Issues of Property Rights According to England Law - Case Study Example

Simon has recently decided upon a career change and has set up a property development business. His first project has resulted in him buying ‘The Hollies’ from an old acquaintance, Luke. The Hollies is a substantial property with several acres of land and numerous outhouses. However, being enthusiastic yet somewhat inexperienced, he has purchased the property without taking legal advice, believing that it would make the process quicker and would keep costs down. Unfortunately, now that the sale has been completed and Simon has started redevelopment works, he has encountered several problems that have resulted in him now seeking advice. Firstly, he noticed Eve leading several goats into the garden of The Hollies. Simon told her that he was now the owner and that she had to remove the goats, but she produced a document described as a deed dated 1988 granting Eve the right to graze goats in the garden “for the rest of her life”. Secondly, he discovered that he couldn’t get into one of the outhouses. Simon had visited the property before buying and recalled glancing into the outhouse and seeing a man (Adam) working on a lathe. Simon asked him what he was doing there and Adam replied “give me a minute mate, this bit is very tricky”. Simon hung around for a minute or two, but then left to continue his inspection of The Hollies. However, now that Simon has purchased the property, he is aghast to see that Adam arrives in his van at 8:00 am every weekday morning to begin work in the outhouse claiming that he has a right to do so. Simon asked for evidence and was shown a document granting Adam exclusive possession of the outhouse for 5 years at £50 per month. The document was dated 1st January 2008 and had been signed by both Adam and the previous owner, Luke. However, there was a gap on the document where their signatures should have been witnessed. Finally, Peter, Luke’s former partner arrived at The Hollies claiming that he has an interest in the property. It transpires that Peter and Luke separated several months ago and Peter has been on an extended holiday since the break-up. Apparently, Luke bought the property originally and put it in his sole name for ‘tax reasons’. Peter always understood that the reality was that they owned the property between them and as such, Peter ensured that he paid all of the bills enabling Luke to meet the mortgage repayments. Simon told Peter that he’d had a good look around the property before buying and didn’t recall seeing any evidence of Peter’s things. Peter pointed to a large photograph on the wall that Simon had yet to remove. The photograph was of Peter and Luke at the Taj Mahal. Peter told Simon that the photograph was taken on their honeymoon. Advise Simon as to what rights (if any) Eve, Adam and Peter have in The Hollies and whether the rights are binding upon Simon. Consider the scenario both in the event that the property is (1) unregistered title and (2) registered title. In order to be able to advise Simon, it is necessary to consider the various issues that need to be addressed. It will be necessary to consider the legality of the deed granted to Eve entitling her to continue to graze the animals on the land for ‘the rest of her life.’ It will also be necessary to determine whether the 5 year lease will be binding on Simon, especially given the fact that the lease was not witnessed in the appropriate manner. It will also be necessary to consider whether the burden and benefit of covenants can be transferred to subsequent owners of the land. In relation to Peter, it will be necessary to consider the law in relation to overriding interests, in order to establish whether Peter might have an interest in the property. From this it should then be possible to advise Simon with regard to the claims made by Eve, Adam and Peter, and determine which of these will be binding on Simon. Within this analysis there will be an examination of the effects of the above agreements in relation to registered and unregistered land. It will be necessary to determine whether the rights of each of the parties are rights in law or only equitable rights, as this will affect whether they can be binding on Simon. Under the Law of Property Act 1925 s2 legal interests in property can be created. These legal interests include easements1, rights of way, rentcharges2, legal mortgages3 and other similar charges. Where an agreement to allow another to use the land is created by way of a deed, the person to whom the right has been granted is entitled to use the land as though they are the legal owner of that land4. With property the legal rights of ownership are vested in the person in whose name the property us registered. This entitles such persons to rights in rem over the property5. By contrast equitable rights are in personam only and cannot exist independent of the law6. The principle of equity is based on justice or fairness but cannot always be applied to correct a wrong7. Equity acts on the conscience of the legal claimant by instructing him with regard to how he should conduct himself. In the above, the creation of the deed for Eve and the document signed by Adam and the previous owner are likely to amount to a right in law. This would mean that these obligations would be binding on Simon. In general terms, for a lease or deed to be binding on a subsequent owner, there must be an entry made on the register so that a prospective buyer would know of its existence8. If these are not entered on the register the transferee does not acquire a legal estate or interest9. Exceptions have been noted where there is no such entry but the lease still becomes binding on a subsequent owner10. This might occur where a lease has been granted for less than 3 years as there is no requirement for an entry on the register for leases of less then 3 years duration11. It could be argued that the lease issued to Adam is invalid as it has not been witnessed, however, the