Topic 5 - Practical aspects of property and mortgage law Flashcards
What is the purpose of land registration?
Land registration is used to provide an accurate, up‑to‑date and continuing
record of ownership of land
Who is responsible for land registration in Scotland?
In Scotland, land registration is the responsibility of the
registers of Scotland
What details does the Land Registry hold for registered land?
The Land Registry holds details across 3 separate registers for registered land:
These are:
1) The property register - contains details about the land, a plan of the property including any easements that are beneficial to the property
2) The proprietorship
register - contains details various details, such as things about the owner and tenure type
3) The charges register- contains info regarding any charges over the property, including any negative easements or restrictive covenants or the rights of any mortgagee (lender)
Tell me the various classes of title in relation to property ownership
1) Absolute (best)
2) Good leasehold
3) Possessory
4) Qualified title (worst)
If I were to say the following, what do I mean:
It’s best to buy a property ‘with good title’
IE, I own my property freehold with good title
‘Good title’ means the property has a clear and legally sound ownership history
Prospective buyers will obviously want this because it means they don’t have to worry about any issues down the line such as legal challenges about ownership or something else.
Buying real estate with good title ensures a smooth and secure transfer of ownership
Tell me the various classes of title in relation to property ownership in order from best to worst and briefly explain each
1) Absolute (best)
The following is classed as ‘Absolute’:
-Freehold with good title
-Leasehold with good title (the lease must be at-least 21 years and both the leaseholder and freeholder have ‘good title’ )
2) Good leasehold
The following is classed as a ‘good leasehold’:
-The lease is longer than 7 years
-The leasehold is fine but the freeholder’s title is not (ie the freeholder has not supplied the land registry with evidence of ownership perhaps because the title deeds are destroyed or lost)
3) Possessory
The applicant is unable to produce the title deeds or other proof of title when the property is first registered. Applies the same to freehold and leasehold property
Possessory title means the owner is registered as the owner, but it does not provide protection from a claim from another person asserting that they owned the land before it was registered. Lenders will therefore avoid unless they have indemnity insurance, which will obvs cost more for the borrower
4) Qualified title (worst)
This is rare
Occurs when there is some defect in the title as registered, and so absolute or good leasehold title cannot be guaranteed. A defect might be legal issues or errors in property records and so on.
What are the title deeds of a property?
The title deeds are the documents that prove ownership of the property and show the history of ownership
You show the land registry these documents and they will then allocate your ownership title. IE, if the title deeds are full and correct you will be given absolute title or if you cant supply the documents because they are destroyed for instance (which is what happened a lot during WW2) you may be given possessory title and so on
What are squatters rights when it comes to:
Unregistered Land
Registered land
For unregistered land:
If a squatter has been in intentional occupation of the land for 12 years with no objection from the legal owner they may apply for possessory title.
Once possessory title has been held for 12 years without counter claims, the Land Registry will usually allow the title to be upgraded to absolute title
Registered Land:
If occupied for 10 years without objection from the registered owner, the occupier can claim title to the land.
They will get absolute title if there is no objection from the owner
If the owner does object the applicant will be rejected unless they can:
Show that it’s unreasonable to
deprive them of the property
Show they have a valid claim on the property (eg they had paid for the property but it was not registered in their name)
Can show they had occupied the property reasonably believing it is their own.
What is a squatter
An individual who intentionally lives in a property without permission and lives there
It is known as ‘adverse possession’
A squatters right when it comes to registered land is as follows:
If registered land has been intentionally occupied for 10 years without objection from the registered owner, the occupier can claim title to the land.
They will get absolute title if there is no objection from the owner
What happens if the owner does object after the squatter making an application:
If the owner objects the squatter’s application will be rejected unless they can:
Show that it’s unreasonable to
deprive them of the property
Can show they have a valid claim on the
property (eg they had paid for the property but it was not registered in their name)
Can show they had occupied the property reasonably
believing it is their own.
What is a conveyancer ?
Person whose job is to manage the process of transferring legal ownership of property
Transfers of registered land should be
registered within 30 days of completion
Is this a legal requirement?
What is the 30 day period known as?
What issues can arise if the transfer takes longer than 30days?
Not a legal requirement
The 30 days is referred to as the
‘priority period’ . Its called this because the new owner has priority over other claims and charges.
Failure to register within 30 days could mean other interests may be registered and take higher priority
Is registration of land compulsory?
Yes it is
What is classed as unregistered land?
Unregistered land is land that has not, since the introduction of compulsory registration:
Been legally transferred;
Had a lease exceeding seven years granted;
Had a legal mortgage created upon it;
Had rights entered over
Land registration is compulsory nowadays. How is it possible there is unregistered land still?
