Property Law: Analysis of the Property Rights - Case Study Example

Property Law The facts of the case that the Peter bought the Wimbledon Property without knowing the following: that Bob contributed to the purchase of the property back in 1998; that Dave has an existing lease with Vicky for the exclusive use of the garage, and; Max, Bob’s brother lives in the converted garage during weekdays when Bob is not around. Peter bought the property presumably for a considerable amount of money. An analysis of each person’s right shows that Bob has an equitable interest in the property because of the amount he contributed to its purchase; Dave has an equitable interest in the leasehold of the garage for the duration of ten years, and; Max has at least a vested interest in the property because he has been living in its grounds during those times when Bob was not around. The circumstances under which Peter bought the property seemingly fall squarely with the textbook definition of the term “bona fide purchaser for value without notice.” A bona fide purchaser for value without notice is defined as a buyer of the land for a considerable sum of money without knowledge of existing equitable interests over the land. Title at law is enforceable against the whole world. “A person who is such a bona fide purchaser for value and without notice is known as ‘equity’s darling’, and will take a legal estate free from equitable interests.1 In other words, a bona fide purchaser for value with legal title and without notice therefore has a right against everyone including equitable titles and interests. The issue therefore in this problem is whether Bob, Dave and Max have rights under the circumstances notwithstanding that Peter is on the surface, a bona fide purchaser for value without notice. The Rights of Bob Bob contributed to the purchase price in the amount of GBP 50, 000 and took up residence within the Wimbledon Property, first in the main house and later, when his relationship with Vicky went sour, converted the barn to a residential building and continued his residency there. His clothes and his other things are left in the converted barn. Albeit that he now lives during the weekdays with a girlfriend in the city, he showed no intention of abandoning his stay in Wimbledon. As a matter of fact, he allowed his brother Max to keep house during the times he was away. On the basis of his contribution to the purchase of the house, Bob has acquired an equitable right over the property, notwithstanding that this was an amount not so huge vis-à-vis Vicky’s GBP 400.000. Prior to the present land registration law viz., The Land Registration Act of 2002, there was no need to register equitable interests, only ownership over the land. As discussed above, however, even equitable rights can be defeated. A bona fide purchaser for value without notice is entitled to absolute possession of land free from all interests on it if he had no prior notice to their existence. The issue here is whether Peter qualifies as such with respect to Bob. The facts of the case state that Bob did not bother to look into the converted barn upon word from Vicky that it was not occupied and there was nothing of importance there. According to the different case law pertinent to the case at hand, a purchaser can only be said to be without notice if he has actually taken steps to ensure as to the real status of the land. He is required therefore to make a careful ocular inspection of the land and enquire as to whatever seems to be odd or out of place with it which will have the potential to affect his ownership in the event he ultimately purchases it. This is not the case with Peter. He bypassed inspection of the converted barn and allowed Vicky to dissuade him from taking a closer look at it. Had he entered the barn, he would have known that somebody was living in it or he would have met Max who would have apprised him that his brother Peter was occupying it. Peter and his surveyor therefore did not exercise reasonable care in inspecting the lands. This failure to exercise reasonable care therefore did not qualify Peter to be a purchaser for value without notice I so far as Bob is concerned. At hand, are four decided cases which have similar factual situation to the present case, as they involve equitable interest over lands, the registered ownership of which were in the name of another. In the first two consolidated cases the rights of the wives over the family property were upheld and were deemed to be “overriding interests” notwithstanding that the lands were registered in their husbands’ names. In these cases, the wives actual occupation of the houses should have served as constructive notices to Glyn’s Bank Limited that there were other parties that might have interest in the property. The failure of the bank to exercise reasonable care precluded it from being a purchaser of value without notice. In the Midland case however, the purchaser was upheld by the court because she was found to have been a purchaser for value without notice of a prior agreement for an option to sell. On the other hand, the case of Mrs. Hodgson clearly illustrated the stand taken in the present