SBAQ - ENFORCEABILITY OF THIRD PARTY INTEREST

Question 1

1. On the sale of unregistered land the seller must prove his title by producing title deeds to the property proving ownership of the land for at least five years.

Is this statement True or False?

Answer 1

the statement is False.

Ownership of property needs to be proved for a period of at least 15 years prior to the proposed sale.

Question 2

Which one or more of the following questions is or are correct?

A. A legal easement created over an unregistered title is automatically binding on subsequent purchasers of that title.
Correct answer
B. When the Bilford Bank Trust Corporation, acting as trustee of the Smith Family trust, sells land with unregistered title belonging to the trust, the purchaser will not be bound by the interests of the Smith Family.
Correct answer
C. An equitable lease created over an unregistered title after 1925 is binding on a purchaser unless he is Equity’s Darling.
D. A purchaser of an unregistered title will not be bound by a pre-1926 restrictive covenant if he is Equity’s Darling.

Answer 2

statements A, B and D are correct.

Legal rights generally bind the world in the unregistered system. A trust corporation can give a valid receipt for capital money arising on the sale of a trust property (ss 2 & 27 LPA 1925). A post-1925 equitable lease is an estate contract and so should be registered as a C(iv) land charge at the Central Land Charges Department to bind a purchaser. Pre-1926 equitable interests (including covenants and easements) still rely on the doctrine of notice (‘Equity’s Darling’) for their enforceability.

Question 3

Which one or more of the following statements is or are correct?

An option to renew a legal lease will be binding on a purchaser of the freehold title if…

A. The freehold has an unregistered title and, before the sale, the option had been registered as a C(iv) land charge at the Central Land Charges Department

B. The freehold has an unregistered title and, before the sale, the option had been registered as a class F land charge at the Central Land Charges Department
C.
The freehold has a registered title and, before the sale, the option had been registered as an overriding interest on the title at Land Registry
D. The freehold has a registered title and, before the sale, the option had been protected by registration of a notice in the Charges Register of the title at Land Registry

E. The freehold has a registered title and the tenant with the benefit of the option is in actual occupation of the property at completion of the sale

F. The freehold has an unregistered title and the tenant with the benefit of the option is in actual occupation of the property at the completion of the sale

Answer 3

A, D and E are correct.
To be binding on a purchaser of an unregistered freehold, an option must be protected by registration as a Class C(iv) land charge at the Central Land Charges Department (Plymouth). (Class F protects the statutory right of a non legal owning spouse or civil partner to occupy under s 30 Family Law Act 1996). With a registered title the option will be binding if it is either protected as an interest affecting a registered estate by the registration of a notice in the charges register of the title, or it may be protected as an overriding interest if the tenant is in actual occupation under Schedule 3 paragraph 2 LRA 2002. The option is an interest in land and that interest becomes overriding if the owner of the interest is in actual occupation of the property. Overriding interests are not entered on the register and the principle does not apply to the unregistered system.

Question 4

As a result of the Land Charges Act 1925, certain incumbrances must be registered as land charges if they are to bind successors in title. Please match the following incumbrances to their correct land charges class.
Incorrect
1 of 4 pairs matched correctly
Prompts
Answers
1. Restrictive covenant created on or after 1 January 1926
Class D(ii)
2. Equitable lease
Class C(iv)
3. Estate contract
Class C(iv)
4. A right of occupation under the Family Law Act 1996
Class F

Question 5

Tim holds Blackacre on trust for Bella and Barry. Tim sells Blackacre to Peter.

Which one of the following statements is correct?

A. If Blackacre has an unregistered title, Bella’s and Barry’s interest will only be binding on Peter if it was registered as a C(iii) land charge at the Central Land Charges Department.
B. If Blackacre has an unregistered title, Bella’s and Barry’s interest will not be binding on Peter if he is a bona fide purchaser for value of the legal estate without notice of their interest (Equity’s Darling).

