The Law of Property Act - Essay Example

The factual scenario raises complex issues under property law, which I shall deal with in turn Whether Ming was en d to remove the sign Whether or not Ming was entitled to remove the sign is dependant on whether the sign falls within the legal definition of land1. Section 205(1) (ix) of the Law of Property Act 1925 (LPA) defines “land” as “any tenure and mines and minerals, whether or not held apart form the surface buildings of parts of buildings (whether the division is horizontal, vertical or made in some other way) and other corporeal hereditaments, also a manor, an advoswson, and an easement, right, privilege, or benefit in, or over, or, derived from land”. Moreover, in any contract for the sale of freehold land, there is a presumption that the contract will automatically include everything which legally constitutes “land”2. Accordingly, whether or not Ming was entitled to remove the sign depends on whether the sign can validly constitute land or whether it constituted a chattel, which doesn’t fall within the scope of “land”3. The classic definition of a fixture is anything which is physically (but not necessarily legally) removable and makes a permanent improvement to the land4. Conversely, a chattel is an item brought onto the land, which doesn’t become part of the land5. The general rule regarding fixtures is that whatever is attached to the soil becomes part of the soil6. In determining whether the sign is fixture or a chattel, it will be necessary to apply the two factual tests as extrapolated by Blackburn J in the case of Holland v Hodgson7, namely the degree of annexation test and the purpose of annexation test. The degree of annexation test requires that the object be fastened to or connected with the land in some way for there to be a presumption that it is a fixture8. For example, in the case of Hamp v Bygrave9 it was held that patio lights that were attached to the wall of the house were fixtures. Moreover, if an object is not fixed, but merely rests on its own weight, there will be a presumption that it is a chattel10. If we apply this by analogy to the current scenario, the sign had hung from a post, which if resting on its own weight will lead to a presumption of it being a chattel. However, the presumption can be rebutted on the basis of the purpose of the annexation test. In the case of Elitestone Limited v Morris11 Lord Clyde asserted that this test involved a consideration of “the purpose which the object is serving and not the purpose of the person who put it there12”. As such, the test is objective and is concerned with the intention of the person who put the object on the land. It further requires the overriding purpose of the object being the enhancement and enjoyment of the land to make a permanent improvement to the land, in order for it to be a fixture13. If we apply this by analogy to the current scenario, we are not aware of the terms of the contract of sale between Ming, Barin, Flash, Dale and Hans. If the contract expressly provided that the sign would remain as part of the land as a condition of sale, then removal by Ming will be in breach of contract. Alternatively, if the sign is part of the land, Ming did not have a right to remove it and Barin, Flash, Dale and Hans would be able to request a return of the sign14. However, if the sign rests on its own weight, then the parties will have to rebut the presumption by demonstrating that the sign was intended to enhance the enjoyment of the land. If this can be established, the sign will form part of the land and the parties will be able to recover the sign from Ming. 2) Action to recover rent from Skylark Limited With regard to Skylark’s tenancy, the purchasers were aware of the tenancy and I shall proceed on the presumption that there are no issues regarding validity of the lease. With regard to recovery for the arrears of rent, as Skylark Limited is an assignee of the original lease with Ming; Barin, Flash, Dale and Hans may be able to recover the rent from Vultan as the original tenant if there is an Authorised Guarantee Agreement (AGA) in place15. An AGA will make Vultan liable for his assignee’s performance relating to the covenants in the original lease. As such, this will enable B, F, D and Hans to recover the rent directly from Vultan. In order to take such action, Barin, Flash, Dale and Hans would have to serve Vultan with a notice to pay on behalf of the defaulting assignee for a fixed charge16. Furthermore, the Landlord and Tenant Act 1995 (LTA 95) would then enable Vultan to request an overriding lease within 12 months of the payment. This will mean that Skylark will then have a sub-lease and will be liable for the rent and if they continue to default with the payments, Vultan would be able to take action against Skylark17. If there isn’t an AGA in place, then the effect of the LTA 1995 is to remove the privity of contract rule and section 5(1) of the LTA 1995 provides that this section applies where the tenant assigns premises demised to him under a tenancy”. Section 5(2) further provides that “if the tenant assigns the whole of the premises to him, he – (a) is released from the tenant covenants of the tenancy”. As such, this enables Barin, Flash, Dale and Hans as assignees of the reversion of the lease from Ming to take action directly against Skylark for the arrears of rent. If Skylark persists in its breach of the rent covenants in the lease, Barin, Flash, Dale and Hans may want to consider terminating the lease. As the lease is a commercial lease until 2011, business tenancies for a term in excess of six months provide tenants with security of tenure under Part II of the Landlord and Tenant Act 1954. Accordingly, the lease can only be terminated