Land Law Problem Situation - Essay Example

?Introduction The background of the situation is that you the three cousins Ben, Clare and Amy purchased a house in Barchester in 2009 to live in andwith the subsequent aim of later starting an accountancy firm in the acquired premises. Each of the three of you contributed equal amounts of ?100,000 in order to raise the total amount of ?300,000 which was needed to pay for the purchase of the property. After successfully purchasing the property, you, Amy, entrusted the registration of the property to Ben and Clare only even though you were still a legitimate partial owner. The three of you were pursuing an accountancy course at the time and hoped to establish the accountancy firm as soon as you completed the course and in the event employ other relatives. However, since Ben and Clare realized they could not raise enough money to complete their course after the purchase they acquired a mortgage of ?250,000 from Macau Bank against the property. You, Amy, signed a waiver form of the bank to enable the loan application to go through, though you may not have sought legal advice before doing so. Ben subsequently died in 2010 and Clare re-mortgaged the house for ?50,000 to Taiwan Bank in order to take additional training in order to cover for the loss of Ben’s expertise. This she did acting as the sole owner of the property without you being consulted. Now in 2011 Clare has decided that she is no longer interested in the accountancy firm and has fallen behind on mortgage repayments. You, Amy, on the other hand is still interested in pursuing the original objective of starting the family accountancy firm. Your Current Situation Your first challenge as Amy is to prove ownership of the property even though you were not registered as the owner having entrusted the registration to your older cousins Ben and Clare. Under the Land Registration Act of 2002 Part 6 section 71 states that: Where rules so provide— (a) a person applying for registration under Chapter 1 of Part 2 must provide to the registrar such information as the rules may provide about any interest affecting the estate to which the application relates which— (i) falls within any of the paragraphs of Schedule 1, and (ii) is of a description specified by the rules; (b) a person applying to register a registrable disposition of a registered estate must provide to the registrar such information as the rules may provide about any unregistered interest affecting the estate which— (i) falls within any of the paragraphs of Schedule 3, and (ii) is of description specified by the rules (Land Registration Act, 2002, 6 (71) (a-b). What all this means is that in your case, you do have an interest in the property that was registered and that was supposed to be stated out-rightly at the time that your two cousins were getting registered in trust to own the property that your interests are included. Whether this was done or not should be confirmed by you. However, given the events that subsequently took place, it is quite clear that your interests were catered for during this registration. A look at the mentioned Schedule 1 and Schedule 3 shows that the interest of a person in actual occupation of the property is catered for (Land Registration Act, 2002, Schedule 1(2). Since you have an interest in the house and the land on which it sits, and you actually occupy it, this provision covers persons such as yourself. Considering the evidence that your interests were included I glean as follows. First of all, you were asked to sign the waiver form when your two cousins were applying for the mortgage from Macau bank. Signing the waiver basically means that in case of failure to repay the mortgage, then the entire house, including your share of it, could be attached to recover the outstanding dues (Degeling & Edelman, 2008, 31). The second indicator was that when Clare sought a second mortgage from Taiwan Bank you should have been consulted save for the pain you were in. This means that your interest was taken into consideration even at this point. That being the case then it is important to understand exactly what situation you are in right now. Beneficial Tenants in Common Note that the kind of ownership of property you were registered into is classified as Beneficial Tenants in Common. This means that each of the three of you own the property in given percentages, in this case equal percentages, and thus each individual is entitled to their share of the property (Worthington, 2006, 106). The word tenant here has nothing to do with paying rent on a property; it means you own the property (Worthington, 2006, 106). However, the challenge is to establish if this kind of ownership was explicitly stated when the registration was done. You need to confirm this for a fact, though as explained earlier, I strongly suspect that this was done. There are three scenarios here. First there is the original intention of buying the house. You three had intended to use the house as a residence and later it would be used to establish the accountancy business. Now, Clare has changed her mind and she wants to sell off the place to go into a different career in the circus. In effect she has changed her mind and is no longer interested in the accountancy firm you all intended to invest in. The legal situation is that nothing can stop her from changing her mind and going into some other business she chooses (Degeling & Edelman, 2008, 40). This is her right and neither you nor anyone else can stop her. Nevertheless, she cannot dispose of the whole property without your consent and the will of the deceased Ben. All she has a right over is her share of the property and not the whole of it. So if you can prove that Ben’s intention