Law Reform

Question 1

What is equity?

Answer 1

Two people take joint legal ownership in a property, if there is no statement to the contrary they will also take joint beneficial ownership in the property.

Question 2

What is an equitable right?

Answer 2

A beneficial interest in real property that gives the title holder the right to acquire legal title to the property. Equitable title holders cannot transfer legal title to real property, but they derive benefits from the property’s appreciation in value.

Question 3

What is Doctrine of Notice?

Answer 3

Under the doctrine of notice, a bona fide purchaser of a legal estate for value takes priority over any pre-existing equitable interest which is not registrable as a land charge, provided they did not have actual, constructive or imputed notice of their existence.

Question 4

What is fee simple absolute in possession?

Answer 4

An unconditional fee simple where there are no limits on the owner’s rights in respect of the land.

Question 5

What is the “two trustee” rule?

Answer 5

A conveyance or deed must be made by at least two trustees to overreach any powers or interests affecting a legal estate in land (Law of Property Act 1925 s 2(1)(ii))

Question 6

Background:

Answer 6

Before 1 January 1926, there were a variety of defects, problems and pitfalls in the law of property e.g. purchasers were very often bound by equitable rights that they knew nothing about.

Question 7

Background:

Answer 7

Therefore on 1 January 1926, an array of property legislation across 6 different Acts of Parliament came into force, designed to consolidate 40 years worth of reforms and simplify land law concepts and the conveyancing process.

Question 8

Pre 1925:

Answer 8

Problem of priority - Answer historically depended on whether Ben’s rights in Greenacre were legal or equitable.
Trusts of Land:
- Position of legal estates because there were too many
- Now we only talk about freehold and leasehold that use trustee’s

Question 9

Pre 1925:

Answer 9

Key reason for change:
- Legal rights in land – enforceable against all subsequent owners of the estate affected by the legal right: “legal rights bind the world”.
- Equitable rights in land – enforceable against all subsequent owners of the estate affected by the equitable right, except a bona fide purchaser for value of the legal estate without notice of the equitable right.

Question 10

Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783:

Answer 10

Facts
A married couple jointly contributed to the purchase price for a property intended to serve as the matrimonial home with the husband taking sole legal title to the property at registration. When the marriage subsequently disintegrated, the wife ceased full time occupation of the property but returned daily to look after their children and would spend the night on occasion were the husband absent.
The husband then mortgaged the property, falsely claiming to be single, and arranging for the inspection of the property by the defendant for when he was aware the house would be vacant.
Subsequently, the inspector found no evidence of a wife and the husband stated she had ceased occupation months prior. The inspector did however note that children appeared to be in occupancy.

Question 11

Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783:

Answer 11

Issue
Whether the wife’s beneficial interests amounted to constructive notice given the defendant’s failure to make adequate investigations.

Question 12

Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783:

Answer 12

Decision / Outcome
The Court found that the wife’s beneficial interest in the property ought serve to bind the defendant as per the doctrine of notice.
There were clear inconsistencies between the husband’s paper application and the results of the inspection, and in failing to make further inquiries about this, alongside allowing for the inspection to occur at a time arranged by the claimant, the defendants had failed to fulfil their duty in taking all reasonable steps to discover any beneficial interests in the property and thus ought be bound with constructive notice.
Notably, this decision overturned the previous approach in Caunce v Caunce [1969] 1 WLR 286, ChD, under which Mrs Tizard would not have been able to claim.

Question 13

1925 Reforms:

Answer 13

• Law of Property Act 1925 (LPA 1925)

Question 14

1925 Reforms:

Answer 14

• Land Charges Act 1925 (LCA), now repealed and replaced by Land Charges Act 1972 (LCA 1972)

Question 15

1925 Reforms:

Answer 15

• Land Registration Act 1925 (LRA), now repealed and replaced by Land Registration Act 2002 (LRA 2002)

Question 16

1925 Reforms:

Answer 16

• Settled Land Act 1925 (SLA), substantially amended by the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996)

Question 17

Aims of the 1925 legislation:

Answer 17

• Simplify the creation and transfer of estates and interests in land (conveyancing)

Question 18

Aims of the 1925 legislation:

Answer 18

• Reduce costs associated with creating and transferring estates and interests in land

Question 19

Aims of the 1925 legislation:

Answer 19

• Increase certainty for purchasers (including mortgagees) of estates in land

Question 20

Aims of the 1925 legislation:

Answer 20

• Enhance protection for owners of legal and equitable estates and interests in land

Question 21

Obstacles in achieving their aims:

Answer 21

Practical problems associated with:
(a) the proliferation (quick increase) of legal estates and the fragmentation in the ownership of those estates, and;
(b) the treatment of equitable interests.

