Analysis of Land Law Case - Assignment Example

QUESTION: Answer both parts of the question, which carry equal marks. Part James and his partner Julie decided to set up home together and have recently purchased Primrose Cottage. They purchased the property from Charles who was the sole registered proprietor of Primrose Cottage with absolute freehold title. Charles and his partner Ethel (who are unmarried) purchased the property in 1995 for £150,000. Ethel contributed her life savings of £15,000 toward the purchase price. On inspecting the property prior to purchase, James and Julie met Ethel who was watching television. Ethel had recently suffered a nervous breakdown and had just returned from a stay in hospital. James asked her if she had ‘any interest’ in the property. Ethel shrugged her shoulders and said nothing. Primrose Cottage has a large garden, which slopes down to a river. James and Julie noticed that there was a newly constructed summerhouse at the bottom of the garden. It contained no furniture or any other signs of occupation, so the couple thought no more of it. After agreeing the purchase price with Charles, contracts for the sale were exchanged in November 2007 and James and Julie subsequently received a clear official search from HM Land Registry. Later that month the transfer was completed and registered. The following day James and Julie prepared to move in. However, they then discovered that Charles had absconded with the proceeds of sale and that Ethel was still in occupation of Primrose Cottage. They also discover Frederick occupying the summerhouse. When questioned by James and Julie, Frederick tells the couple that he is on a fishing holiday and produces a deed duly signed by Charles (and satisfying all other formality requirements) granting him a four year lease to use the summerhouse from November 26th - December 10th in each of the four years. The lease was granted on October 2nd 2007. Advise James and Julie as to whether they are bound by any rights that Ethel and Frederick may have in the property. How would your answer differ, if at all, had Charles and his brother Richard been registered as joint proprietors of Primrose Cottage? Part 2 In 1989, four fellow workers at the Hemsby Sugar Refinery, A (then aged 28), B (then aged 16), C and D (both then aged 24), decided to buy a house together within easy walking distance of their workplace. They quickly discovered a suitable property, Potter House, which was duly purchased and conveyed ‘to A, B, C and D as beneficial joint tenants’. (Contd..) In 2000, B moved to a new job in Kent. He wrote to C and D demanding ‘immediate payment for my share in Potter House’. One month later, B contracted a fatal illness and died, leaving all of his property by will to his mother, X. In 2005, C, who had left Potter House to live with his girlfriend, sold his interest in Potter House to D. Last week, A and D were simultaneously killed as they were walking to work when a wall collapsed on top of them. A’s will left all of his property to the Y charity. D’s will left all of his property to his aunt, Z. Explain the effect of the above facts on the ownership of the legal estate and equitable interest in Potter House. In order to be able to advise James and Julie on the issue of the rights of Ethel and Frederick it is necessary to establish whether Ethel and Frederick’s rights would exist in law or would only exist in equity. 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 property1. By contrast equitable rights are in personam only and cannot exist independent of the law2. The principle of equity is based on justice or fairness but cannot always be applied to correct a wrong3. Equity acts on the conscience of the legal claimant by instructing him with regard to how he should conduct himself. A legal owner is entitled to dispose of the property in any manner he chooses4. The principle of equity will only be considered in order to prevent unfairness or injustice caused by the actions of the legal owner5. In the above scenario this would mean that Ethel and Frederick would have no claim over the property and would essentially lose any money that had been paid to Charles for either the purchase of the house or the leasing of the summerhouse. Their interest in the property would only be an equitable interest. In examining the rights of Ethel in relation to any claims she might have over the property it is necessary to discuss the effect of the contribution she made towards the purchase price of the property. As mentioned above the property was registered in the name of Charles only which would mean that in law Ethel would not have a legal right over the property. The effect of her contribution to the purchase price of the property is likely to give rise to a claim for a share of the property under the principle of a resulting trust6. This principle was applied in the case of Tinsley v Milligan7. This case involved a lesbian couple who had purchased a house together but had registered the property in the name of the respondent only so that the plaintiff could claim benefits. At the trial the respondent attempted to rely on the fact that the property was only registered in her name in an attempt to deprive the plaintiff of her share. Initially the court struggled in assisting the plaintiff as the doctrine of equity requires the applicant seeking equity to do equity. The court was able to find in favour of the plaintiff on the basis that she did not need to rely on her illegal conduct to assert her claim in the property. Under the principle of a resulting trust equity presumes that a person who contributes to the purchase price of the property must have done so with the intention of acquiring an interest in the land in proportion to the amount they have contributed towards purchasing the property8. This point was emphasised by Lord Diplock in Gissing v Gissing9 where he stated that A resulting, implied or constructive trust…is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny the cestui que trust a beneficial interest in the land acquired. A resulting trust has the effect of making an express declaration10 that the person contributing towards the purchase price will have an interest in the property. A further point which requires discussion is the fact that Ethel is still living in the property. Her occupation might be regarded by the court as an overriding interest11. Overriding interests have included legal easements12, squatter’s rights and the rights of a person in actual occupation of the property13. Someone intending to purchase that land must ask the occupier whether they have an interest in the property or not, as actual occupation could protect their rights to remain in occupation. Where the person with an interest in the property is in actual occupation it is likely that the court would allow them to remain there. It is not stated as to whether Ethel knew of the impending sale. If the sale had not been completed Ethel would be able to apply for proprietary estoppel to prevent the house from being sold. She could have applied for this on the grounds that her contribution to the purchase price gave her a beneficial interest in the property under equity14. Proprietary estoppel was established in the cases of Willmott