Informal Arrangement to Park Bartholomews Car on Ravis Driveway - Coursework Example

Introduction In order to advise Angelina with regard to the potential third party rights in the Hatfield Property (“the Property”) it will be necessary to evaluate the nature of the right (whether equitable or non-equitable) and on the assumption that the Property is registered, the provisions of the Land Registration Act 2002 (“LRA). The LRA sets out the requirements regarding registration of third party rights and the extent to which such rights bind the interests of the purchaser. The LRA distinguishes third party rights that are required to be registered and those that are considered overriding1. As a general rule, the prior estate will have priority over the buyer subject to the exceptions in the LRA. Under the LRA, if a right is subject to the requirement of registration in order to have priority, (unless the right is an overriding interest under Schedule 3), failure to register will forfeit priority and the right will not bind a purchaser on a disposition2. However, the right may still be enforceable subject to the principles of equity and I shall consider any potential equitable rights when considering Angelina’s legal position. (i) Informal arrangement to park Bartholomew’s car on Ravi’s driveway. With regard to the current informal arrangement enabling Bartholomew to park his two cars on Ravi’s driveway, the central issues are the nature of the right to be granted under any proposed formal arrangement and ensuring that the formalised arrangement is binding on third parties. Under section 1(2) of the Law of Property Act 1925, an easement such as a right of way can be created at law however the current informal arrangement fails to comply with the legal requirements and as such, operates as an equitable easement3. Furthermore, under the 2002 LRA, equitable easements no longer constitute overriding interests on third parties4. With regard to the formal arrangement, the right of way must be recorded in a deed and a legal easement must be defined, in terms of duration of the entitlement, in analogy with either a freehold or a leasehold estate; either with no limit of time or for a fixed period. It is arguable that ‘until such time when P sells his property’ complies with this5. Moreover, in order to be valid against a third party, the interest must be entered as a notice in relation to both the Property and Ravi’s land as the servient and the dominant tenement6. Under the LRA, an expressly granted legal easement is a registrable disposition and as such cannot take effect as an overriding interest binding on third parties in the event of failure to register. In summary, the right of way should be recorded formally in a deed and registered at the Land Registry in order to be enforceable at law and binding on third parties. ii) Deed Promising Jock that “neither he nor his successors in title shall use the property for business purposes”. In order to advise Angelina as to her legal position in respect of the covenant in the deed between original owner Bartholomew and Jock, it will be necessary to consider the nature of the obligations in the covenant and determine whether the benefit and burden of the covenant have become attached to and run with the land to be enforceable against Angelina by Jock as Angelina is not party to the original covenant. The original covenant between Bartholomew and Jock imposed obligations on Bartholomew not to operate a business or trade from the premises. As such, the covenant appears to contain negative obligations. In the case of Haywood v Brunswick Permanent Benefit BS7 it was asserted that enforceability of restrictive covenants was only applicable to negative covenants. This was subsequently confirmed in the case of London & South Western Railway Co v Gomm8, where Jessell MR asserted that “The doctrine of [Tulk v Moxhay9], rightly considered appears to be either an extension in equity of the doctrine of Spencer’s Case 10to another line of cases, or else an extension of the doctrine of negative easements”. Positive covenants were again considered in the case of Rhone v Stephens 11in which the House of Lords endorsed earlier case law distinguishing between positive and negative covenants. Accordingly, as asserted in Rhone and as shown in the case of Tulk v Moxhay 12itself, if a covenant imposes both positive and restrictive obligations then the courts will be prepared to enforce the restrictive part13. Furthermore, the Gomm decision asserts that in determining whether a covenant is restrictive, the determinant factor is expenditure and whether the covenantor is required “to put his hand into his pocket14”. With regard to Angelina, the covenant preventing use of the land as a business is restrictive and potentially enforceable. The next issue is to determine whether the obligations in the original covenant are enforceable against Angelina. As original covenantee Jock is clearly entitled to the benefit of the covenant and if Angelina breached the covenant, Jock would be entitled to sue Bartholomew as original covenantor15. However, this potentially exposes Angelina to liability under the chain of indemnity covenants principle16. Secondly, if Angelina is subject to the burden of the covenants, then the covenants will be enforceable against her. At common law, there are four conditions which must be satisfied in order for the benefits of a covenant to “run-with” or become attached to the land17. Firstly, at the time the covenants were entered into, the original covenantee must have had title to the legal estate in the land, 18which is not ian issue here as Bartholomew was owner of the Property when the covenants were entered into. Secondly, the party seeking to enforce the covenant must have legal estate in the land19. With regard to the current scenario, Jock has interest in the land for which the covenant was intended to benefit under the original deed. The case of Rogers v Hosegood 20established the third requirement, which stipulates that the covenants must touch and concern