C. If Blackacre has a registered title, Bella’s and Barry’s interest will be binding on Peter because equitable interests under a trust are always overriding interests.
D
Whether the title is registered or unregistered, Bella’s and Barry’s interest will not be binding on Peter because he overreached it when he purchased the property.

Answer 5

B

Peter has not satisfied the condition for overreaching because he did not pay the money to all the trustees being a minimum of two or, if appropriate, to a trust corporation. There was only one trustee, Tim. With unregistered titles it is not possible to register equitable interests arising under a trust at the Central Land Charges Department. This means that when deciding whether or not the interest is binding on a purchaser in the unregistered system we must ask whether or not the purchaser is Equity’s Darling. With a registered title, interests under a trust are only overriding interests if the owner of that interest is in actual occupation of the property (Schedule 3 paragraph 2 LRA 2002).

Question 6

Select the correct phrase from the list below to complete the following statement:

A seller of a registered title must prove his ownership by providing the buyer with

A. copies of the title deeds
B. a Land Charges Department search
C. a Land Registry search
D. official copies of the title from Land Registry

Answer 6

D. official copies of the title from Land Registry

You are right. The seller’s ownership can only be proved by entry of his name on the Proprietorship Register of the title to the land at Land Registry. A seller must provide a buyer with a copy of the title, known as ‘official copies’. A search of the Land Register will not provide this information. Title deeds and Land Charges searches are only relevant where the seller owns land with an unregistered title.

Question 7

Where the title to the property is registered, a mortgage by deed may either be protected by deposit of the title deeds or by the registration of the charge against the title to the property at Land Registry.

Is this statement True or False?
1.
True
2.
FALSE

Answer 7

FALSE

To be binding on a purchaser of the registered title and to be completed as a legal mortgage, the mortgage must appear as a registered charge in the charges register of the title at Land Registry, as it is a registrable disposition under s 27 LRA 2002. It is not possible to protect a mortgage of a registered title by deposit of title deeds.

Question 8

Henry, the registered proprietor of Rose Cottage, sells the property to Paul. When Paul tries to move in, Henry’s wife Wendy refuses to move out. She tells Paul that she paid £20,000 towards the purchase of Rose Cottage and she has the right to stay there.

Which ONE of the following statements is correct?
1. Wendy has no automatic right to remain in the property because she has no interest in the land.
2. Wendy’s equitable trust interest will only be binding on Paul if it has been registered as a notice on the Proprietorship Register of the title to Rose Cottage.
3. Wendy’s equitable trust interest may be binding on Paul as an overriding interest under Sch 3 para 2 LRA 2002.

4. Wendy does not have an additional interest under s30 Family Law Act 1996 as she is already an equitable owner.

Answer 8

C is correct.

Paul has not overreached Wendy’s (valid) equitable trust interest as he has only paid one trustee (Henry) and her interest is incapable of being registered as a notice on the register (s33 Land Registration Act 2002). Her equitable trust interest may be binding on Paul, however, as an overriding interest under Schedule 3 paragraph 2 LRA 2002 by virtue of her actual occupation. Wendy does have an interest under s30 FLA 1996 as well, as she was not a legal owner of the cottage. (To bind Paul it would have to be protected by entry of a notice on the register of title and cannot be protected by Schedule 3 paragraph 2 LRA 2002).

Question 9

Since 13.10.03, which one or more of the following legal leases must be registered with their own title (and noted against the superior title) in order to bind a purchaser?

A. Lease for 3 years

B. Lease for 10 years

C. Lease for 7 years

D.Lease for 21 years

E. Lease for 22 years

Answer 9

B. Lease for 10 years

D. Lease for 21 years

E. Lease for 22 years

only leases granted for more than seven years must be registered with their own title. (Under the pre-LRA 2002 rules, the term was twenty-one years).

