Contrasts of the Land Law - Essay Example

?Land Law Contracts of whatever nature regulate the relations between the contracting parties thus conferring upon them the liberty to stipulate and agree on such terms and conditions as they deem convenient and reasonable under the circumstances subject to such limitation that it must not contravene existing laws, public policy, good morals or customs. Owing to the bilateral nature of the contract, the parties are duty bound to respect the terms embodied therein and they cannot abdicate or relinquish the performance of their obligations unilaterally. Both parties are enjoined to comply in good faith with the provision of the contract to realize its purpose. The general rule is that contracts are not transmissible and cannot be enforced against third parties. However, this rule is not absolute and admits exception as when real rights are affected then the terms and conditions of the contracts entered into by other persons may be enforced or deemed binding upon said thirds parties and acquiescence or recognition of rights bestowed is rendered compulsory. A natural person or juridical entity therefore is free to enter into an agreement to exercise dominion or ownership over a property. Ownership of a real property in fee simple excludes all others from the enjoyment and possession thereof giving the owner complete and unconditional rights over the property to cede, dispose, transfer, mortgage or otherwise alienate it in a manner not contrary to law, public policy and good morals. An owner’s unbridled right or dominion over the property should be mindful of the rights of others to peaceful co-existence. It should not be a nuisance as to usurp the rights of others to freely enjoy fruits or benefits of their properties as well. Legal concerns are presented by Mineral Ventures resulting in its acquisition over the freehold owned by Leo through foreclosure proceedings after he defaulted in the payment of the loan he procured in 2007. Though Leo voluntarily vacated the premises, the problem arose when he removed a number of huts built in 2004 which were attached individual plinths that served as offices and facilities for his employees. Another issue which must be equally given attention is the claim of ownership of Reckless Rail (RR) over the one mile railway track connected from the freehold to the national railway system. RR now asserts its ownership over the railway track as Leo defaulted in the payment of the annual installment. Pursuant to its agreement with Leo, RR shall retain ownership over the track until it is fully compensated for its supply and fitting of concrete sleepers and steel rails. Mineral Ventures wants to find out if it has rights to run after Leo for the return of huts he removed and if Mineral Ventures can sell the freehold with the railway track without recognizing RR’s rights over it. Elementary is the rule that Leo as the landowner can validly enter and in fact had entered into a legal property mortgage agreement with Mineral Ventures covering Prospect Hills to keep Leo’s business operations afloat. Prior to the execution of the real estate mortgage, it is likewise indisputable that Leo had executed a binding and enforceable commercial contract agreement with RR. Under the agreement between Leo and RR, it was mutually consented and stipulated that the ownership of the railways RR installed in Prospect Hills stretching towards the national railway shall be retained by it until the annual installments are paid in full. On the first issue posed by Mineral Ventures if it has legal standing to demand for the return of the huts or in the alternative, entitled to be indemnified or to recover the cost of the huts, it must first be determined whether the huts are considered immovable or real property and movable or personal property. A property is considered as immovable by its nature if it is land, roads, mines, quarries and others of similar nature. A structure however is characterized as an immovable property if it is incorporated or adhered to the soil in a fixed or permanent manner or it is a fixture or ornament placed or embedded by the owner of the land with the intention to attach them permanently which includes machineries installed and other implements designed to be used for an industry or work which may directly tend to meet its needs or promote its beneficial use. In contrast, a personal property are referred to as capable from being moved from place to place or carried wherever the owner intends to go such as money, goods and other similar articles which can be appropriated or disposed by the owner without legal formalities such as written agreement, deed or instrument. An immovable property requires it to be affixed or incorporated permanently to the soil or it is intended to be attached or embedded permanently to the soil in order to facilitate work or industry and thus applying these requisites to the instant query of Mineral Ventures, a hut does not fit into this category. A hut is commonly referred to as a shed, cabin, shack, shanty, small house or lodge built with light materials and temporary structure. The fact that the huts installed by Leo were placed on mere plinths or platforms bolster the temporary nature of the huts thus it was never intended as a permanent fixture or structure. Under this given situation, the huts placed in the Pleasant Hills freehold by Leo having been made of light materials and the temporary nature of the structures cannot be deemed as an immovable property as the essential elements of permanence and intent were not satisfied. Thus, Leo cannot be compelled to return the huts nor can he be made liable for the cost and damages for its removal. Even assuming that the subject of a real estate mortgage consists not only of the land in question but