v Barber (1880) 16 Ch D and Ramsden v Dyson (1866) LR 1 HL 129 where five essential elements were highlighted that had to be satisfied before a legal owner would be prevented from asserting his legal rights. These five elements consisted of the plaintiff having expended some money or having done some act on the faith of their mistaken belief that they would acquire an interest in the land15; they must have made some mistake as to their legal rights; the defendant must know of the existence of his own right which is inconsistent with the plaintiffs rights; the defendant must be aware of the plaintiffs mistaken belief of his rights; and lastly the defendant must have encouraged the plaintiff to spend money in the way they have or have encouraged them to act in the way they did16. As the property has been sold proprietary estoppel cannot be applied. With regard to the lease Frederick might encounter some difficulties if he was not in actual occupation at the time of the completion of the purchase of the property. The fact that the lease was for a date after the conveyance would have been completed would mean that Frederick would not have had the right to occupy the summerhouse until after the completion of the sale17. Generally speaking in order for a lease to be binding on subsequent parties there must be a deed and an entry made on the register so that any interested party would know of its existence18. There are however exceptions where the statutory formalities have not been adhered to any the courts have found that the lease is binding19. One such exception is where the lease is for a term not exceeding three years20. In such circumstances a written or oral grant of a lease will suffice in creating a legal lease. There are two provisos in such circumstances these being that the tenant must take immediate possession and that the rent is the market rent21. In the situation above the lease is for a future date and therefore as the tenancy is not immediate this would mean that no legal lease has been created. The lease may still be enforceable in equity or in law if the parties can prove that the lease was for value22. The courts could take the view that the lease should be treated as a contract to execute a lease in due form23. In equity the courts will treat the failed lease as a contract to grant a formal lease. According to Walsh v Lonsdale (1882) 21 Ch D 9, ‘a contract for a lease is as good as a lease’, in equity. The doctrine established in Walsh v Lonsdale proceeds in four stages. First it examines whether there is a contract to grant a lease, and then is this contract enforceable. The third element is deciding whether the contract is specifically enforceable and if these points are satisfied then ‘equity regards as done that which ought to be done.’ Equity in essence treats the parties as if the contract had already been carried out. In this case Frederick has a written deed therefore it is likely that the court would allow Frederick to use the summerhouse as dictated by the deed. If Charles was a joint proprietor with his brother Richard then both would have had to agree to the sale in order for James and Julie to buy the property. A joint tenancy is a collective ownership which means that there is unity of ownership amongst one or more persons24. With unity of ownership the sale or disposal of the property has to be done collectively. If they were regarded in law as joint tenants this would mean that they could not sell their share of the property to anyone else or leave it in a will to anyone else. As joint tenants the legal title can only be dealt with as a whole. Joint tenancies are classed as unseverable25. It must be a unilateral decision as joint tenancy insists on unity of title26. When looking at the legal and equitable interest in the Potter House it is necessary to consider the relationship of the parties. With ownership of property there can be two kinds of co-ownership, these are joint tenancies27 and tenancies in common28. With a joint tenancy there is a unity of ownership of the property between one or more persons29. As the unity of ownership must remain intake at all times the disposal or sale of the property must be done collectively. In the situation above the A,B,C and D would be regarded as joint tenants as they have all contributed equally to the purchase price. This would mean that B could not sell his share to anyone else nor could he leave his share in a will to another party. Joint tenancy agreements create the right of survivorship30. Under this doctrine when one of the joint tenants dies their share in the property is divided between the surviving tenants. In this situation this would mean that when B died his share would have been split between A, C and D. Joint tenancies are classed as unseverable31. Although the joint tenancy is not severable C can sell his interest to D as she is a joint tenant with him. None of the parties can force the others to sell the property. When C sold his share of the property to D if he did not expressly surrender his legal ownership in the property D would not be able to sell the restaurant without C’s agreement. In general terms co-ownership assumes that the relationship is a joint tenancy unless there have been words of severance or when it is one of the three special cases where the ownership is covered by equity. Under equity one of the special cases that are listed is where the co-owners are business partners32. The notion behind treating business partners as tenants in common is because it is not appropriate to have rights of survivorship in business dealings. A tenancy in common creates individual ownership in the shares of the property but can only be recognised in equity33 or through severance34. If words are included in the purchase of the property stating that the parties will have separate shares then severance is established. Where it is stated that the property is to be held in equal shares then severance can be presumed35. A tenancy in common would allow the parties to sell their shares in the property individually. If the court regard the words of B as words of severance this would in essence entitle him to be classed as having created a tenancy in common. Under a tenancy in common the rights of survivorship do not apply which would mean that B would be entitled to leave his share of the property to X. X would only have an equitable interest in the property as she is not registered as a joint owner of the property. X could not order the sale of the property and is only entitled to a beneficial interest in the property. The actions of C selling his share of the house to D amounts to severance. If C had not done this he would have become the sole owner of the house when the other three had died. The subsequent death of the remaining two owners of the property would mean that the charity Y and the aunt Z would all have a beneficial interest in the property along with X. In essence there would be no legal owner of the estate as C had sold his interest to D. Bibliography Beale, HD, Bishop, WD, Furmston, MP, Contract Cases and Materials, 3rd Ed, 1995, Butterworths Civil Procedure Volume 2, The White Book Service, 2002, Sweet and Maxwell Dixon, M. 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