Analysis of Land Law Cases - Case Study Example

The extent to which P is bound by the other third parties purporting to have interests in Gresham Road(“the Property will depend on the nature of the right (whether equitable or non-equitable) and as the Property is registered, the provisions of the Land Registration Act 2002 (“LRA). The LRA sets out the requirements regarding registration of third party rights and the extent to which such rights bind the interests of the purchaser. The LRA distinguishes third party rights that are required to be registered and those that are considered overriding1. As a general rule, the prior estate will have priority over the buyer subject to the exceptions in the LRA. Under the LRA, if a right is subject to the requirement of registration in order to have priority, (unless the right is an overriding interest under Schedule 3), failure to register will forfeit priority and the right will not bind a purchaser on a disposition2. However, the right may still be enforceable subject to the principles of equity and I shall consider any potential equitable rights when considering P’s legal position. Although P bought the property unaware of the other interests, he may still be bound by some of them. I shall deal with each right separately and conclude with a summary of P’s legal position vis-à-vis the other third parties. M’S INTEREST IN 45 GRESHAM ROAD With regard to M’s interest in 45 Gresham Road (“the Property”), we know that M was not registered proprietor and there does not appear to have been any express trust complying with the necessary requirements for a valid trust3. Even if the express trust was not valid, M would still have a proprietary interest in the property under either a constructive or resulting trust4. In contributing the sum of £50,000 to the purchase price, the previous owner N would hold the property on trust for himself and M in equity5 and therefore prior to P’s purchase, N held the Property as sole trustee and there were two co-owners in equity6. As the Property was held in trust and there is only one trustee of the land and two co-owners, P would not be able to rely on the doctrine of overreaching to negate M’s interest7. Under section 338 of the LRA, trusts are not registerable as notices on the registers and fall within the definition of “excluded interests.” Furthermore the effect of section 26 of the LRA is that purchasers are entitled to proceed in the absence of such an entry on the register on the basis that there are no limitations on the owner’s powers:9 “Subject to subsection (2), a person’s rights to exercise owner’s powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition”. Accordingly, although N was clearly in breach of trust by selling the Property, P’s title will in respect of M will not be affected unless M can establish that P was aware of the trust and N’s breach and therefore in knowing receipt of trust property. However, as M has an equitable interest in the Property under the trust, his interest may still be binding on P as an overriding interest. Schedule 3, paragraph 2 of the LRA protects overriding interests of those with rights to the property that are in actual occupation10. The definition of “actual occupation” clearly varies according to the nature of the premises concerned and the facts of each individual scenario. Schedule 3 of the LRA expressly requires actual knowledge and that occupation must have been “obvious on a reasonable careful inspection of the land at the time of disposition”11. Furthermore, it has been held that whilst actual occupation must be given its natural meaning, the LRA unequivocally requires it to be reasonable discoverable12. In BCCI v Akendel13e, the Court of Appeal that such knowledge had to be such as to make it “unconscionable for him to retain the benefit of the receipt.” Accordingly, if P made enquiries at the time of negotiations and was not made aware of M’s interest, he has a strong basis to claim she did not have actual knowledge. If we consider the factual scenario, it is evident that P’s surveyor inspected the property and that the surveyor saw M’s belongings in the flat. If the surveyor didn’t pass this information on to P then P would be entitled to sue the surveyor for breach of duty of care in preparing the survey report. This was confirmed in the case of Yianni v Edwin Evans & Sons14 Nevertheless, whilst P will potentially have redress against the surveyor for negligence, this will not absolve P from his duties as buyer to determine the details of any third party rights by physical inspection and by raising written enquiries about who is in occupation15. It has been established that although the term actual occupation must be given its natural meaning, the LRA unequivocally requires it to be reasonably discoverable16. Accordingly, it is questionable whether this is sufficient in itself to satisfy the requirement of making reasonable enquiries.17 Furthermore, it is arguable that the presence of M’s belongings in the flat should have put the buyer on suspicion to make further enquiries.18 Alternatively, the case of Chhokar v Chhokar19 also asserts that the requirement of actual occupation is satisfied by the symbolic presence of inanimate objects. Although uninterrupted presence is not a mandatory requirement, a fleeting presence is not sufficient either and the Court will consider the effect of the temporary absence, the length of absence, the purpose, the symbolic physical evidence of continued residence and evidence of the intention to return20. Accordingly, whilst M’s belongings were in the flat, if we consider the purpose of absence test, it is evident that M had been granted a lease to move into another house. He was beginning to spend more time there and as such, this would point in favour of signalling no intention to return to the Property. Whilst M has grounds for establishing an overriding interest, on the balance of probabilities it is likely that P will be able to negate this on grounds of lack of notice. If P can establish that he satisfied the reasonable inspection test along with a search of the register to support the claim of no actual knowledge, he will not be bound by M’s interest. R’S LEASE With regard to R’s claim to a lease of the top floor flat the initial issue is whether he has a valid right capable of enforcement. As the lease is stated to be for a year, it is not required to be registered and leases that are granted for a term less than seven years are overriding interests under Schedule 3 paragraph 1 of the LRA. However, the lease itself was not in writing and therefore the statutory requirement that a valid lease be in writing is absent, which undermines the validity of the lease as a valid legal estate21. There is an exception to the writing requirement with leases that are less than 3 years, at market price and that take effect in possession22. However, in R’s case, we are not aware of