equally and naturally includes all accessions to the improvements, fruits—civil or industrial, and other interests on the land—perceived to be existing at the time of constitution of the mortgage shall be deemed included is not applicable to Mineral Ventures’ position. It must be noted that when the real estate mortgage was constituted in 2007 the huts were already erected on the freehold as early as 2004. However, the very nature of the huts and how it was constructed and intended to be temporary offices and shelter for the employees render it movable therefore the huts cannot be classified as a real improvement to the property in question. Verily, Leo’s ownership over the freehold not only extended on the land but it likewise involves all structures or buildings constructed thereon. However, the coverage of the real estate mortgage applies only to immovable objects or properties attached or affixed to the land and the huts cannot be considered as such owing to its temporary and movable state. It is noteworthy to consider that the real estate mortgage was silent with regard to the manner the huts shall be treated. Even on the assumption that the real intention of both parties with respect to the huts cannot be determined with certainty, it can nonetheless be deduced from the actions of Leo by placing the huts on simple plinths or platforms. So also, in the absence of any provisions with regard to the handling of the huts, the fundamental rule therefore must apply. It is a rudimentary principle in real property mortgage that only the real or immovable property itself is embraced in the deed and it does not include personal properties or movable objects even though it may add or diminish the value of the real property and may be disposed of without the formalities required by law such that it must be in writing. If the huts in question were considered real improvements that have considerable amount of value or add on value to the property, the real estate mortgage deed or instrument should have stipulated that the huts are real property improvements and therefore form part of the real property mortgage agreement. Since it was not mentioned at all, the huts are therefore immaterial or not germane to the mortgage agreement making restitution in favor of Mineral Ventures untenable and unjustifiable. It is clearly shown that Leo entered into a real estate mortgage with Mineral Ventures covering only the real property or Pleasant Hills. When Leo defaulted in his loan, it cannot be denied that it is well within Mineral Ventures’ legal right to take possession of the real property. However, it should be noted that the absence of any provisions in the contract that the huts come within the purview of the real estate mortgage or shall form part thereof. Thus, any demand for the return of the huts or reimbursement for its costs cannot be validated or defended. The real estate mortgage similarly failed to mention how the huts should be disposed or conveyed in case of default but before foreclosure. As earlier articulated, an owner may exercise his dominion or rights over the property owned—it can be disposed, removed or destroyed in any manner deemed appropriate. In this case, Leo removed the huts as an exercise of dominion and ownership. This indubitably supports the view that the huts by its temporary nature are considered personal property of Leo therefore it is within his legal rights to take possession of the huts and dispose or enjoy it in the manner he deigns proper since this is not part of the Pleasant Hills freehold. Anent the second issue whether Mineral Ventures can sell the property, the answer is in the affirmative but it can only include the railway track in its offer if it compensates RR for expenses it incurred for the materials and construction of the railway. The agreement between RR and Leo is an independent commercial transaction or venture which must be respected by other individuals or juridical entities such as Mineral Ventures. Prior agreements which confers rights upon another party cannot be abrogated or overtaken by the execution of a real estate mortgage since the agreement between RR and Leo is deemed incorporated thereto. The commercial agreement must be respected by Mineral Ventures where in essence the title to the railway shall remain in the legal and beneficial ownership of RR until all the installments due are paid in full. Since Leo defaulted in the payment of the installments, the title to railway did not pass to him and therefore no valid title or right can be transmitted by Leo. In this instance, Mineral Ventures cannot claim any right accruing to it notwithstanding the execution of the real estate mortgage since the right of Leo is inchoate or dependent upon his payment of the installments due and having defaulted in the payment, no right or valid title or right is conveyed to Mineral Ventures. The terms and conditions of the agreement of Leo and RR must be given full force and effect as RR did not intend to part with its ownership over the railway unless and until it is paid in full. Although by the very nature of sale of goods, the seller agrees to convey or transfer physically into the possession of the buyer consequently ownership is transferred. However, in Leo and RR’s undertaking, it was agreed that the ownership is retained until the consideration or price for the railway and services was paid in full. It is clear that the ownership shall vest upon Leo only upon full payment. The mutuality of the consent and agreement is evidenced by the fixing of the price during negotiations and execution of a deed containing all clauses and provisions to regulate their relationship. The law on sales does not require that the agreement between RR and Leo be in writing it is sufficient that the terms and conditions of the sale