre-conditions of the doctrine?
1) There must be a clear correlation between the benefit and the linked burden.
2) The covenantor’s successors in title must have the opportunity to elect whether to take the benefit (and accept the related burden) or to renounce it (and escape the related burden).
What are the 2 sets of rules for running of the benefit at common law?
1) Annexation
– The covenant must touch and concern the land.
– There must have been an intention that the benefit should run with the estate owned by the covenantee (express words or implied).
– The covenantee must have a legal estate in the benefitted land.
– The buyer of the benefitted land must also take a legal title in the benefitted land.
2) Assignment
– Must take place at the same time as the transfer of land.
– Must be in writing and signed by the assignor (original covenantee) and
– Written notice must be given to the person with the burden of the covenant.
What are the 3 sets of rules for running of the benefit in equity?
1) Annexation
2) Assignment (same requirements as for passing of benefit at common law).
3) Building schemes (relatively rare; modern developments tend to exclude them).
What are the 3 types of annexation?
1) Express annexation
– Crucial to identify the defined piece of land intended to receive the benefit of the covenant with clear words (e.g. ‘each and every part’).
2) Implied annexation
– The required intention must be manifested in the transfer as construed in the light of all the surrounding circumstances (statutory as priority over implied).
3) Statutory annexation (more common)
– Applies where the covenant was created post-1925 (after implementation of LPA 1925) and the covenant touches and concerns the land.
What are the characteristics of building schemes?
- Applies to a defined area where title is derived from a common owner.
- The estate was laid out in lots subject to restrictions intended to be imposed on all the lots.
- The common owner intended the restrictions to apply to all the lots to be sold and
- The original buyers bought their lots on the basis that the restrictions would benefit all the lots in the scheme.
N.B. Effect is to impose reciprocal obligations between the buyers of the different plots of the scheme, including positive covenants.
What approach is taken for restrictive covenants when the burden has passed in equity?
The benefit needs to match the burden for the dominant land owner to take action.
– Burden cannot pass at common law, but may pass in equity if the Tulk v Moxhay criteria is met.
– When the original covenantee sells the dominant land, the successor in title needs to demonstrate that they have the benefit of the covenant in equity, enabling them to pursue a claim (in equity) against the successor in title to the original covenantor.
– This involves considering annexation, assignment and building schemes.
What approach is taken for positive covenants when the burden has passed in equity?
– Burden cannot pass to a successor in title either at common law or in equity. The original covenantor remains bound by privity of contract.
– A successor in title to the dominant land can pursue the original covenantor for breach of a positive covenant provided that the successor in title can show that the benefit of the positive covenant has passed to them at common law (above).
– The original covenantor may then be able to pursue their own successor in title via an indemnity covenant.
What remedies are available for breach of a positive covenant?
1) Damages - usual common law remedy.
– Can be sought against the original covenantor by the original covenantee or a successor in title to the original covenantee. May include a future loss sum.
– N.B. Once the original covenantee has disposed of the land benefitting from the covenant, they are unable to demonstrate that they have suffered a loss and would be unable to claim damages.
2) Specific performance - may be available for breach of a positive covenant by the original covenantor (but not a successor in title to the original covenantor).
What main remedy is available for breach of a restrictive covenant?
1) Injunction - principal remedy but no automatic right to one.
– Purpose is to restrain the breach of a restrictive covenant; can be applied for in anticipation of a breach or in response to an existing breach.
When might a court award damages for breach of a restrictive covenant instead of an injunction?
Where;
– The injury to the Claimant’s rights are small.
– And capable of being estimated in money.
– And can be adequately compensated by money.
– And it would be oppressive to the respondent to grant an injunction.
E.g. oppressive where homes have been built, sold and occupied in breach of a restrictive covenant.
N.B. Injunction not awarded where Claimant has acted inequitably or has delayed action.
What are the 4 methods for removing or limiting the effect of a freehold covenant?
1) Express release
– The covenantee(s) may agree to release or modify a covenant, deed required and usually payment negotiated for such a release.
2) Common ownership
– Where the servient and dominant land come into common ownership, the covenant will be extinguished.
3) s84 LPA 1925 (applies only to restrictive covenants).
– Application made to Upper Tribunal.
4) Insurance (applies only to restrictive covenants).
– Purchased for a one-off premium.
What are the 4 grounds applicant must satisfy 1 of to discharge or modify the covenant in whole or part?
1) The restrictive covenant was found to be obsolete.
2) The restrictive covenant impedes some reasonable use of the land and does not secure any practical benefit for the person it should or is contrary to public interest.
3) That those entitled to the benefit have expressly or impliedly agreed to the discharge.
4) That the discharge will not injure the persons entitled to the benefit.
Define a mortgage?
Lender provides money by way of a loan, and in return, the borrower provides security by creating a mortgage over the property in favour of the lender.
When created, the borrower continues to hold the legal estate (freehold or leasehold) subject to the mortgage. 3rd party right over land.
Creation of a mortgage enables a lender to enforce its security against the borrower.
What is the difference between a mortgagor and mortgagee?
Mortgagor = borrower.
Mortgagee = lender.
What is required to create a legal mortgage in relation to a legal estate?
A deed that meets the requirements of s1 LPMPA 1989.
N.B. Where a document lacks the above requirements, equity may intervene and recognise an equitable mortgage.
List the 5 remedies available to a lender in relation to a legal mortgage?
1) Possession.
2) The power of sale.
3) Debt action.
4) Appointing a receiver.
5) Foreclosure.