Question 10

Select the correct authority from the list below to complete the following statement: Easements created by implication or prescription are enforceable against a purchaser of land with registered title under.
Hide answer choices
A. s 27 Land Registration Act 2002
B. Sch 3 para 2 Land Registration Act 2002
C. Sch 3 para 3 Land Registration Act 2002
D. Sch 3 para 1 Land Registration Act 2002
E. s 32 LRA 2002

Answer 10

C. Sch 3 para 3 Land Registration Act 2002

Such easements are legal but are not registrable as they are not created expressly in a deed. Instead, they are protected as overriding interests under Schedule 3 para 3 Land Registration Act 2002. (Sch 3 para 1 protects legal leases for 7 years or less and Sch 3 para 2 protects interests where the owner of the interest is in actual occupation of the land. Section 27 refers to registrable dispositions and s32 to registration of notices).

Question 11

1. In 1978, a man sold part of his freehold unregistered land (‘the Property’) to a woman. In the conveyance, the woman promised not to use the Property for any purpose other than a private residential house. The man took no steps to protect the promise made by the woman. Recently, the woman sold the Property to a hotel manager. The manager gave the woman an indemnity covenant to observe and perform the promise. The manager has converted the Property and is running it as a hotel.

Which of the following statements best describes the manager’s liability to the man in relation to the promise by the woman?
A. The manager is not bound because the man took no steps to protect the freehold covenant as a land charge.
B. The manager is bound as he gave the woman an indemnity and therefore the man can pursue the manager direct using the indemnity.
C. The manager is bound as the freehold covenant is restrictive in nature and therefore binding on a successor.
D. The manager is bound by the freehold covenant as it was made by deed and is therefore good against the whole world.
E. The manager is not bound because the man can only pursue the woman for breach of the covenant via privity of contract.

Answer 11

A is correct.

The covenant made by the woman is a restrictive covenant and therefore equitable by nature – s.1(3) LPA 1925. Even though it has been made by deed, it retains its equitable nature and is therefore not good against the whole world.

Only the burdened land has changed hands. The manager is only bound by the covenant if the criteria in Tulk v Moxhay are met. The final criteria is that the purchaser, the manager, must have notice of the covenant. In unregistered land such a covenant is protected by a D(ii) land charge – s.2 LCA 1972. If it is not so protected, it will be void against a purchaser for money or money’s worth of the legal estate – s.4(6) LCA 1972.

The man can pursue the woman via privity of contract. The woman could then pursue the manager via the indemnity covenant.

Question 12

Last month, before emigrating to Australia, the then owner (“the Former Owner”) of a house with an unregistered title made an outright gift of the house to his cousin who did not have a home of his own. When the Former Owner bought the house a few years ago, his wife paid the deposit and when doing so she made it clear to her husband, the Former Owner, that in paying the deposit she was not doing so as a gift or a loan. Before accepting the gift of the house, the Former Owner’s cousin was shown around the house by the Former Owner and his wife but the cousin was not aware that the Former Owner’s wife had paid the deposit. The Former Owner’s wife, who did not want to emigrate to Australia, is claiming that she is entitled to an interest in the house in a consequence of having paid the deposit.

Is the Former Owner’s wife entitled, as a consequence of having paid the deposit, to an interest in the house that is enforceable against the Former Owner’s cousin who now owns the house?
A. Yes, because the house was gifted to the Former Owner’s cousin.
B. No, because the Former Owner’s cousin was unaware that the Former Owner’s wife had paid the deposit.
C. Yes, because the Former Owner’s cousin was aware that the Former Owner’s wife had been living in the house.
D. Yes, because the house had been the matrimonial home.
E. Yes, because the Former Owner’s cousin should have found out that the Former Owner’s wife had paid the deposit.

Answer 12

A is correct because the Former Owner’s cousin, not being a purchaser for value of the legal estate, was bound by the implied trust interest of the Former Owner’s wife arising from her payment of the deposit.

Option B is wrong because it is irrelevant that the Former Owner’s cousin was unaware that the Former Owner’s wife had paid the deposit.

Option C is wrong because it is not relevant that the Former Owner’s wife had been living in the house.

Option D is wrong because it is not relevant that the house had been the matrimonial home.

Option E is wrong because there was no requirement on the part of the Former Owner’s cousin to enquire whether the Former Owner’s wife had paid the deposit.