until death was to use the house to establish an accountancy firm, and that remains your intention, then you can keep the house provided that Clare gets her share of it in cash so as to pursue her newly desired career. In other words, you would have to buy her off. Secondly, the situation is further complicated by the fact there are two mortgages to consider here. There is the first mortgage of ?250,000 from Macau Bank which you approved when you signed the waiver form and which has to be paid off. Then there is the further mortgage of ?50,000 from Taiwan Bank of which you did not approve. Repaying the first loan is the responsibility of all three of you, and since Ben is dead, his share of the loan can be paid off jointly by the two of you or the bank will remain with an interest in the property to the extent of his share provided that the two of you pay off your debts (Degeling & Edelman, 2008, 41). In the latter scenario the Bank may still sell off the house and give you the balance of the money after deducting their outstanding dues. As for the second mortgage of ?50,000, Clare is solely responsible for its repayment since she took it out alone. However, she took it out against the same house, it must be recovered from her own share in the house and that should not affect Ben’s interests or yours (Degeling & Edelman, 2008, 48). The third consideration is that it is not clear whether Ben left any will since his death was quite sudden. However, his wish to start an accountancy firm has not changed and that is supported by you. Conversely, though something has to be done about repaying his share of the debt. If you really want to keep the house then you will have to go into an agreement with the Macau Bank and sort out with Clare how she will repay her share of the loan and the additional one she acquired from Taiwan (Degeling & Edelman, 2008, 48). The two of you have to come to an agreement on how to sort out these loans since you wish to keep the house while Clare wishes to sell it. The bottom-line is that Clare cannot sell the house alone since she is not the sole owner but is only one of the beneficial tenants in common. This is the reason you have to make arrangements to retain the house. Depending on your ability to pay off the mortgage you and Ben owe, you may keep the house. If not then the house may be sold off to recover outstanding dues from the first mortgage while Clare will still be liable for outstanding dues against the second mortgage that she took out alone (Worthington, 2006, 61). Precedents The question here really is where all this leaves you with respect to the property. It is understandable and highly commendable that the original intent of putting up an accountancy firm is not lost on you. This will work well in your favor in case the matter ends up being settled legally. Hopefully, this should not be the case as it is always better to settle this kind of thing out of court. However, if push comes to shove, it is important to consider what has transpired in other cases like this. Reverend Donald Smith and others vs Reverend John Morrison and others [2011] CSIH 52 In this case the Reverend Smith was the moderator of the General Assembly of the Free Church of Scotland. The church was the legally registered entity that owned a building and land that acted as the legal premises of worship of the church. However, a faction splintered from the church and headed off the start their own congregation. This splinter faction was headed by Rev Morrison. The faction claimed co-ownership of the church building and the land on which it stood as bona fide members of the church. They stated that since they still shared in the fundamental beliefs of the church it was not fair to exclude them from its premises, even though they had moved away to a different location. Reverend Smiths group who remained true to the original church congregation were the majority while The Morrison faction constituted the minority. As it turned out, in the ruling the presiding judges Lord Osborne, Lord Bonomy and Lord Drummond Young sitting at the Extra Division, Inner House, Court Of Session in Scotland found that the claim of Morrison and his faction was not valid since they had essentially deserted the church of which they were part. The fact that they still professed the same religious doctrines in their new location was considered insignificant since by defecting they had effectively formed a rival church. This legal precedent can be compared to your case only to the extent that Clare quit from the original plan for which the house had been bought by the three of you. Judges would therefore find it hard to sympathise with someone who betrayed the original trust in pursuit of a totally different agenda which had not been mutually agreed on (Mitchell, 2010, 22). In simple terms, she has lost the objective for which the house was bought in the first place which is tantamount to betrayal of trust (Worthington, 2006, 108). Lucyna Maria Dibble Vs Urs Bernhard Pfluger [2010] EWCA Civ 1005 In this case heard in the High Court Of Justice Court Of Appeal (Civil Division) on appeal from Central London County Court before Lord Justice Ward, Lord Justice Lloyd and Lord Justice Pitchford; the claimant Lucyna Maria Dibble a widow who lived in a mortgage free home in Longlands moved into her house with the defendant Bernhard Pfluger who was 13 years her junior. The defendant had his own house in Arundel which was subject to a mortgage. The two began living together in 1992 and became engaged 2 years later. In 1998 they realized that the house in Longlands needed renovation and they took out a joint loan of ?25,000 from Barclays Bank for the renovation. They executed a deed of trust to hold the beneficial