by one of the procedures laid down in the Landlord and Tenant Act 1954. If the security of tenure provisions are not contracted out in the lease itself, Barin, Flash, Dale and Hans will have to serve a notice under Section 2 of the LTA 1954 specifying a termination date of not more than 12 months nor less than 6 months from the date of service18 and the specified date cannot be earlier than the expiry date of the initial fixed term of the lease19. Applied to the current scenario, this suggests that the earliest the parties could terminate would be upon the expiry of the lease under the LTA 1954. The notice must specify reasons for objections to a new tenancy only using certain specified grounds20. The exact wording of the grounds are set out in section 30(1) of the LTA 1954 and are reproduced in full in the body of the section 25 request21. With regard to the current scenario the most relevant ground would be the section 25 ground for failure to pay rent. c) Whether Aura is entitled to remain in Unit 2. The extent to which Aura’s rights are enforceable will depend on the nature of her rights and the enforceability of interests under the Land Registration Act 2002. If we firstly consider the factual scenario, Aura argues that she has been using Unit 2 since 2004 and pays a yearly “occupation fee”. This creates a degree of ambiguity as to whether her alleged right to use the property constitutes a licence or a lease. If the living arrangements point to rights under a lease, it will then be necessary to consider whether the interest takes effect as a legal or beneficial interest. With regard to whether or not the living arrangements constitute a lease or a licence, the general principle of law is that unless an individual occupying another’s land has exclusive possession, they will be a licensee and not a tenant22. In the current scenario, it appears that Aura has had exclusive occupation of Unit 2, however the other key-defining factor of a tenancy is the offer and acceptance of exclusive possession for a term at “rent23” and we are not aware of the exact terms of her alleged agreement with Ming since 2004. The fact that she has been using Unit 2 since 2004, will point in favour of there being a lease. The distinction between a lease and a licence was formulated in the leading case of Street v Mountford24, where Lord Templeman asserted that the general test for determining a tenancy was to firstly consider the question of “exclusive possession” as a starting point. Lord Templeman further stated that the existence of “exclusive possession” was essentially a question of fact and that the intention of the parties was irrelevant25. Accordingly, if Aura can establish that in fact, the occupation arrangement resulted in the grant of exclusive possession, the arrangement will constitute a lease and not a licence. As Smith comments26, with regard to rented accommodation an occupier in residential accommodation is either a lodger or a tenant27. In Street v Mountford28, Lord Templeman asserted that the facts would point to a lodger if the landlord provides attendance or services that required the landlord to exercise unrestricted access to and use of the premises. However, in practice many landlords have not wanted to provide the services required but have used the shield of lodger as a route to indicate a licence29. For example, in the case of Aslan v Murphy30, the occupier was made to vacate the premises for 90 minutes every day and the owner retained a key on the pretence of cleaning the room and providing bed linen. However, the Court of Appeal asserted that the term requiring the vacating of room was not actually intended to be acted upon and was therefore a sham31. There does not appear to be any such requirement here and no such services were provided to Aura from the facts provided. The relevant consideration is whether Aura’s occupation satisfied the requirements of “exclusive possession” as set out in Street v Mountford. Indeed in the Street case itself it was asserted that the relevant consideration was to look at whether the arrangement amounted to a tenancy in practice notwithstanding the label given to the arrangement by the parties32. Accordingly, whilst it is not clear as to whether the agreement constituted a licence or a lease, the length of occupancy and the yearly fee will operate in favour of there being a lease. Alternatively, the lack of exclusive possession of the entire Unit 2 will operate in favour of there being a licence. Ultimately, Aura will have the burden of proof. If the terms of her use of Unit 2 constitute a licence, then Barin, Flash, Dale and Hans will be able to terminate upon giving notice. Alternatively, if her arrangement constitutes a lease, the issue of contention will be whether this is binding on the purchasers. The Land Registration Act 2002 (LRA) prescribes specific requirements regarding registration of third party rights and the extent to which such rights bind a purchaser’s interests, distinguishing between third party rights requiring registration and overriding interests33. As a general principle, a prior estate has priority over the buyer subject to the specific exceptions in the LRA. Under the LRA, if a right is subject to the express requirement of registration in order to qualify for priority (and not an overriding interest under Schedule 3), failure to register will forfeit priority and the right will not bind a purchaser on disposition34. In order for a lease to be valid, the case of Lace v Chantler35 asserts that it must be for a determinable period (in the case of periodic tenancies/recurring tenancies) or a specified period of time. However, with regard to the current scenario, it is important to mention at the outset that the lease