It was unregistered before the introduction of compulsory registration and it has remained so since
When a new owner is registering a property, what is the timeframe and what happens if they dont meet this timeframe?
An application for registration must take place within two months of the
transfer;
If the timeframe is missed, the title reverts to the previous owner, who will hold it on trust for the new owner
What does the term ‘root of the title’ refer to?
When a conveyancer is looking to establish good title they search back the last 15 years (known as root of the title)
An unregistered property makes it more difficult to do this
Easements and Restrictive Covenants are said to ‘run with the land’
What does this mean?
It means they remain in place and are passed on to future owners
Ie they stay on the land
What is an easement?
An easement is a right that one property has over the land of another
Common examples include: rights of way, rights to light or prospect (the view), rights to hang a sign on another person’s house and so on
It must involve two properties, that are close together, with two separate owners
What is a Dominant Tenement?
What is a Servient Tenement?
Both refer to easements
An easement is a right that one property has over the land of another
The land that enjoys the right over the other is called the dominant tenement
The land which is subject to the right is called the servient tenement
What is the difference between a positive easement and a negative easement?
Positive easements give the landowner a right himself to do something on, or to his
neighbour’s land
Negative easements give the landowner a right to stop his neighbour doing something on his (the neighbour’s) own land’
One type of positive easement is ‘right of way’
Explain what right of way is
Why is it is a positive easement?
Right of way allows someone to cross someone else’s land without breaking the law
You may need it so you can get access to your own property. For example, you have to walk through your neighbour’s field to get to your land
Many lenders will only lend money to prospective buyers of flying freeholds if there is an existing easement in place which allows right of way through the property that the flying freehold is situated in. This is the case because otherwise , there is no guarantee the flying freehold can be maintained resulting in more risk for the lender
Positive easements gives the owner of land a right himself to do something on or to his
neighbour’s land (ie walk across it as with right of way) hence positive easement
What is right of light?
Why is this a negative easement?
A right of light is established when
one person wants to build a property adjacent to another.
The occupant of the existing property can take action to secure their right of light, forcing the developer to build a certain distance away from the existing property
Negative easements give a landowner a right to stop his neighbour doing something on their (the neighbour’s) own land.
What is an easement by necessity?
This type of easement is one that is created automatically because it is necessary for the landowner in order to
do something essential.
ie, A landowner might sell a small part of their farm land, like a barn, which is surrounded by their other land. An easement will be automatically created which allows the buyer to walk across the landowner’s land so they can gain access to their land. This is an easement by necessity is it is necessary for the new land owner to do something essential.. gain access to their land
Can an easement be removed?
What is the term for this?
If an easement is removed it is said to be ‘extinguished’
The main reasons an easement is extinguished are:
The same person takes ownership of both the dominant and servient pieces of land.
The easement expires
The owner of the dominant piece of land expressly terminates the easement by deed, after negotiating with the other parties
Do easements apply to the landowner or the land?
The land
That’s why easements are said to ‘run with the land’ as they remain and apply to any subsequent owners
An easement can be extinguished through implied release
Give an example:
The owner of the dominant land has not used the easement for more than 20 years
The opposite to easement by necessity
What are covenants?
Covenants are restrictions or conditions placed by a landowner on those who subsequently buy or lease the land
Covenants apply to a single property
What is the difference between a covenant and an easement?
Covenants impose restrictions or conditions to subsequent owners about things like can/cannot do. Covenants apply to a single property
Easements impose a right that one property has over the other. Easements apply to 2 properties
What is a positive covenant?
What is a negative covenant?
POSITIVE COVENANT
A condition of title imposed by an earlier owner stating what subsequent
owner‑occupiers must do. (ie, keep a boundary such as a fence with your neighbour)
RESTRICTIVE COVENANT
A condition of title imposed by an earlier owner specifying what an owner‑occupier must not do (ie, don’t build a house on the drive way or park caravans on the property)
Restrictive Covenants run with the land.
Why would an earlier owner occupier impose a restrictive covenant on future owners?
A restrictive covenant states what a subsequent owner‑occupier must not do
This could have been added for a number of reasons
For example, if there is no restrictive covenant (or local authority restrictions) stopping the owner from building a new house on their drive they may do this. This is turn will have a negative impact on the developers reputation who built the house
Both easements and restrictive covenants run with the land. What does this mean?