Question 13

A buyer recently completed the purchase of an unregistered freehold property (‘the Property’). Yesterday, the buyer moved into the Property and was confronted by the neighbouring landowner who claimed to have a right of way over the Property for 20 years. The neighbouring landowner produced a deed evidencing the right of way. The buyer checked the document and discovered that the signatures had not been witnessed.

Will the buyer be bound by the neighboring landowner’s right of way?
A. Yes, because the right-of-way is a legal right and, therefore, binding on the buyer.
B. No, because the right of way is equitable by nature and, therefore, not binding on the buyer.
C. No, because the right of way is legal but only binding if a Land Charge is registered.
D. Yes, because the right of way is equitable and the buyer is bound by the equitable doctrine of notice.
E. No, because the right of way is equitable and the buyer will only be bound if a Land Charge has been registered.

Answer 13

The correct Option is E.

An easement for a fixed duration (20 years) is capable of being legal. A deed is required to create a legal easement. The document does not comply with the formalities for creating a deed because the signatures have not been witnessed. The easement is, therefore, equitable and would need to be protected by registration of a Land Charge.

Option A correctly states the legal principle but does not relate to the facts. The answer is, therefore, wrong.

Option B is partially correct in that it identifies that the easement is equitable but wrong in stating that an equitable easement cannot bind the buyer.

Option C is wrong as a legal easement in unregistered land would bind the world. A Land Charge is only required to protect an equitable easement.

Option D correctly states the legal principle applying to equitable easements created prior to 1926 but the easement in question was created recently and, therefore, the answer is wrong.

Question 14

A solicitor acts for the buyer of an unregistered property. Last year, the seller granted the adjoining owner the right (by deed) to use their property as a shortcut to reach the nearby village for a period of 10 years.

Which of the following best describes the buyer’s position in relation to this interest?
A. The buyer will not be bound by the interest unless it has been registered as a D(iii) Land Charge.
B. The buyer will not be bound unless the easement has been registered on the seller’s title.
C. The buyer will be bound as they have notice of the easement under the doctrine of notice.
D. The buyer will not be bound by the interest as it is for a fixed duration and, therefore, not a legal easement.
E. The buyer will be bound by the legal interest as it is binding against the whole world.

Answer 14

The correct statement is E.

The interest is an easement. An easement must be equivalent to a freehold (forever) or a term of years absolute (a fixed ascertainable duration). The period of 10 years complies with this. Therefore, option D is wrong.

An easement is capable of being legal but, in order to be legal, must (unless created by implication or prescription) be created by deed. The facts state that this is the case. In unregistered land a legal easement is binding against the whole world.

A D(iii) Land Charge protects an equitable easement. The easement is legal. Therefore, option A is wrong.

The doctrine of notice applies only to equitable easements. Option C is, therefore, wrong.

Option B is wrong as it relates to registered land and the question relates to unregistered land.

Question 15

A solicitor is acting for the buyer of a freehold property with registered title. The buyer plans to extend the property into the garden area to have a larger kitchen and dining space. The seller has told the buyer that the previous owner of the property purchased it from the person next door, and in the transfer deed promised not to alter the exterior without first getting approval from them.

What will the buyer’s solicitor look for when examining the Land Registry official copy of the title to confirm that there is a binding covenant?
1. A restriction on dealings in the Proprietorship Register.
2. An entry referring to a covenant in the Property Register
3. An entry referring to a covenant in the Charges Register.
4. An entry referring to a restriction on dealings in the Property Register.
5. An entry referring to a covenant in the Proprietorship Register.

Answer 15

The correct statement is C - the entry would be a notice referring to the covenant in the Charges Register of Title.

Option A is wrong as the entry should be a notice on the Charges Register of Title not a restriction on dealings.

Option B is wrong as the entry should appear in the Charges Register of Title.

Option D is wrong as the entry should be a notice on the Charges Register of Title and a restriction on dealings would appear in the Proprietorship Register of Title.

Option E is wrong as the entry should appear in the Charges Register of Title.

