The Land and Property Act - Case Study Example

 Property Issues The issue arising in the scenario of Dave and Maggie’s purchase of the property are as follows: (a) the applicability and enforceability of the restrictive covenant prohibiting sale of liquor on the property (b) whether Mr. Smith has a binding claim on the land he has possessed (c) whether the mortgage offered by the local brewery that has clogs on it The most important issue that arises in the case of the property Dave and Maggie want to purchase is the restrictive covenant that prevents the use of the land for the sale of alcohol. However, since the young couple specifically wishes to open a bar on the premises, this is likely to invoke the restrictive covenant. The Land and property Act of 1925 states clearly 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 shall have effect as if such successors and other person were expressed.”1 Therefore, it is important for Maggie and Dave to take into account the fact that the covenant may be fully enforceable by the freehold owners of the neighboring properties or any of their successors. The major factor that will be taken into consideration by the Courts is how the Covenant is drafted. In the case of Martin v David Wilson Homes ltd2, the use of the word “a” in the covenant denoted a greater deal of flexibility than the use of the word “one” in the case of Crest Nicholson v McAllister3, where the Covenant was deemed to be fully enforceable. In this case, the drafting of the Covenant is very clear that the property is not to be used to set up licensed premises such as a bar and will be strictly enforceable, especially because it is also registered, and therefore negate the young couple’s purpose in purchasing the property. If Maggie and Dave choose to ignore the restrictive covenant and continue with building a bar on the premises, it could be demolished, as was the case in Mortimer and Another v Bailey and Another4, a restrictive covenant was successfully enforced to demolish a building. However working in their favor is the recent case of Sugarman and Porter and Others5 where an existing restrictive covenant on a property was deemed to be valid only up to the period the land remained unsold. In order for a restrictive covenant to be enforceable against subsequent owners such as Maggie and Dave, the land benefiting from the Covenant must be identifiable, but in this case the neighboring land belongs to a brewery which is not likely to benefit from the restrictive covenant against a bar on the premises. It is not immediately clear who can press for enforcement of this restrictive covenant, which was the same issue raised in the case of Crest.6 Maggie and Dave can also invoke the provisions of Section 84 of the Land and property Act of 1925, under which the Lands Tribunal may modify or discharge a restrictive covenant on a freehold title where over 40 years have passed. An application can be made by the young couple on the grounds that the existing covenant is an obstruction on the reasonable use of the property which is planned. In view of the age of the property, it is possible that the request may be granted unless the Covenant has been imposed following statutory powers, because that would make it enforceable. However, it appears likely that Maggie and Dave can succeed in discharing the covenant through this application, especially if those benefiting from the Covenant, such as the neighbors and locals do not offer any objections. In regard to the issue of the neighbour, Mr. Simon, Maggie and Dave need to be aware that there is a possibility that Mr. Smith can make a claim for the land, because he has been grazing his cattle on it for ten years and has also been putting up fences and maintaining it. The title to the land is registered, therefore the person selling the land to Maggie and Dave is the prima facie owner of the property, therefore Mr. Smith is in effect, trespassing on the land and can be evicted. However, since he has been in possession of the property for a long time and has made use of it as though it is his own, he may be able to claim proprietary estoppel on the property. In the case of Ramsden v Dyson7, the grounds for proprietary estoppel were the squatter’s mistaken belief that he held the title and the owner did not disillusion him. This may not apply in Mr. Smith’s case since he is aware the land is not his. There is also no indication that any interest in the land was promised to Mr. Smith by the freehold owners, therefore the grounds of proprietary estoppel invoked in Re Basham8 also cannot be invoked. In the case of Uglow v Uglow9, the issue of proprietary estoppel was deemed to be satisfied through measures of equity to satisfy it. Mr. Smith has spent money on the property and it is possible that a claim in proprietary estoppel will invoke a serious consideration of his claim to the property in view of the time and money he spends on its upkeep, and he would definitely be able to argue in favor of being allowed to stay longer, even on a temporary license, on grounds of proprietary estoppel10. Based upon judicial precedents, the following aspects may work in Mr. Smith to put in a claim of adverse possession of the land: (a) physical occupation of the property.11 “Factual possession signifies an appropriate degree of physical control…….. the alleged possessor has been dealing with the land as an occupying owner might have been expected to deal with it and… no-one else has done so.”12 (b) the intention to possess the land13 without the consent of the actual owner14. One of the salient points noted by Browne Wilkinson in allowing the judgment for the defendant in the case of Pye was the issue of whether the defendant squatter had “dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.”15 After twelve years of occupation, the squatter on a land may apply for registration of title as proprietor of a new or registered estate16. Adverse possession in itself will not give the squatter the right to register the land but a squatter will be entitled to apply for registration of the land and