‘run with the land’, means it relates to the property rather than the owner and are passed on to the next owner when the property
changes hand
Positive Covenants do not run with land meaning new owners are not automatically bound by it. However, in most cases new owners are subject to the covenant once they buy the property. Explain why this is
The person who was first subject to the covenant may
still be bound by it
Therefore, when they sold the property it would be agreed that the covenant remains
They would also insert a clause in the deed that makes any future sale conditional on the
covenant being included
Since they are still bound by the covenant, if they didn’t do this, and the new owners broke the covenant’s rules, they could face legal issues
Define the following:
Easement
Restrictive Covenant
Positive Covenant
EASEMENT
A right that one property has over another, eg rights of way, right of light.
POSITIVE COVENANT
A condition of title imposed by an earlier owner stating what subsequent owner‑occupiers must do.
RESTRICTIVE COVENANT
A condition of title imposed by an earlier owner specifying what an owner‑occupier must NOT do
When a vendor sells the property they state whether they are selling with full title guarantee, limited title guarantee or no guarantee
If the vendor sells with full title guarantee what does this mean?
If the vendor sells with
limited title guarantee what does this mean?
Full title guarantee =
Free from any charges and encumbrances, and free from any rights
exercisable by third parties, other than
those of which they could not reasonably
be expected to know (lenders will generally only accept this type)
limited title guarantee = Since the vendor acquired the property,
they have not created any charges or
encumbrances that still subsist over it and As far as they know, no one else has done
so either.
What does the word encumbrances mean?
It refers to any legal claims, restrictions, or limitations on the property (such as easements, covenants etc)
How do all the following affect a lenders decision?
Title Guarantee
Easements
Restrictive Covenants
Matrimonial Interests
Title Guarantee = Some lenders will only accept a full title guarantee in order to lend
Easements = Some easements have a negative impact on value of land. A lender may reduce the amount they’ll lend or decline to lend entirely depending on the easement
Restrictive Covenants = Same as easements
Matrimonial
interests = These interests and the potential interests of others who may be
occupying the property, will require the lender’s attention
What is a ‘consent to mortgage form’
Why is it used?
This form contains a
declaration that the
signatory gives up
their right to claim an
overriding interest in the property
A lender will make any adult occupants in a property who are not legal owners of the property (like myself living with my parents) sign this form so in the event of a claim on the property (ie the mortgagor defaults) the adult occupants cannot claim any rights over the lender. If this were to happen to the lender may not be able to sell the property which is obvs a big risk
This ties in with the matrimonial topic 5.5
What is a mortgage deed?
The mortgage deed sets out the terms and conditions of the mortgage
Under a typical mortgage deed, what are the lenders rights over the borrower?
Levy Charges
Call in the debt
Insure the property (if the borrower fails to)
Meet statutory conditions (Meet any conditions imposed by statute, a local authority or title, if the borrower fails to do so)
Let the property (after taken into possession)
Transfer the mortgage to another lender with the borrowers consent
Make further advances without creating a new mortgage deed
Under a mortgage deed, there is a section that outlines the borrower’s covenants
Explain what this section is and tell me all the things it includes
A borrowers covenants in the mortgage deed are a number of things the borrower promises to do, which the
lender can enforce if they fail to do so
It includes the following:
Make mortgage payments
Insure the property
Comply with legislation
Seek consent before letting
Allow lender access to property for repair when reasonable
To comply with the conditions of the title (ie, positive covenants, restrictive covenants and/or easements)
To comply with the terms of the lease of a leasehold property ( if applicable )
Which Land Registry sub register holds details of the nature and class of title applying to a property?
The property register
The proprietorship register.
The charges register.
The proprietorship register
The property register contains details of the land, its title number and a plan of the property.
The charges register records any charges over the property
Tell me the different land registers and the difference between them
The property register = The property register contains details of the land, its title number and a plan of the property
The proprietorship register = holds details of the nature and class of title applying to a property
The charges register = records any charges over the property.
If registered land has been intentionally occupied for ten years without objection from the registered owner, the occupier can claim title to the land. This is known as:
possessory title.
squatters’ rights.
qualified title rights
squatters’ rights
Possessory title occurs when the owner is unable to produce the title deeds or other proof of title when the property is first registered. They could still face a claim from someone else to be registered as legal owner.
Qualified title is rare and occurs where there is some defect in the title as registered, and so absolute or good leasehold title cannot be guaranteed. The title is given, subject to any defect
Pamela and Gareth are buying a house that is not yet registered with the Land Registry. Within what period must an application for first registration be complete?
The deadline for unregistered land is two months.
The deadline for registered land is 30-days
Which of the following statements apply to easements? Select all that apply.
Easements are a right that one property has over another.
The two plots do not have to be close together.
The benefit applies to the property rather than the owner.