interest in the property. This was executed against two thirds of the value of the property to the claimant and one third of the gross values less the mortgage to the defendant. The defendant then proceeded to sell off his property at Arundel. In 1998 the two entered a legal agreement that the defendant would pay off the mortgage but they would jointly pay common household expenditure. The two ultimately sold the property and shared the proceeds and eventually bout another property in Alinora which was much smaller that their original property. In addition, the claimant who was from Poland inherited a property belonging to her parents in her home country to which they moved in. In the process the defendant invested some ?58,500 paid in bits for the completion of the Poland property though the two moved back to England later where they settled in Alinora. It was these payments that were actually made to the claimants parents for the maintenance of the Poland house that were subject of the plea by the claimant. The conflict arose from the fact that the house in Poland was eventually sold with the defendant receiving nothing from the sale. The defendant was demanding these monies back while the claimant believed she owed the defendant nothing. The Presiding judge at the London County Court at which the case was first heard had found that the defendant had no valid claims since the monies in question had been remitted the parents of the claimant and not to the claimant herself. He further found that the house in Poland had been bought by the claimant’s parents long before the defendant remitted any monies. He also argued that those payments were not made by establishing common intention. However, on appeal the Judges referred the case back for retrial because they did not agree with the findings of the lower court. They said that if the monies were paid towards the completion of the house in Poland then it was up to the Recorder to establish common intention in the payment of these sums which he did not do. The import of this case is that once again it goes to prove that each individual is entitled to their share towards the purchase, building, renovation or completion of a property (Mitchell, 2010, 24). In your case therefore you remain entitled to you share of monies contributed towards the buying of the property that you jointly own with your cousins regardless of whether the property was ultimately registered in the name of your two cousins or not. From the case of Dibble vs Pfluger it is quite clear that the property in Poland was registered in the name of Dibbles parents yet that did not negate the import of Pfluger’s investment in it regardless of the fact that no agreement of common intention was reached into. Conclusion From the foregoing it is clear that Clare and yourself must work out an agreement between yourselves which will fairly cater for both of your interests in the eventual sale or retention of the house. In the event that the two of you decide to retain the house, then the way forward is that you must work out how to share the repayment of the mortgage of Macau Bank including that of Ben to which the two of you are now liable (Mitchell, 2010, 26). In Case there is anyone else who can take over the payment of Ben’s share of the mortgage such as his parent or sibling then he can pay so as to retains Ben’s share in house at least in trust. However, this arrangement can only be made mutually since Ben’s will did not expressly specify such a wish. In addition, Clare must complete the repayment of the mortgage from Taiwan Bank which she took out on her own without your participation. The complication here of course remains the difficulty that Clare is experiencing in paying off this mortgage and the fact that she has advertised the house for sale. The fact of the matter is that there is no way in which in which Clare can purport to sell the house alone as if it solely belongs to her since it does not. This is selfishness and the law has no provision for that (Worthington, 2006, 111). You therefore have an immediate obligation to stop the sale of the house immediately by seeking a court order in case she does not cooperate. Her claim to sole ownership of the property is not legal since she did not buy the house alone, the three of you bought it and surely there is evidence of that since the amounts involved here are substantial and there have to be records of the transactions. Secondly, she is acting in breach of common intention since she has long abandoned the idea of establishing an accountancy firm which was the original intention of buying the house in the first place. However, as it has been earlier pointed out, nothing can stop her from selling out her share in the house (Worthington, 2006, 121). However, she can only sell out her share and not the other two shares that do not belong to her. If she does sell out then amounts she owes the two Banks must be calculated in order for her to pay. If you are to buy her out so as to remain the sole owner of the property then I am sure she will not get much, if anything at all, since she still has outstanding debts from the two loans. References C Mitchell, 2010, Hayton and Mitchell's Commentary and Cases on the Law of Trusts and Equitable Remedies, London: 13th edn, Sweet & Maxwell. JE Martin, Modern Equity, 2009, London: 18th edn Thomson Sweet & Maxwell,) Precedent Cases Retrieved from Case check the Legal Resource, 2011, on 30/11/2011, < http://www.casecheck.co.uk/CaseLaw> Simone Degeling and James Edelman (eds), 2008, ‘Liability Chains’ in Restitution in Commercial Law, London: Thomson. S Worthington, 2006, Equity, New York 2nd edn, Clarendon. UK Land Registration Act, 2002, Retrieved 28/11/2011 from: . Read More