including the conditions for return and retention of title was clearly understood and known by the parties thus third persons may be bound by such agreement. The subsequent execution of the real estate mortgage, lien and encumbrance in favor of Mineral Ventures did not diminish its rights or interest or alter the nature of Leo and RR’s transaction which is in the nature of sale. Moreover, the contract or agreement between RR and Leo need not be registered since the transaction involves service and supply contract thus it is not required to be registered in accordance with the property law. It should equally be considered that the real property mortgage agreement did not mention RR’s railways therefore the basic rule must also apply. While it is correct to state that the railways under ordinary circumstances are considered immovable as they are attached permanently to the ground and are used to facilitate work or industry in the freehold but when applied to the issue at hand, it is not so. It cannot support the argument that it is deemed incorporated as an immovable to form part of the mortgage when the deed was put together. Such assertion must necessarily fail as independent contract of sale was executed where valid rights emanate from it which cannot be overlooked or ignored. The contract between RR and Leo is valid and subsisting at the time the deed of mortgage was executed, it is equally correct to say that RR’s rights and interest over the contract is conveyed, ceded or assigned to the new owner. It is therefore within the discretion of the Mineral Ventures to continue with the contract with RR or discontinue it, either by paying the installments due or allow RR to remove the railways if the non-payment option is exercised. If Mineral Ventures elects to discontinue the contract with RR, it is well within the legal rights of RR to remove the railways as stipulated in the original commercial contract with Leo and now with Mineral Ventures. Should Mineral Ventures continue to insist on the onerous condition to retain the railways without the requisite payment of the remaining consideration or balance, it is tantamount to confiscation of property or unjust enrichment. To completely disregard RR’s right over the railway is an oppressive and unfair as RR’s emanated from a lawful and valid contract. It is important to state that it is customary practice in loan and mortgage transactions that extensive credit investigation is conducted before a loan is granted. The rationale for the credit investigation is to ascertain the credit score and financial capacity of the mortgagor to repay the loan. Though a lender has an option to foreclose the security or collateral upon default or non-payment, foreclosure is avoided or not vigorously promoted as it entails not only a costly and tedious process but more importantly, it affects the liquidity of the mortgagee as well. The mortgagee usually wants to avoid being saddled with properties which may or may not be sold immediately. (UK Mortgage Guide, 2004) More importantly, mortgagees generate income or revenue by imposing interest on credit transactions thus its stringent credit investigations is designed to assure the mortgagee that the mortgagor can pay the loan on due date pursuant to the conditions of the loan. Foreclosed properties are white elephants in a lender’s books thus loans are granted only after satisfactory finding and compliance of a number of financial indicators such as debts—updated or defaulted in payment, profit yields and other exposures to mitigate or avoid risks altogether. (UK Mortgage Guide, 2004) It can therefore be assumed that before Mineral Ventures granted a loan to Leo, it conducted an extensive investigation not only on the financial capacity of Leo but it included the verification of the value of the property not to mention other encumbrances or interest over the freehold by third persons or entities. In its investigation, Mineral Ventures would have discovered the conditions imposed by RR in its railway installment payment scheme with Leo thus Mineral Ventures cannot now feign naivete when it is incumbent upon it to perform due diligence to protect its investment by conducting thorough credit check. Mineral Ventures may not have exercised the diligence required to establish the credit viability of Leo and therefore it must bear the burden of its negligence. RR should not be penalized if Mineral Ventures may have been remiss in its duty to determine the financial standing as well as the value of the property of Leo, including his debts and other credit or profit indicators. Given the facts of the inquiry as presented, the real estate mortgage agreement between Mineral Ventures and Leo did not include any information with regards to the Railways and the Huts. So also, there is a standing commercial agreement with regards to the disposition of the Railways between RR and Leo. The details of which include that RR retain ownership of the railways until such time that Leo the owner of the property at that time compensate RR fully for the construction of the Railway. Therefore, to reiterate, Mineral Ventures cannot sell Prospect Hills to Micks without Mineral Ventures compensating RR for the railways. To reiterate, RR still has ownership of the railways therefore Mineral Ventures cannot sell something it does not own. So also, the Huts that Leo removed from Pleasant Hills are not part of Pleasant Hills that was the subject of the Real Estate Mortgage. The very nature and construction of the huts render the huts as movable, therefore, it cannot be considered as part of the Pleasant Hills. Bibliography Commercial Lifeline. "UKL Mortgage Guide." 2004. Commercial Lifeline. 30 January 2011 . Parliament, United Kingdom. Law Of Property Act of 1925. Law. London: Parliament, 1995. Read More