Encirclement creates an easement by necessity.
Easements can generally impose a positive burden on a property.
The property over which the right is held is called the ‘servient tenement’
The two plots must be close together.
With one or two exceptions, an easement cannot impose a positive burden on the servient tenement, ie cannot demand that the owner acts.
Everything else applies
Requiring a property owner to maintain a fence on the property is an example of a:
Requiring the owner to do something is a positive covenant
Manolo has discovered that there is a restrictive covenant on his property and wishes to remove it. He is unable to trace the beneficiary of the covenant. What can he do?
A) He cannot remove the covenant if he cannot find the beneficiary.
B) He can remove the covenant by default if all neighbours affected by its removal agree.
C) He can take out an indemnity policy
C
The covenant is between the property and the original beneficiary, so neighbours would have no say in its removal.
If Manolo cannot trace the beneficiary, he can arrange an indemnity policy to cover him in the unlikely event of a future claim.
The right under the Family Law Act 1996 for a non-owning spouse to enter and occupy their spouse’s registered property would be entered on the Land Registry:
a) proprietorship register.
b) property register.
C) charges register
C
The legislation recognises the right of a non-owning spouse to register an interest in the property through a formal entry on the charges register at the Land Registry for registered land, or the land charges register for unregistered land
Aisha is applying for a mortgage to buy a house in her sole name, and has agreed that her older brother Aabir can live with her. Why would the lender require a signed ‘consent to mortgage’ form from Aabir?
It will prevent him from gaining rights over the property
Signing a ‘consent to mortgage’ form removes the overriding rights gained by adults who occupy the property but are not registered as legal owners
Which of the following would no tbe a lender’s right under a mortgage deed? To:
A) To take possession if the borrower defaults on the mortgage.
B) Insure the property if the borrower fails to do so and charge premiums to the mortgage account.
C) let the property if it has been repossessed.
A
The lender must seek a court order before it can take possession; it is not an automatic right contained in the mortgage deed like the other two, but a legal remedy available in the event of default
James is buying a leasehold flat with a mortgage. How would the mortgage paperwork state the requirement for him to comply with the terms of the lease?
Within the lender’s rights in the mortgage deed.
As a borrower’s covenant in the mortgage deed.
As a standard condition in the mortgage offer.
As a borrower’s covenant in the mortgage deed
Kevin and Janice married five years ago and lived in the house Kevin bought before their marriage; he is registered as the sole owner. The couple divorced last year, but under the Family Law Act 1996, there is a charge over the property to protect Janice’s interests in the property. This charge would be shown in the:
proprietorship register.
ownership register.
charges register.
property register
charges register
Karen has put her house on the market. She is registered as the owner at the Land Registry but at the time of registration she was unable to provide the title deeds or other proof of title. What form of title does Karen have?
Possessory – Karen is the registered owner, but because she did not have the title deeds or other proof of title, there is a possibility that someone else has a claim on the property. Therefore she cannot be granted absolute title
How long after taking possession of the land can a ‘squatter’ apply for ownership of REGISTERED land?
10 years
Rights over unregistered land are registered in the charges register. True or false?
False: rights over unregistered land are registered with the Land Charges Registry
If the buyer fails to register previously unregistered land within two months of purchase, the legal transfer becomes void. True or false?
True: The legal transfer becomes void. Title reverts to the previous owner, who holds it on trust for the new owner
Javier’s self‑build property is encircled by land owned by the person who sold him the plot. An easement by necessity will give him a right of way to gain access to his house. True or false?
True
Don’s deeds contain a clause forbidding him from having trees in excess of 2m in height on his boundary. This is an example of
a. restrictive covenant?
b. Negative easement?
A Restrictive covenant
A previous owner has stopped him doing something
Vendors are deemed to covenant that they have the right to sell the property. True or false?
True
Tell me the definition of the following:
An easement
A Covenant
Easement = A right that one property has over another, eg a right of way. A positive easement gives the dominant tenement the right to do something. A negative easement restricts what the servient tenement can do. Easements run with the land, so pass on with the property each time ownership changes
Covenant = A restriction or condition placed on land by a landowner that will affect future purchasers. A positive covenant requires the owner to do something, such as maintain a fence, while a restrictive covenant prevents the owner from doing something, such as parking a caravan on the property. Covenants run with the land, so pass on with the property each time ownership changes
What is Chancel repair liability?
An ancient right given to parochial councils, which can require the owners of certain properties in the parish to pay for, or towards, the cost of repairs to the chancel of the parish church
What is a Puisne mortgage?
A second or subsequent charge on unregistered land where the deeds are held by the first-charge lender.