Question 22

Problem 1: Legal estates

Answer 22

• Issue: before the 1925 reforms the law recognised several different types of legal estates in land. This raised practical problems in that dealings with the land often required the participation of large numbers of people, all of whom would have to consent to any transaction and sign the relevant paperwork.
• Solution: limit the types of legal estates to

Question 23

Problem 1: Legal estates

Answer 23

• Specifically, section 1(1) LPA 1925 restricts the types of estates capable of existing at law to freehold and leasehold.
• Section 1(3) LPA 1925 provide that all other estates (e.g. life interests) take effect in equity as beneficial interests behind a trust.
• Section 34(2) LPA limits the maximum number of trustees to four people.
• The legislation also empowers the trustees to deal with the legal estate – i.e. transfer, lease, mortgage (see now Trusts of Land and Appointment of Trustees Act 1996, s.6(1))

Question 24

Problem 1: Legal estates

Answer 24

• Trusts of land
• Legislation goes further to impose a trust in every case where land is co-owned.
• Co-ownership = two or more people enjoy rights of ownership in relation to a freehold or leasehold estate
• Successive ownership (e.g. life interest followed by fee simple absolute in possession)
• Concurrent ownership (i.e. two or more people are simultaneously entitled to a legal estate (freehold or leasehold) and/or the beneficial interest in that estate).
• LPA 1925, ss.34 & 36, as amended by Trusts of Land and Appointment of Trustees Act 1996

Question 25

Problem 2: Beneficial interests under trusts

Answer 25

• Issue: Restricting the range of estates and imposing trusts in all cases of co-ownership ensures that there is always someone who is empowered to deal with the fee simple absolute in possession of land (i.e. the trustees), BUT it would leave purchasers – and mortgagees – potentially vulnerable to the equitable interests of beneficiaries under a trust.
• In the absence of any other mechanism, a purchaser (including a mortgagee) of a legal estate with notice of a beneficiary’s equitable interest under a trust would be bound by that interest. (i.e. BFPVLEWN test and doctrine of notice would apply, as seen in Kingsnorth Finance v. Tizard [1986] 1 WLR 783).
• Solution: Overreaching

Question 26

Overreaching:

Answer 26

• Conveyance must be made by trustees.
• Equitable interest must be capable of being overreached:
  Overreaching applies only to beneficial interests under trust of land, not to those listed in s.2(3) of the LPA 1925.
• Capital money must be paid over in the manner prescribed by statute:
  Capital money (i.e. purchase price or loan money) must be paid to a minimum of trustees, or to a trust corporation.

Question 27

Purchaser’s point of view:

Answer 27

• Compliance with statutory requirements enables purchasers to avoid being bound by beneficial interests under trusts of land.
• No need to inquire into the existence or nature of these interests.

Question 28

Beneficiary’s point of view:

Answer 28

• Beneficial interest in land is converted into a beneficial interest in a sum of money of equivalent value.
• Beneficiaries are protected to some extent against fraud by the “two trustee rule”.

Question 29

Theoretical basis:

Answer 29

• Overreaching treats beneficial interests under trusts as general interests in property, rather than specific interests in land.
• This is consistent with general principles of the law of trusts which treat trust property as a “fund”.
• Trustees are under a duty to preserve the fund, but are at liberty to invest and re-invest the fund in different assets.

Question 30

Controversy:

Answer 30

• Why was the legislature satisfied in 1925 that a beneficial interest in land could be treated as being convertible into a beneficial interest in a sum of money?
• At that time, owner-occupation of land was not widespread (approximately 10% of population owned their own homes).
• Most people with beneficial interests in land were concerned with receiving the income from the land or its capital value (i.e. investment or exchange value), rather than occupying the land itself.
• This is no longer the case today (nowadays approximately 63% of the population own their own homes. This figure has dropped from 70% in the last 3-4 years).

Question 31

Problem 3: Protection of other estates and interests

Answer 31

Issues: Purchasers of land (including mortgagees)
- Bound by all pre-existing legal rights, regardless of notice.
- Even if those legal rights were not discoverable at the time of purchase (e.g. relevant documents were missing from title deeds).
- Bound by all pre-existing equitable rights, unless BFPVLEWN.
- Practical difficulties surrounding the operation of the “doctrine of notice” – remember Kingsnorth Finance v. Tizard [1986] 1 WLR 783.
Owners of equitable interests
- Uncertainty surrounding operation of the “doctrine of notice”.
- Equitable interests may be undiscoverable in practice by purchasers.
- Equitable interests may also be destroyed by transfer to a BFPVLEWN.

Question 32

3 problems summed up:

Answer 32

The solutions to these three problems underpin the structure of modern land law.

Question 33

Conveyance by private treaty

Answer 33

• Before 1925 transactions in land were conducted privately between parties.
• Proof of ownership of estates and interests rested on documents of title (“title deeds”).
• Title deeds were difficult to work with (e.g. difficult to read) and could be lost, damaged or destroyed.

Question 34

How did the 1925 legislation seek to overcome the problem of protecting estates and interests in land?

Question 35

The Big Idea: Land Registration

Answer 35

Replace system of conveyance by private treaty (“title deeds”) with a new system of land registration:
- Establish a centralised register of titles to land, known as the Land Register.
- Compel land owners to register their titles in the Land Register.
- Verify titles on first registration.
- Ensure that the Land Register is constantly updated to reflect all subsequent dealings with titles.
- Make protection of estates and interests dependent, as far as possible, on registration in the Land Register.

Question 36

What is Mirror Principle?