the rules to be followed have been clearly set out17. The application must be made on an ADVI form and be accompanied by a statutory declaration. The owners of the freehold must be notified and there is no guarantee of success if the land is registered, even if fences have been erected by the squatter.18 If there is opposition by the owners, the squatter’s application will be rejected unless he can prove the following19 (a) he is entitled to be registered as proprietor through some compelling reason (b) the equity of estoppel would render it unconscionable to the proprietor to displace the applicant (c) in certain cases when the squatter’s property adjoins the land in question.20 Applying this to the case of Mr. Smith, the statutory period of 12 years has not passed, however on the basis of proprietary estoppel, he will have a good claim. Prior to the Land Registration Act of 2002, he might have been able to claim adverse possession, especially since he has been tending to the property “as an occupying owner might have been expected to deal with it and …no one else has done so.”21 Mr. Smith will also be able to demonstrate the necessary intention. Although he realizes that he is trespassing, his actions clearly show the intention to exclude the world and even the freehold owner “so far as reasonably practicable and so far as the law allows.” 22 However, there are two significant aspects that will bar any binding claim Mr. Smith may be able to make to the land. Firstly, he has been making use of the land with the consent of the freehold owner, since no attempt has been made to dislodge him or indication any opposition to his sue of the land. Therefore there is an implied license inherent in Mr, Smith’s use of the land by the freehold owner who may have intended to sell it but has no present use for the land and therefore permitted Smith’s use of it.23 But most importantly, possession is no more nine tenths of the law. Before the Land registration Act of 2002, it would have been easier for Mr. Smith to gain a title to the land in question through his possession of it, however after the Land registration Act of 2002, any such claim will not pass uncontested. The freehold owner has the right to oppose the squatter’s claim, because no matter how long the possession of the land, it will not bar the paper owner’s title to the registered land24, because adverse possession itself will no longer constitute ownership if the registered title holders oppose the claim. Therefore if Maggie and Dave oppose any claim made by Mr. Smith, his claim is unlikely to succeed. While he has a good chance of gaining temporary continuing possession on the basis of proprietary estoppel, he cannot put in any binding claim on the land. Lastly, the conditions that are being imposed by the local brewery would be equivalent to a clog, which would have earlier made the mortgage a fettered one and therefore void in equity. However, the choice of whether or not Maggie and Dave want to accept this mortgage is entirely theirs. They must bear the following factors in mind: (a) The brewery wants the right of first refusal, therefore it is only if they do not wish to purchase the property that Maggie and Dave will be free to sell it to someone else. According to MacKenzie and Philips, “it is not possible to give a mortgagee a valid option to purchase the estate as part of the mortgage transaction.”25 The question that arises in determining whether the mortgage that is being offered could qualify as a clog and therefore void in equity is whether it is an unconscionable transaction. In the case of Warnborough Lts v Garmite Ltd26 the Court held that in making such a determination, the mortgage must be an “objectionable restriction on the rights of the borrower who has mortgaged his property as security for the debt.” In this case it may be seen that by restricting redemption for twenty years and forcing Dave and Maggie to sell the product of the local brewery, the mortgage company is encroaching into the rights of the young couple to manage their property in their own way and stock it as they like, which is also an issue unrelated to the mortgage which the local brewery does not have the right to interfere in. Through the restrictive conditions being imposed, the local brewery will be virtually gaining the ownership of the bar which Dave and Maggie will set up, forcing them to sell their product and also gaining first prerogative to take over the property. The transaction is likely to qualify as unconscionable from the point of view of encroachment of Dave and Maggie’s right to make their own choices in their business matters and sales of the property. Out of the desire to acquire the competitive interest rate, Dave and Maggie may be handing away most of their rights on the property. Therefore, it would be advisable for the young couple to seek an alternative source of funding, where even if the interest rates are a little higher, they will have greater flexibility and options open to them in future choices they make on the property. However, on the other issues, it is possible to successfully get the restrictive covenant discharged and Mr. Smith may not have any definite claim to the land, which the freehold owners cannot object to. Bibliography Legislation: * Land and Property Act of 1925 * Land Registration Act of 2002 Cases: * Martin v David Wilson Homes ltd [2004] EWCA Civ 1027 * Crest Nicholson v McAllister [2004] EWCA Civ 410 * Chandler v Kerley (1978) 1 WLR 693 * Inglewood Investment Co Ltd v Baker 2002] EWCA Civ 1733 * JA Pye (Oxford) Ltd v Graham [2002] UKHL 30 [2003] 1 AC * Mortimer and Another v Bailey and Another [2004] EWCA Civ 1514 * Powell v McFarlane (1977) 38 P&CR 452 * Ramsden v Dyson (1866) LR 1 HL 129 * Re Basham (1986) 1 WLR 1498 * Sugarman v. Porter and Others (2006) EWHC 331 Ch * Uglow v Uglow (2004) WL 1476789 * Wallis’s Cayton Bay Holiday Camp Ltd v Shell Max and B.P. Ltd (1975) QB 94 * Warnborough Lts v Garmite Ltd (2006) EWCH 10 (CH) Books: * Mackenzie, J.A. and Philips, M, 2004.. 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