Question 16

A woman lives in a house, the registered freehold of which is owned in the sole name of her civil partner. The woman has resided there throughout the 12-year relationship, but she has made no direct or indirect financial contributions towards the house.

The relationship has recently broken down and so she seeks advice from a solicitor. She explains to the solicitor that her civil partner has now moved out of the house and is threatening to sell it. This is concerning her as she would be left homeless if a sale did go ahead.

Which of the following statements best describes the advice which should be given to her by the solicitor in relation to her concerns about a sale of the property?
A. She should immediately register a Class F land charges against the name of the civil partner at the Land Charges Department.
B. She should immediately register a notice in the charges register of the title to the property.
C. She should immediately register a restriction in the proprietorship of the title to the property.
D. So long as she continues to live in the property, a buyer will be bound by her overriding interest as a person in actual occupation, irrespective of whether her interest is registered.
E. A buyer will be able to overreach her interest by paying the purchase money to at least two trustees, irrespective of whether her interest is registered or whether she is living in the property.

Answer 16

Option B is correct
because she has home rights under s30 Family Law Act 1996 (FLA) as a non-owning civil partner.
As the title to the property is registered, she should protect this interest by registering it as a notice in the charges register (it is classified as a minor interest). If this is done by the date of registration of a buyer, it will bind the buyer and she cannot be evicted from her home without a court order whilst the civil partnership is still in existence (in practice, it is unlikely that a buyer would proceed with a purchase whilst such a notice remains on the register).

Option A is wrong because the registration of a Class F land charge would only be applicable if the property had an unregistered title.

Option C is wrong because a restriction would only be relevant if she had a trust interest and on the facts it appears that no such trust interest has arisen (and in any event, a restriction simply alerts a buyer to overreach).

Option D is wrong because home rights cannot be protected by actual occupation as an overriding interest under Sched 3 para 2 Land Registration Act 2002 (s31(10)(b) FLA 1996).

Option E is wrong because it is only possible for a buyer to overreach a trust interest, and on the facts no such trust interest has arisen.

Question 17

A client purchased the freehold of a property from a sole seller. The price the client paid to the seller for the property was below market value. Title to the property was unregistered. During the course of the transaction, the conveyancing solicitor acting on behalf of the client discovered that the seller’s mother had originally contributed to the purchase price when the seller had purchased the property, although the property had only been conveyed into the seller’s sole name. The solicitor did not pass any of the information relating to the mother or her contribution to the purchase price on to the client before the purchase completed. The seller’s mother now claims she has an interest in the property and that the client is bound by that interest.
Will the client be bound by the mother’s interest?
A. No, because the client is a bona fide purchaser of the legal estate for value without notice.
B. Yes, because the client had notice of the mother’s interest.
C. Yes, because the client did not purchase the property at market value.
D. No, because the mother’s interest was successfully overreached.
E. No, because the interest should have been registered by the mother as a land charge on the Land Charges Register.

Answer 17

Option B is correct.

The mother is likely to have an equitable interest in the house because she has contributed to the purchase price.

As title is unregistered, the rules relating to unregistered land apply.

Some equitable interests are capable of being registered as land charges and these are listed under section 2 of the Land Charges Act 1972. An equitable interest under a trust (such as the mothers) is not capable of being registered as a land charge. Therefore Option E is wrong.

As the interest is not capable of being registered as a land charge, the basic rule in unregistered land applies, namely that equitable interests are enforceable against anyone except the bona fide purchaser of the legal estate for value without notice
The client appears to be bona fide and is a purchaser. The client has also bought the property for value - it does not matter that the consideration is less than market value so Option C is wrong.

The issue here is that the solicitor was aware of the mother’s interest. Even though the client did not have actual or constructive notice, the client’s solicitor did have actual notice and therefore the client is deemed to have imputed notice.

It would have been possible to overreach the mother’s interest if the client had paid the purchase money to at least two trustees or a trust corporation. However, the facts make it clear that the client purchased the property from a sole seller. Therefore, Option D is wrong.