the dominant land in some way. The restrictions in prohibiting the operation of a business or trade from the land arguably benefit Jock by preventing noise nuisance and use of his home as a private residence21. Furthermore, the case of Marten v Flight Refuelling Limited22 and subsequent case law indicates that the courts will generally be willing to accept the opinion of the covenantee that the land is benefited. If this opinion can be reasonably held, then the courts will not delve into the detailed evidence23. The fourth condition in determining whether the benefit has become attached to the land is that at the time the covenants were made it must have been intended that the benefit was to run with the land24. Such an intention is considered to be demonstrated where the wording of the covenant includes reference to “successors in title and assigns25”, which is evident from the express terms of the deed between Bartholomew and Jock. However due to the rule in Austerberry v Corporation of Oldham26, the burden of a covenant (whether negative or positive) never runs with the land at common law; which means that the covenant will only be enforceable against Angelina in equity27. Accordingly, Angelina could arguably be liable to Jock for breach of covenant under two principles. Firstly, under the of “chain of indemnity” covenants principle, Jock could sue Bartholomew as the original covenantor under the rule established in Austerberry that a successor in title to the original covenantee has a right to sue the original covenantor for damages notwithstanding the fact that breach is caused by a successor in title to the original covenantor28. Applied to the current case, Bartholomew could then sue Angelina to indemnify him for any compensation payable to Jock. If the breach of covenants were caused by Bartholomew, then the right of Jock to sue the original covenantor would not impact Angelina’s legal position. Another indirect method of enforcement would be the principle in Halsall v Brizell29, that whenever rights are granted to an individual, then the obligations in the conveyance are enforceable, thereby asserting the equitable maxim that “he who takes the benefit also takes the burden”30. In determining whether the benefits of the restrictive covenants run in equity, there are four conditions, the first three of which are the same as the conditions at law as discussed above31. The fourth requirement stipulates that the benefit of the covenant must have been transmitted in one of three ways required by equity; namely, assignment, annexation or building scheme32. Furthermore, the decision in Miles v Easter33 laid down five requirements for an equitable assignment of a covenant to be valid: “(a) the covenant must have been taken for the benefit of land of the covenantee; (b) the land must be indicated with reasonable certainty; (c) the dominant land must be retained in whole or in part by the plaintiff; and (d) be capable of benefiting from the covenant; and (e) the assignment of the covenant and the conveyance of the land to which it relates must be contemporaneous34”. Whilst we are not aware of the exact terms of the conveyance, there does not appear to be any contention that the above circumstances have not been satisfied. It is commented that prior to the decision in Federated Homes35 that assignment was an important method of passing covenants.36 For example, in the case of Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd37held that it sufficed if the land to be benefited could be identified by extrinsic evidence with reasonable certainty. With regard to the current scenario, the contemporaneous nature of the assignment deed with the covenant will further strengthen the argument that the covenant’s benefit has passed. Alternatively, with regard to annexation, if the covenant is annexed, this will result in the “linking” of the covenant to the benefited land, generally by virtue of the covenant itself38. For example, the case of Rogers v Hosegood39 demonstrates how this “link” is achieved through interpretation of the wording in the covenant, which must demonstrate “an intent that the covenant may enure to the benefit of the vendors, their successors and assigns and others claiming under them to all or any of their land adjoining”40. With regard to the current scenario, the use of the wording “neither he nor successor in title” strongly supports annexation of the covenant. Furthermore, statutory annexation of the covenant is possible as provided for by section 78(1) of the LPA, which states that “A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and persons deriving title under him or them, and shall have the effect as if such successors and others were expressed”. In conjunction with the operation of section 78 of the LPA, the case of Federated Homes 41operates to effectively “automatically annex the covenant to each and every part of the dominant land,” which conflicts with the principle of assignment42. This was evidenced in the case of Roake v Chadha43 where section 78 was excluded because of the express wording of the assignment stated that the benefit should only pass by assignment. With regard to the current scenario, it is likely that the assignment deed would be relied on as clear evidence of the benefit running with the land. In determining whether the burden of the covenants run, the five conditions set out in Tulk v Moxhay44 must be satisfied. Firstly, the covenant must be negative. Secondly, there must have been a dominant tenement and the covenant must touch and concern the land. Fourthly the benefit must have intended to run with the servient land. This would appear to clearly be the case on the basis of the express wording of the deed, however section 79 of the LPA will imply this subject to express intentions stating otherwise. Fifthly, a restrictive covenant will not run with burdened land unless registered. Accordingly, if the charge is not registered, then being a registrable disposition under the LRA, it would have to be registered in order to be binding on