court may apply the principle of equity if Adam can prove that the lease was for value12. In such circumstances, the court could determine that the lease should be treated as a contract to execute a lease in due form13. In equity the courts will treat the failed lease as a contract to grant a formal lease. According to Walsh v Lonsdale (1882)14, ‘a contract for a lease is as good as a lease’, in equity. When purchasing a property, it is the responsibility of the buyer to enquire as to the existence of equitable interests on the property. Certain interests have to be entered onto the register in order to be enforceable15, however, there are instances where the court will allow equity to intervene, where such interests have not been entered. With unregistered property, information concerning interests in the land should be contained within the deeds. In relation to the interests of Peter, it is necessary to consider the rules regarding constructive trusts. A constructive trust can be inferred by the court where the actions of the person who is not entered on to the register appear to suggest that they expected to have an interest in the property. Such evidence can be adduced through the payment of household bills and assistance with repairs to the property16. In order for Peter to be able to claim a right in the property, he would have to demonstrate that he has acted to his own detriment in reliance on the promise made to him by Luke. This was found to be the case in Lloyd’s Bank Plc v Rosset17 where the court initially determined that there had been an inference that Rosset would have a beneficial interest in the property. Evidence that Rosset had acted in her own detriment was adduced from the work she had undertaken on the property. This decision was overturned on appeal on the grounds that only direct contribution to the purchase price by the party who is not the legal owner whether from the offset or by payment of the mortgage instalments will justify the inference necessary for the creation of a constructive trust. (Lord Bridge of Harwich). However, in Rowe v Prance18 the plaintiff won her claim for a half share in the yacht despite the fact that she had made no financial contribution. The court accepted the evidence that Prance had made representations to her referring to ‘our boat’ and ‘sharing the boat together’ stating such declarations could amount to a declaration of trust. The cases of Eves v Eves19 and Grant v Edwards20 are also likely to assist as in both these cases inference was drawn from comments made by the respondents to the plaintiffs and by their conduct in respect of work carried out that there was an intention to give the plaintiffs a beneficial interest. Had the property not been sold Peter might have been able to rely on the doctrine of proprietary estoppel to prevent Luke from selling the house. This was used in Willmott v Barber (1880)21 and Ramsden v Dyson (1866) LR22. In both these cases, the court stated that in order to rely on this principle the applicant had to show that they had spent money or performed some kind of act in faith on the mistaken belief that by so doing they would acquire a beneficial interest in the property23, and that the person making those representations had encouraged them to act in that manner24. It is not clear from the above, whether the deed or the lease were entered onto the register. If they had been entered onto the register and Simon failed to notice these when he searched the register, then both would be binding on him. If, however, no such entry had been made on the register, then the deed issued to Eve would be invalid and she would not be allowed to graze the goats on the land anymore. Similarly with Adam, as the lease is for 5 years, this would have to be entered onto the register in order for it to be valid. If this was not done then Simon would hold the property free of any incumbrances. In relation to Peter, the court might determine that he has an equitable interest in the property, however, as he was not in actual occupation of the property when Simon purchased it, Peter would probably have to bring an action against Luke for a share of the money he received from the sale. If he had been in occupation, he could have claimed proprietary estoppel, which would have entitled him to remain in the property. Bibliography Ashburner, W, (1933), Principles of Equity, 2nd Ed, Butterworths Birks, P, (1985), An introduction to the Law of Restitution, Oxford University Press Bridge, M, (2002), Personal Property law, Clarendon Press Bryn P, (2000), Understanding Land Law, 3rd Ed, Cavendish Publishing Ltd Civil Procedure, (2002), The White Book, Volumes 1 & 2, Sweet & Maxwell Cockburn, T & Shirley, M (2005), Equity in a Nutshell, Lawbook Co Cockburn, T, Harris, W, & Shirley, M, (2005), Equity & Trusts, Butterworths Cooke, E J, (2002), ‘Adverse possession, electronic conveyancing, and registration, overriding interests: Title to lan’, Conv 11 Dixon, M. (2005). Modern Land Law, 5th Ed, Cavendish  Dixon, M, (2003), ‘The reform of property law and the Land Registratio Act 2002: a risk assessment’. Conv 136 Dockray, M, (1985), ‘Why do we need adverse possession’ Conv 272 Glover, N & Todd, P, (1995), ‘Inferring share of interest in home: Midland Bank v Cooke’, 4 Web JCLI 28 September 1995. Gravells, N P, (1999), Land Law Text and Materials, 2nd Ed, Sweet and Maxwell Gray, K & Gray, S, (2005), Elements of Land Law, 4th Ed, Oxford University Press Gray, K & Gray, S F (2006), Land Law, (4th Ed), Oxford University Press. Hayton, D J, (2001), The Law of Trusts and Equitable Remedies, 11th Ed, Sweet & Maxwell Pearce, R and Stevens, J, (1998), The Law of Trusts and Equitable Obligations, 2nd Ed, Butterworths Smith, R J, (2006). Property law: Cases and materials, 3rd Ed, Pearson Education Thomas, M, (2001) Statutes on Property Law, 8th Ed, Blackstone’s Zander, M, (1998), The Law-Making Process, 3rd Ed, Weidenfield & Nicolson www.bailli.org www.opsi.gov.uk www.westlaw.ac.uk Read More