N.B. Entirely for the lender to decide which remedy to pursue.
Which of the 5 remedies will bring the mortgage to an end?
Power of sale and foreclosure.
Explain how the ‘possession’ remedy works?
Usually used as a precursor to the exercise of another remedy.
Lender has the right to take possession ‘before the ink is dry on the mortgage’ (borrower need not be in default).
Means either;
- Taking physical possession (ousting the borrowers), or
- Directing that the tenants pay their rent to the lender (not borrower) where the property is let.
In practice, when will lenders exercise the ‘possession’ right?
If the borrower is in default.
What are the possession proceedings?
Where property is residential, lender must comply with pre-action protocol to resolve arrears through dialogue, potentially avoiding possession by exploring options like selling the property or rescheduling debt.
N.B. The protocol is weighed heavily in favour of enabling the borrower to continue to make payments and live in the property.
When can a borrower facing possession proceedings request the court to exercise its discretion to adjourn, suspend, or postpone the date for possession?
When;
- The lender has started possession proceedings.
- The property includes a dwelling house.
- The borrower is likely to pay any sums due under the mortgage (arrears) within a reasonable period of time.
N.B. The court will not exercise its discretion unless the borrower can provide a detailed financial plan showing ability to meet ongoing payments and clear arrears.
N.B. A reasonable period has been defined to include the full remaining period of the mortgage.
Can a lender use income produced from the property subject to the mortgage to pay the debt owed?
Yes; but the lender must account to the borrower for any sum beyond that which is due to them and manage the property, accounting to the borrower for any income that should have been received had the property been managed correctly.
N.B. This strict duty to account is why lenders prefer to appoint a receiver in relation to an income-producing property.
Explain how the ‘power of sale’ remedy works?
Before exercising the power of sale, it must;
1) Exist
2) Have arisen
3) Become exercisable
When will ‘power of sale’ exist?
Expressly stated within the mortgage deed or implied into every legal mortgage as long as power not excluded.
When will ‘power of sale’ have arisen?
Mortgage money must be due and legal date for redemption (usually 1 month into mortgage term or expressed in mortgage deed) has passed.
When will ‘power of sale’ become exercisable?
Expressly set out in mortgage deed or lender will rely on 1 of the following;
- The lender has given the borrower notice to repay the loan amount (entire debt to be repaid) and the borrower has not paid the sum for 3 months after such notice.
- Interest is in arrears for 2 months after becoming due.
- The borrower has breached a term of the mortgage e.g. obligations on part of the borrower to insure the property and keep in good repair.
What duties do lenders owe (in equity) to borrowers (and all others interested in the equity of redemption) when exercising their power of sale?
To act in good faith and not cheat borrowers (e.g. properly advertise the property and cannot hastily sell at a knock down price).
To take reasonable care to obtain true market value of the property at the date of sale.
What is the ‘equity of redemption’?
The right (in equity) for the borrower to recover the assets subject to the mortgage upon repayment of the debt.
If the property is worth more than the sum owed, the balance, payable to the borrower, represents the equity of redemption.
How must proceeds of sale be distributed?
1) To pay the costs of redeeming any prior mortgages (mortgages with priority over the selling lender’s mortgage).
2) To pay the lender’s expenses of sale.
3) To pay the lender’s own mortgage.
4) To pay the balance (if any) to the person(s) entitled to the equity of redemption.
How does the ‘debt action’ remedy work?
Aims to recover the debt by a repayment action on the borrower’s covenant to pay.
The legal date for redemption must have passed before action can be taken.
Statute limits the lender’s ability to recover the debt to;
- 6 years for recovery of interest and
- 12 years for recovery of capital.
N.B. Where a lender has exercised the power of sale and the proceeds of sale are insufficient to pay the debt (negative equity), the lender can pursue the borrower for the shortfall as a debt action.
How does the power to ‘appoint a receiver’ arise?
Lenders will usually appoint one if the property subject to the mortgage is producing income.
The power arises in the same way as the power of sale and the receiver must be appointed in writing.
What power does the receiver have?
The power to demand and receive income from the property, with such income applied to pay;
- Outgoings on the property.
- Interest on any prior mortgages.
- Insurance premiums, repair costs, and their own costs.
- Interest on the current mortgage.
- Capital on the current mortgage.
- The balance to the borrower.
Why is appointing a receiver potentially more attractive than taking possession?
As the receiver is deemed to be an agent of the borrower and the borrower thus has no recourse to the lender for the acts/omissions of the receiver. Also, avoid strict duty to account in taking possession.
What duties does a receiver have in relation to both the borrower and lender?
- To ensure that their personal interests do not conflict with their role as a receiver (means a receiver cannot purchase the mortgaged property in a personal capacity).
- To act in good faith in the course of their appointment.
- To act with reasonable competence (meaning depends on nature of particular property).
- To take reasonable care to obtain the true market value of the property at the date or sale (if receiver has power of sale).
- The receiver may (not obliged to) take steps to increase the value of the property.
Whose interests should the receiver put first if those of the borrower and lender conflict?
Lenders.
Explain the ‘foreclosure’ process?
Available by an application to the High Court once the legal date for redemption has passed. 2 stage process;
- Foreclosure Nisi - directing the preparation of accounts of what is owed followed by a period (usually 6 months) in which to pay and
- Foreclosure Absolute - has the effect of vesting title to the property in the lender and extinguishing the equity of redemption held by the borrower.
Why would a lender not use the foreclosure remedy where there was negative equity?
As if the property is worth less than the sum owed, the borrower is released from liability.