Angelina. . In summary, the facts of the scenario indicate that it is highly likely that the benefit and burden of the covenant in the conveyance between Bartholomew and Jock have attached to the land in order to be enforceable against Angelina by Jock, which clearly has implications for her intentions to operate a business. However, if the covenant was not registered, it will be unenforceable against Angelina. If enforceable, the other option available to Angelina would be to apply for modification or removal of the covenant to the Land Tribunal under section 84 of the LPA, which is a convoluted process and no guarantee of success45. (iii) Potential rights of Abraham in the Property. Notwithstanding Bartholomew’s attempts to assuage Angelina’s concerns regarding Abraham’s interests in the property and notwithstanding the fact that Bartholomew is sole registered proprietor, Abraham would still have a proprietary interest in the property under either a constructive or resulting trust46 as a result of his direct contribution to the purchase price. In contributing a third of the purchase price, Bartholomew would hold the property on trust for himself and Abraham in equity47 and therefore prior to Angelina’s purchase, Bartholomew held the Property as sole trustee and there were two co-owners in equity48. As the Property was held in trust and there is only one trustee of the land and two co-owners, Angelina would not be able to rely on the doctrine of overreaching to negate Abraham’s interest49. Under Section 3350 of the LRA, trusts are not registerable as notices on the register and therefore Angelina would not have seen Abraham’s interest on the register. Furthermore, the effect of Section 26 of the LRA is that purchasers are entitled to proceed, in the absence of such an entry on the register on the basis that there are no limitations on the owner’s powers51. Accordingly, although Bartholomew will clearly be in breach of trust by selling the Property to Angelina, Abraham could potentially have a claim in equity against Angelina for knowing receipt of trust property if he could establish that she knew of the trust and Bartholomew’s breach of trust52. Furthermore, as Abraham has an equitable interest in the Property under the trust, his interest may still be binding on Angelina as an overriding interest. Schedule 3, paragraph 2 of the LRA protects overriding interests of those with rights to the property that are in actual occupation53. The definition of “actual occupation” clearly varies according to the nature of the premises concerned and the facts of each individual scenario. Schedule 3 of the LRA expressly requires actual knowledge and that occupation must have been “obvious on a reasonable careful inspection of the land at the time of disposition”54. From the facts given, we know that Angelina is aware of Abraham living in the Property. Accordingly, in light of the fact that Angelina made enquiries at the time of negotiations and was made aware of Abraham’s interest, he has a strong basis to claim she did have actual knowledge in order to establish an overriding interest under Schedule 3 of the LRA. Moreover, it has been established that although the term actual occupation must be given its natural meaning, the LRA unequivocally requires it to be reasonably discoverable55, which does not appear to be the issue in the current scenario. Moreover as Abraham’s belongings are at the Property, this further supports his contention that he was in actual occupation through a symbolic presence of inanimate objects56. In light of the factual scenario coupled with the Angelina’s knowledge of Abraham’s interest in the Property, I think it is likely that Angelina would have satisfied the requirement that she did had actual knowledge of Abraham’s occupation and as such, the purchase will be subject to Abraham’s overriding interest in the Property. On this basis, Angelina should ensure that Abraham seeks independent legal advice and independently enters into a formal arrangement consenting to Angelina’s unencumbered purchase of the Property57. iv) Formalities for Proposed Leases With regard to the proposed leases to John and James, under the LRA 2002 only a grant of a lease for more than seven years will be compulsorily registrable58. Accordingly, the lease of 10 years to John must be registered and failure to do so will mean that the lease will not be binding on subsequent third party purchasers. With regard to the lease of seven years to James, this is not registrable, however will be an overriding interest binding third party purchasers under Schedule 3(1) of the LRA. In order to be a valid legal lease, both leases must comply with the common law requirement that a valid lease be of a prefixed maximum duration and the statutory requirement for writing59. BIBLIOGRAPHY Blackstone’s Statutes on Property Law., (2007-2008). 15th Edition Oxford University Press. M. Dixon (2005) “Principles of Land Law”, 5th Edition. Routledge –Cavendish Publishing A J Oakley (2001) Megarry’s Manual of the Law of Real Property 8th. Sweet & Maxwell R J Smith (2003) Property Law 4th Edition, Longman R J Smith (2003) Property Law Cases & Materials 2nd Edition, Longman Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. Case Law Austerberry v Corporation of Oldham(1885) 29 Ch D 750. BCCI v Akindele, [2001] Ch 437 Birrell v Carey 1989 58 P & CR 184 Bull v.Bull [1955] 1 QB 234. Chhokar v Chhokar (1984) FLR 313 Congregational Christian Church v Iosefa Tauga 1982 8 Comm Law Bull 129 Federated Homes Ltd v Mill Lodge Properties Limited [1980] 1 WLR 594. Halsall v Brizell [1957] Ch 169. Haywood v Brunswick Permanent Benefit BS (1881) 8 QBD 403 London & South Western Railway Co v Gomm (1882) 20 Ch D 562 Marten v Flight Refuelling Limited [1962] Ch 115. Miles v Easter [1933] Ch 611. Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286 Roake v Chadha [1984] 1 WLR 594. Rhone v Stephens [1994] 2 AC 310. Rogers v Hosegood [1900] 1 Ch 388. Spencer’s Case (1582) 5 Co Rep 16a Tulk v Moxhay (1848) 2 Ph 774. Websites www.opsi.gov.uk Read More