Answer 36

Registration Act 2002, but the key principles of land registration introduced in 1925 still underpin the 2002 Act:
- Mirror principle – register should accurately reflect the current ownership of estates and interests in land.

Question 37

What is Insurance Principle?

Answer 37

Registration Act 2002, but the key principles of land registration introduced in 1925 still underpin the 2002 Act:
- Insurance principle – state should guarantee the accuracy of information contained in the register and compensate any person who suffers loss as a result of inaccuracy.

Question 38

What is the Curtain Principle?

Answer 38

Land Registration Act 1925 has now been repealed and replaced by Land Registration Act 2002, but the key principles of land registration introduced in 1925 still underpin the 2002 Act:
- Curtain principle – overreachable rights (i.e. beneficial interests under a trust of land with two or more trustees) should be kept off the register.

Question 39

Registered Land:

Answer 39

• Another important part of the policy of the registered land system was that the bona fide purchaser test and the doctrine of notice should have NO part to play in registered land.
• Instead, questions of priority in registered land should be resolved by reference to the provisions of the Land Registration Act.

Question 40

The Temporary Measure: Reform of the Existing Unregistered Land System

Answer 40

• 15% of all land in England and Wales remains unregistered. However, the percentage varies significantly from one place to another.
• For example, in the City of Plymouth only around 12% remains unregistered, but in Torbayma around 53% is still unregistered.

Question 41

Unregistered Land:

Answer 41

• Introduced mechanism for protection of certain interests in unregistered land.
• Make protection of certain types of interests in unregistered land (mostly equitable interests) dependent upon registration in another new, but entirely separate register known as the Land Charges Register.

Question 42

Causation:

Answer 42

If you break the chain of causation with having someone with no notice involved does the next person with notice can go back and be bound
Court said no, Wilkes equitable interest had been destroyed by the surrender of the lease of 137 high street because the landlord was a BFPFVLEWN

Question 43

Wilkes v Spooner: looking at the equitable rights

Answer 43

• Isaac spooner is the farther and carried on business as a pork butcher at number 137 high street, had a agreement that it could only be used for pork
• General butcher at 170 high street, he assigned this to his apprentice, Wilkes
  He gave with the lease a restrictive covenant for 137 high street that Wilkes could utilise, the covenant benefited Wilkes at 170 and restricted 137
• Isaac spooner decided he wanted to surrender his lease, give it back to his landlord
  Landlord did not know about the restrictive covenant between Isaac spooner and Wilkes
• Landlord gets the land back satisfying that BFPFVLEWN
  Landlord creates a new lease with George spooner, Isaac’s son

Question 44

The Land Charges Register was introduced by the Land Charges Act 1925:

Answer 44

Class C:
C(i) Puisne mortgages (i.e. legal mortgages not protected by deposit of title deeds)
C(iii) General equitable charges (i.e. mortgages)
- C(iv) Estate contracts

Question 45

The Land Charges Register was introduced by the Land Charges Act 1925:

Answer 45

Class D:
- D(ii) Restrictive covenants created after 1925
- D(iii) Equitable easements created after 1925

Question 46

The Land Charges Register was introduced by the Land Charges Act 1925:

Answer 46

Class F:
- Statutory rights of occupation under Matrimonial
-Homes Act 1983 and Family Law Act 1996 (note: these are statutory rights available to spouses, not property rights).

Question 47

Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

The equitable interest of spouses in occupation of a matrimonial home.

Answer 47

Facts
The appeal concerned two consolidated cases. In a matrimonial home, each wife contributed to home’s purchase monies and mortgage instalments, rendering each tenant in common in equity to the extent of their financial contribution. Both homes were conveyed in the legal names of their husbands. Each husband legally mortgaged the homes to a bank. When they defaulted, the bank started proceedings for possession of the homes. The wives were in continuing occupation of the home.

Question 48

Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

The equitable interest of spouses in occupation of a matrimonial home.

Answer 48

Issues
The question arose as to whether the beneficial interest of a wife in actual occupation of the property is capable of taking an overriding interest under the Land Registration Act 1925 over the effect of a legal and registered mortgage.

Question 49

Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

The equitable interest of spouses in occupation of a matrimonial home.

Answer 49

Decision / Outcome
The House of Lords held that the beneficial interest of a spouse in actual occupation of property legally owned by another spouse possesses an overriding interest in the property, that takes priority over a legal charge. Firstly, on the facts, the Court held that each wife is treated as a person in actual occupation, as a spouse physically living in the house, affording her protection accordingly.

Question 50

Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

The equitable interest of spouses in occupation of a matrimonial home.

Answer 50

Decision / Outcome
Secondly, the Court held that the Land Registration Act 1925 recognises the rights of occupiers, in light of widespread developments in shared ownership, and that the equitable interests of a spouse in actual occupation of a matrimonial home under a trust for sale are capable of being recognised as overriding interests protected by section 70(1)(g) of the Act, overriding that of a legal charge by a legal owner. The Court noted that, in lieu of the way that the Act confers protection to occupants, banks ought to make more careful enquiries into occupation. Accordingly, the Court held that the wives’ interests overrode the bank’s legal charge.