case that the actual occupation of a person of the property subject to conveyance should serve as a constructive notice of an opposing interest in the land unless upon enquiry, the opposite was revealed. The last case, that of Ainsworth, an older case, albeit stated principles that are contrary to the stand of the present case is nevertheless included for comparative purposes and to show the legal trend of cases regarding the subject. In the cases of William’s & Glyn’s Bank Limited v. Boland and another2, which were consolidated because of the similarities of the facts, the wives claimed to have contributed to the purchase of their respective houses. Their rights however were not registered and only the husbands’ names appeared as proprietors of the properties. The husbands, in both cases, mortgaged the properties to the William’s & Glyn’s Bank and subsequently defaulted and the bank swiftly moved for foreclosure proceedings. The wives intervened claiming equitable and beneficial rights over the properties. The operative law under which the above cases occurred was the Land Registration Act of 1925, where the only registereable interests are the legal estate in lands, unlike the Land Registration Act of 2002 in which almost anything pertaining to land is capable of being registered under Section 2 thereof. In the former however, notwithstanding the limitation in registration, the Act nevertheless acknowledged the kind of interests in equity which it called “overriding interests,” which the law was obligated to likewise legally dispose. These interests were laid down in Section 70 of the Act and these were, inter alia, “the rights of every person in actual occupation of the land or in receipt of the profits thereof, save where enquiry is made of such person and the rights were not disclosed.” The implication of the said provision is that persons occupying the property or receiving profits from the property have “overriding interests” in the property and any transaction involving the property must be made only after enquiring as to their actual rights over the said property. The House of Lords held in this case that the actual possession of the wives or anyone for that matter, of the property subject to purchase has the effect of transforming mere equitable interests to overriding interests and therefore was protected by law. In the case of Midland Bank Trust Company Limited and Another v. Green and Another 3, a son, Geoffrey, let a 300-acre farm of his father and farmed it as a tenant. His father eventually offered him an option to purchase the land which the son accepted at £1 open for ten years. This agreement however was not registered in accordance with the Register of Land Charges law. Eventually, father and son had a falling-out, and without the son’s knowledge, the father sold the property to his wife for £500 to defeat the son’s option. Subsequently the wife executed a will which entailed to all her sons, including Geoffrey all her property, one of which was the farm the latter was working. When the son learnt of this he registered the option to purchase and a few days later notified all concerned that he would exercise it. Two years after the death of the mother, a writ was issued for the specific performance of the option. The House of Lords, upon appeal to it of the case where the lower court decided in favor of Geoffrey, held that the mother was a purchaser for value and that therefore the transaction of the land in her favor was not a sham. Since the registration of the option took place only after the conveyance to her of the land was completed, then that option was void as to her. In the same the case, the subject of a bona fide purchaser for value was broached by the HL which described it as “a creation of equity” where a purchaser described as such can only be affected by equitable interests if the purchaser had constructive notice of such equitable interest. The doctrine of constructive notice where “equity fastened upon his conscience” therefore was formulated to defeat the absolute rights of a purchaser for value in good faith. In the case of Hodgson v. Marks4, Mrs. Hodgson, the owner of a property, ceded the property orally to Mr. Evans, one of her lodgers. Before, during and after she gave the property to Mr. Evans out of “love and affection” for him, she was in actual occupation of the property. Mr. Evans eventually registered the property in his name but even after such registration nothing remained in the relationship of the two as owner and lodger. Mr. Evens still paid his monthly rent to Mr. Hodgson and the latter still occupied the place as owner of the house. Mr. Evans eventually sold the land to Mr. Marks.. When Mr. Marks made an ocular inspection of the house several times, he saw Mrs. Hodgson twice and he assumed she was the wife if the seller without bothering to ask her. Mrs. Hodgson filed an action to defend her right over the property. The judge of the lower court denied Mrs. Hodgson the case on the ground that the phrase “actual occupation of the land” did not serve as constructive notice to the purchaser because it did not include in its ambit the owner of the house. Lord