Land Law - Essay Example

Oliver is currently in arrears of payment and in order for Drogheda Bank to recover possession, it will firstly be necessary to consider their proprietary rights under the Land Registration Act 2002 (LRA)1. Secondly, it will be necessary to evaluate the possibility of Elizabeth’s proprietary rights in the Property operating as an overriding interest. With regard the rights of mortgagees, the LRA 2002 splits third party rights into those that require registration and those that are overriding2. As a general principle, the prior estate will have priority subject to LRA exceptions3. Under the LRA, mortgages are required to be registered as minor interests4 and in the current scenario Drogheda have registered the charge. Therefore in light of Oliver being in arrears, section 101 of the Law of Property Act 1925 (LPA), prima facie entitles Drogheda bank as mortgage to take possession of the property, to sell the property or to appoint a receiver5. When a mortgagor is in default on the repayments, the mortgagee has the right to sell the property. Under section 101 of the LPA 1925, this power is implied into every mortgage, which further provides that a power of sale arises when the loan or repayment becomes due. However, under section 103 of the LPA, the power is only exercisable by Drogheda bank if they have complied with the following: (i) Served notice on Oliver and not received payment three months after service of notice; or (ii) Mortgage interest payments are in arrears by more than two months (which is applicable in the current scenario); or (iii) The mortgagor is in breach of some other covenant in the mortgage agreement. Therefore, as Oliver is in arrears for months, this will enable Drogheda Bank to serve notice to obtain possession and seek an order for possession before any purported sale and cannot evict a defaulting mortgagor by force6. Section 87 of the LPA 1925, effectively grants a mortgagee the right of possession. Moreover, as the mortgaged property falls within the definition of “dwelling house”, section 36 of the Administration of Justice Act 1970 provides the court with powers of postponement for any order for possession where there is a realistic possibility that the mortgagor will be able make payments. Additionally Drogheda Bank’s rights of possession may be impacted by Elizabeth’s alleged contribution of £500,000 to the purchase price. Oliver is the sole registered proprietor and as far as we are aware no valid express declaration7 of trust was ever granted to vest Elizabeth’s alleged joint interest in the Property. However, in Dyer v Dyer8if an individual contributes to the purchase price, then in the absence of an express legal interest in the property, an equitable interest will arise commensurate to the size of the contribution to the property price and such interest will be held on resulting trust9. This was confirmed in Westdeutsche Landesbank Girozentrale v Islington LBC10. Accordingly, Elizabeth will have an equitable interest under resulting trust. Under Section 33 of the LRA, trusts are not registerable as notices on the register, however Drogheda Bank may still be bound by Elizabeth’s equitable interest as an overriding interest. Schedule 3 paragraph 2 of the LRA grants overriding status to “an interest belonging to a person in actual occupation”. The definition of ‘actual occupation’ varies according to the individual facts of a particular case. Schedule 3 of the LRA expressly requires actual knowledge on the part of the purchaser and that occupation must have been “obvious on a reasonable careful inspection of the land at the time of disposition”11. On the basis of facts provided, Elizabeth is Oliver’s wife and therefore whilst we are not given further information, it is highly likely that Elizabeth’ occupation will constitute actual occupation and have been obvious to the bank to constitute an overriding interest. Additionally, as Oliver is the sole legal proprietor and Elizabeth has an equitable interest, in Williams and Glyn’s Bank v Boland12, it was held the power of sale cannot be enforced against equitable co-owners in property. Accordingly, whilst the Bank prima facie has the right to make an application for possession, they may be prevented from doing so on grounds of Elizabeth’s overriding interest under the resulting trust. D) In order for Henry to protect his right to first refusal, a specifically enforceable contract to create a legal estate in land can give rise to proprietary rights in equity following the decision in Walsh v. Lonsdale13. However, the contract must be specifically enforceable, written and signed by both parties, made for valuable consideration and incorporate all the terms expressly agreed to14. However, to protect his legal position in law, it is advisable for Henry to enter into a formal written contract for the purchase of the Property. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (the 1989 Act) provides that “a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms”. The essence of Section 2 is the requirement that the contract must be in writing and contain all the terms expressly agreed to and be signed by both parties. If the rules are not complied with, there will be no contract. In the past, failure to comply with the written requirements was remedied by equity when there had been part performance of a contract15. Whilst there is no express provision in the 1989 Act specifically abolishing part performance, there has been an assumption that the doctrine is no longer applicable as section 2 clearly renders oral contracts void. Furthermore, an option to purchase is defined as an estate contract and as such is required to be registered as a notice on the register under Section 33 of the LRA. Failure to register the option means that the option will not bind H in any event due to the provisions of Section 29 of the LRA which 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”. Therefore, in summary it is advisable for Henry at the outset to enter into a written contract for the option to purchase the Property followed by registration of a notice in the register. This will strengthen his position in law and protect against complex claims for equitable claims on grounds of proprietary estoppel in the event of a subsequent dispute. Read More