any terms being agreed regarding the market price and even if this requirement had been satisfied, the lease was granted in July 2008 and the alleged agreed date of possession was December 2008. In the case of Long v Tower Hamlets LBC23 asserted that this requirement is for a lease to take possession immediately. In the Tower Hamlets case a period of 18 days between agreement and the tenant moving into possession was held not to be immediate enough. Therefore on this basis, there are strong grounds fro P to challenge the validity of R’s lease due to lack of immediate possession. Although not a valid lease in law, R may try and argue that it is valid in equity as a properly construed contract for the creation of a lease as “equity treats as done that which ought to be done”. However, in order to be valid, such a contract would be required itself to be signed in writing24. Accordingly, it is unlikely that R can establish any right to a lease either in equity or in law. Furthermore, R couldn’t even claim that she has an overriding interest as Schedule 3; paragraph 2 excepts leasehold estates granted to take effect in possession more than three months from the date of grant but which has not taken effect in possession at the time of disposition from being overriding interests. 3) S’ RIGHTS TO THE TRANSFER OF A LEASE. With regard to S’ claim, there does not appear to be a valid legal lease created by deed on the basis of facts provided as required by section 52(1) of the Law of Property Act 1925. Moreover, section 1(2) of the Law of Property (miscellaneous Provisions) Act 1989 provides that “An instrument shall not be a deed unless: (a) it makes clear on its face that it is intended to be a deed by the person making it, or as the case may be by the parties to it; and (b) it is validly executed as a deed”. Alternatively, if not a legal lease, S may establish that he had a contract for the grant of a lease of the front yard with N and S will have the onus of proving that they had a specifically enforceable contract to create a legal estate. If established, this may constitute an estate contract under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. In the current scenario, it appears that these conditions are satisfied as the terms of the contract were specifically agreed in writing and signed by both N and S. As such, it can give rise to proprietary rights in equity following Walsh v Lonsdale,25which establishes that where there is an enforceable contract to grant a lease, equity will recognise it as an equitable lease and enforce its terms26. The contract must be specifically enforceable, written and signed by both parties made for valuable consideration and incorporate all the terms expressly agreed to27. If either of the parties can prove that they had a signed contract for sale it will not bind P unless protected as a notice on the register28. Section 29(2) of the LRA expressly provides that “for the purposes of subsection (1), the priority of an interest is protected (a) in any case, if the interest – (i) is a registered charge of the subject of a notice in the register”. With regard to S’ rights, the equitable lease under the contract with N will constitute a minor interest and must be protected by entry against the superior title under the LRA. It is evident that the interest was registered and will therefore be binding on P under section 29 of the LRA 2002. 4) U’s Interest in the Storage Yard In conveyancing transactions a “buyer will want to be sure that the contact correct describes the property and that the boundaries on the ground are the same as those shown on the title and in the contract.29” In the current scenario, P was clearly unaware of the existing conveyance between P and U and as such there is a boundary issue. The Land Registration Act 2002 preserves the general boundaries rule that the filed plan boundaries will not be conclusive. Section 60 of the LRA 2002 provides that a boundary of a registered estate as shown for the purposes of the register is a general boundary unless it is shown has having been determined. Section 60 further provides that a general boundary does not determine the exact line of a boundary. Rule 118 of the Land Registration Rules 2002 permits the proprietor of a registered estate to apply to the registrar for the exact line of the boundary of the registered estate to be determined. The registrar will then give the owner of the adjoining land the boundary to be determined notice of the application and other affected parties will then be able to object. If apply this by analogy to the current scenario, it is evident that P had not notice of U’s interest in the storage yard and was entitled under section 29 of the LRA to take the Property as being without encumbrances other than those noted on the register or overriding interests under Schedule 3. Accordingly, the discrepancy in the titles of both No.45 and No.46 Gresham Road as indicated on the register creates a boundary dispute. Either P or U may make an application under Rule 118 of the Land Registration Rules 2002 to the registrar to determine the exact boundary. It is important to note that if U can adduce evidence of the conveyance between U and N for the storage yard this will operate in U’s favour in determining the boundary dispute. In conclusion, P will not be bound by M’s interests unless he can prove that his occupation was more than fleeting and that it was reasonably obvious, which from the facts seems unlikely on grounds of the fact that his occupation was always meant to be temporary and he has been granted a lease of another property, where he has been spending most of his time. If P is bound by M’s interest, P will have recourse against the surveyor for negligence. R does not seem to have a valid claim to a lease either in law or equity, however the agreement with S for the lease will take effect in equity and as a registered interest against P. Finally, the boundary dispute places P in the most precarious position and it is recommended that he makes an application to the registrar to determine the boundary of the Property. BIBLIOGRAPHY Blackstone’s Statutes on Property Law., (2007-2008). 15th Edition Oxford University Press. R. Abbey & M. Richards (2007). A Practical Approach to Conveyancing. Oxford University Press Dixon, M, “Principles of Land Law”, 4th Edition Robert M Abbey, “Blackstone’s Guide to the Land Registration Act 2002”, Oxf.U.P. A J Oakley (2001) Megarry’s Manual of the Law of Real Property 8th. Sweet & Maxwell Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. R J Smith , “Property Law” (2003) 4th Edition, Longman R J Smith, “Property Law Cases and Materials”,(2003) 2nd edition Longman All legislation at www.opsi.gov.uk and the UK Statute Law Database at www.statutelaw.gov.uk Law of Property Act 1925 Law of Property (Miscellaneous Provisions) Act 1989 Land Registration Act 2002 Land Registration Rules 2002 Read More