Russell on appeal demurred to this perspective and said that “It is a principle of law (and of the Land Registration Act 1925) that a person in occupation is protected in his rights by that occupation, unless, of course, the rights are such that they require registration if they are to be protected. A purchaser must pay heed to anyone in occupation if he is to be sure of getting a good title.” In addition, it was held that a registered owner cannot convey ownership of the property without transferring also overriding interests and the act of registering the property itself in one’s name is likewise “subject to overriding interests.” If a person stays as an actual occupant of the property without abandoning her right to so stay, it is a right protected by that occupation unless a potential buyer asks the occupant of his or her right over the property he or she is occupying and he or she did not so declare to the buyer. In the case, at hand, Mrs. Hodgson’s actual occupation of the land implied that she did not give up her overriding interest over the land to Mr. Evans (1971). In the case of National Provincial Bank v. Ainsworth5, the Appellee is a married woman who was abandoned by her husband, leaving her with the children. She continued to stay in the family residence with her children, the house registered in the name of the husband who left her. Eventually, she was granted judicial separation and alimony and the children were each given allocation. The erring husband on the other hand, encumbered the property where the wife and the children were living to the National Provincial Bank. Later on, he sold it to another company and latter encumbered the property to the Bank. After two notices of deafualt, the bank started foreclosure proceedings. The wife objected on the grounds that her dispossession of the property will defeat her case for maintenance to the husband in the divorce proceedings. The decision of the lower court was that the decision of the divorce court did not affect the rights of the Provincial Bank as a mortgagee because it was a purchaser for value without notice that the husband intended to defeat the wife’s claim against him in the divorce proceedings. This was however reversed by the Court of Appeals. The HL however, reinstated the lower court’s decision Dave’ Rights In Dave’s case, he entered into an oral contract of leasehold of the garage with Vicky for a term of ten years sometime in 2007. At that time the Land Registration Act of 2002 was already operative. The said law has widened the scope of registerable rights of lands. Schedule 2 of part I of the 2002 Act included a variety of equitable rights subject to registration, to wit: 2 Scope of registration This Act makes provision about the registration of title to --- (a) unregistered legal estates which are interests of any of the following kinds ----- (i) an estate in land (iii) a franchise (ii) a rentcharge (iv) a profit a pendre in gross (b) any other interest or charge which subsists for the benefit of, or as a charge on, an interest the title to which is registered; and (c) interests capable of subsisting at law which are created by a disposition of an interest the title to which is registered6 The implication here is that Dave should have registered his leasehold right over the garage in accordance with the above provision. However, notwithstanding that Dave failed to comply with this requirement, undeniably he holds an equitable interest over the garage for the duration of ten years. This right over the garage by Dave however cannot defeat Peter’s right over the property including the garage because as to Dave, Peter is a bona fide purchaser for value without notice. The difference between Dave and Bob is that in the case of Dave, there was no way that that Peter could have known of the existence of Dave’s lease of the garage because the garage at that time was not being used and occupied by Dave. Max’s Rights Max’s right over the property was of a personal nature, one that is strictly between him and his brother Bob. It was not sanctioned by Vicky but was merely tolerated. It has nothing to do with Peter and no precedent or case law grants to Max rights vis-à-vis Peter. REFERENCES Land Registration Act of 2002, The. Hodgson v. Marks [1971] 2 WLR 1263. Open Law JISC. BAILII. http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/1971/8.html&query=title+(+Hodgson+)+and+title+(+v+)+and+title+(+Marks+)&method=boolean Midland Bank Trust Company Limited and Another v. Green and Another [1981] 2 WLR 28. Open Law JISC. BAILII http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKHL/1980/7.html&query=%22doctrine+of+constructive+notice%22&method=boolean National Provincial Bank v Ainsworth. Open Law. BAILII. [1965] AC 1175, [1965] 3 WLR 1, [1965] UKHL 1, [1965] 2 All ER 472. [1965] AC 1175, [1965] 3 WLR 1, [1965] UKHL 1, [1965] 2 All ER 472 William’s & Glyn’s Bank Limited v. Boland and another [1980] UKHL 4, and Wiliam & Glyn’s Bank v. Brown and Another [1981] AC 487. Open Law JISC. BAILII http://www.bailii.org/uk/cases/UKHL/1980/4.html Wilson, Sarah (2005). Todd and Wilson’s Textbook on Trusts. 8th Ed. Oxford University Press. Read More