Property Land Law: Analyis of the Case of the Hillside and Coventry Properties - Essay Example

Felix S. Cohen suggests that property is about relationships between people. He writes, "Property depends upon exclusion by law from interference identifying the right of exclusion as an essential characteristic of property rights. Thus, an individual's proprietary interest will depend on his ability, as accorded by law, to dispose of his property as he sees fit and prevent others from enjoying or utilizing it. However, proprietary interests can be fragmented among a number of individuals or groups over different levels, making the ability to exclude others more difficult and confusing, oftentimes leading to property disputes. In Western Australia, such problems become more confusing because of two existing systems of land ownership. The case of the Hillside and Coventry properties is an example where Frederick, owner of the two properties with fee simple interests, mortgaged and consequently sold to Marjorie, Lucille, and Bernie. This left the parties with competing interests, thus calling for the need to determine whose interest is greater and what each party can do to create an interest in the aforementioned properties. According to the Old System, upon which Hillside is initially registered under, Marjorie, upon entering into a contract with Frederick possess an equitable interest in the property. However, because she did not receive the deed to the property, this did not make the mortgage legal. The fact that the deeds were not transferred to her did not complete the transfer, which she should have had a right to under the old system. Nevertheless, her equitable interest remains, granting her a security interest in the land to ensure that Frederick complies with his obligation, Lucille's interest, however, as second mortgagee is quite interesting. Although she is the second mortgagee in the property, she has both equitable and legal interests. The Old System of Mortgage, upon which the Hillside property is registered, prevents more than one mortgage for a particular property. This is because according to the Old System, upon conveyance of a mortgage, "the mortgagee prima facie is entitled to take possession as soon as the mortgage has been executed," 2 provided that the mortgagee exercises strict caution in possessing the property. Hence, there cannot be two legal mortgages over a single property. This, however, does not apply because in Lucille's case, although her mortgage happened subsequent to Marjorie's mortgage, the legal interest was not transferred to Marjorie because Frederick kept the deeds and gave them to Lucille. In this sense, Lucille has the legal interest in the property. However, it is important to determine whether there has been a conveyance of properties. The case only mentioned Frederick giving the deeds of the property to Lucille. If such can be considered a conveyance of the deeds, she possesses the legal interest. On the contrary, if there was no conveyance of deeds, her interest remains equitable. Both Lucille and Marjorie's interests are subject to the equity of redemption3. Thus, although a transfer was made based on the Old System, Frederick still retains certain interests in the property, including the right to redeem it, provided that he complies with his obligations. With regard to Bernie, his interest depends on whether there was a conveyance of deeds and the legal interests were transferred to Lucille. Assuming that Frederick's legal interests were transferred to Lucille by virtue of the mortgage, Bernie possesses only an equitable interest in Hillside based on the equity of redemption, which Frederick retained upon the mortgage. This is because at the time the sale took place, Frederick did not have a legal interest in the property to sell to Bernie by virtue of the mortgage. Hence, Bernie will only possess a legal interest after the mortgage is paid off and redeems his rights from Lucille. Between Lucille and Marjorie, Lucille's interest takes priority because she conducted the legal mortgage, hence possessing a legal interest. Between Lucille and Bernie, Lucille's interest also takes priority, at least at least for the duration of the mortgage, until the obligations for the mortgage are fulfilled and Bernie redeems the legal interest for the property, whereby his interests will then take priority. However, upon registering the Hillside property under s. 58 of the Transfer of Land Act (TLA), crucial changes occur. Section 58 of the TLA states that: No instrument until registered in manner herein provided shall be effectual to pass any estate or interest in any land under the operation of this Act or to render such land liable to any mortgage or charge; but upon such registration the estate or interest comprised in the instrument shall pass or as the case may be the land shall become liable in manner and subject to the covenants and conditions set forth and specified, as the case required.4 Consequently, the aforementioned passage in sec.58 requires all transactions regarding the transfer, sale, mortgage, and any other dealings regarding land to be registered first before they can be recognized. This has a significant effect in the effectiveness of a legal interest because unless a legal interest is registered, it will remain to be an equitable interest. As a result, Bernie's registration under sec.58 of the TLA altered the relationships and interests of the concerned parties. With regard to Lucille's interest as a mortgagee and the transfer of legal interest and possession by virtue of the legal mortgage, her rights to the land and legal interest changes. First, her legal interest in the property is no longer recognized under dec.58 of the TLA because her mortgage agreement has yet to be registered. Consequently, she only possesses an equitable interest. Thus, Marjorie's equitable interest by virtue of the mortgage, therefore takes priority over Lucille's equitable interest because it took place first. Furthermore, her mortgage also takes priority because it is recognized by sec.58 of the TLA due to registration. Thus, with regard to Lucille and Marjorie's competing equitable interests, Marjorie's interest not takes priority because it was registered first. In addition to such changes in the two parties' interests, changes also occur over their respective mortgages. First, the mortgagees no longer have the right of possession by virtue of the Old System. Under the TLA, the mortgagees can only enter the land (sec.78), foreclose the mortgage (sec.79), and sell the land in the instance that the mortgagor fails to fulfill his obligations (sec.77). As a result, the rights of the mortgagees, Lucille and Marjorie, are diminished from having the prima facie entitlement to take possession, to simply having the land for security. Consequently, Bernie's interests, upon registering the land, therefore take priority. First, unlike the Old System where mortgagees have the right to possess the land until the mortgage is settled, the rights of the mortgagee under the TLA is diminished and limited to serve only as a security interest. Thus, Bernie, despite the existence of the mortgage, now possesses both legal and equitable interests in the land. The conveyance of legal interests to Lucille (provided that the transfer did take place) is no longer recognized under the TLA, allowing Bernie to have legal interests by virtue of his registration. With regard to Jade and Bernie, the two parties both have competing interests over Coventry, which is already registered under TLA. In this case, Bernie has only an equitable interest because he is unable to register the transfer of the property to his name due to the caveat placed by Jade. On the other hand, Jade's interest is also of question. According to The principle of Milord v Lord 5 it is imperative that the grantor - Frederick - has done all that is necessary to be done to transfer the property. In Jade's case, Frederick did not accomplish all that is necessary to complete the gift. Thus, Jade should only have an equitable interest in Coventry. However, since she was able to successfully register the property, this gives her a legal interest, which is protected by a caveat. Jade and Bernie therefore have prior legal interest competing with an equitable interest. Based on the interests possessed by Jade and Bernie, one can easily conclude that Jade's interest should take priority because it took place before that of Bernie. However, the conduct at which the gift of land was given to Jade by Frederick calls for further analysis. First, the title to the deed still lies with Frederick. Based on the principle of Milord v. Lord, a gift cannot be completed until the deed of the property is passed on to the recipient of the gift. Thus, Jade's legal interest is in question. Furthermore, it was Jade, the recipient of the gift who accomplished the transfer instead of Frederick. Lastly, Frederick's actions of initially trying to develop the property, mortgage it, and eventually sell calls for the need to question whether or not the gift was really intended. Thus, the aforementioned reasons indicate Bernie's interest in Coventry should prevail because the manner that Jade came to own the land is questionable, although not necessarily fraudulent. Word Count: 1,489 Read More