if valid may not constitute a legal lease and may take effect in equity36. We are not told whether the property is registered or unregistered. In the case of unregistered land, a legal lease must be created by deed if longer than three years but not more than seven. In the current case the agreement has been in operation since 2004 and therefore can be created without formalities37. There does not appear to be any written agreement and therefore whilst not a valid lease in law, Aura 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 writing38.There does not appear to be any written contract, which would further negate Aura’s claim to an equitable lease. However, if Aura could establish rights under an equitable lease, equitable leases are not overriding per se and in order to be enforceable she would have to establish that she was in actual occupation and that Barin, Dale, Flash and Hans had knowledge of this. Schedule 3, paragraph 2 of the LRA protects overriding interests of those with proprietary rights who are in “actual occupation”39. The definition of “actual occupation” varies according to the facts of each individual case and the nature of the premises. Schedule 3 of the LRA expressly requires a purchaser to have actual knowledge and that occupation must have been “obvious on a reasonable and careful inspection of the land at the time of disposition40”. Furthermore, it has been held that whilst actual occupation must be given its natural meaning, the LRA unequivocally requires it to be reasonable discoverable41. Moreover, in the case of Chhokar v Chhokar42 it was asserted that the actual knowledge requires occupation to be reasonably discoverable and it is relevant to consider symbolic presence of occupation. Furthermore, although uninterrupted presence is not a mandatory requirement, a fleeting presence is not sufficient either, and the relevant consideration is the effect of the temporary absence, the length and purpose of absence, symbolic physical evidence of continued residence and evidence of an intention to return43. If we apply this to the current scenario, it is evident that the parties did not have knowledge of Aura’s rights prior to purchase. Moreover, it doesn’t appear that the terms of her occupancy were reasonably discoverable within the LRA definition. As such, it is highly unlikely that Aura’s purported rights to use Unit 2 will be enforceable. d) Barin’s intention to force a sale of the Property. With regard to property ownership in law, section 1(6) of the Law of Property Act 1925 (LPA) asserts that “a legal estate is not capable of subsisting or of being created in an undivided share of land”. Accordingly, the sole mechanism for legal co-ownership of land is by joint tenancy. A valid joint tenancy in law must satisfy the ancient requirements of the four unities, namely; unity of possession, unity of interest, unity of title and unity of time44. Unity of possession requires that each co-owner be entitled to possession of the whole and the possession requirement distinguishes legal co-ownership from separate ownership of parts of the land. With regard to unity of interest, all joint tenants must have interests of the same kind and quantum and it is impossible at law for one tenant to have a different size share to the other tenant and consequently, if a joint tenancy is severed the shares as tenants in common will automatically be of the same size45. It has also been propounded that the unity of interest rule explains the requirement that joint tenants must act together in order to bind the land46. The unity of title requirement demands that the proprietary interests derive simultaneously from the same title (usually by deed or will). The fourth requirement of unity of time is arguably the weakest requirement47. The essence of this requirement is that each of the joint tenants must vest at the same time, which can be problematic in practice48. The use of the trust has become more common to circumvent this requirement and it is questionable whether unity of time is now a relevant requirement in the modern co-ownership model49. The joint ownership model of joint tenancy can be rebutted by an equitable presumption of a tenancy in common50. Lord Hatherley LC in Robertson v Fraser51 asserted that an express agreement to create a joint tenancy or indeed anything “which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy52”. In the current scenario, whilst Flash. Dale and Hans state the property to be held on trust for Barin’s interest, the presumption of joint tenancy is rebutted and the property is held as a tenancy in common. At this point, the Trust of Land and Appointment of Trustees Act 1996 (TLA) imposes a trust of land, which substitutes the previous system of trusts for sale. Under the TLA provisions, all parties will have the legal estate as joint tenants on trust for themselves and tenants in common in equity. As trustees all four parties have absolute power in the Property, which means that they can effectively sell, lease or mortgage the Property. However, under the general law of trusts, any such action must be in the best interests of the trust and have regard to the rights of the beneficiaries53. As the property is a trust of land, Flash, Dale and Hans can legally overreach Barin’s interest under section 2(2) of the LPA 1925 or alternatively offer to buy his share. If Barin’s interest in the Property was overreached or bought out then Flash, Dale and Hans would still hold the Property as tenants in common under the trust of land. Additionally, under the TLA provisions section 14 provides that “Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section”. Moreover, section 15(1) of the TLA provides wide discretion to the courts and states that “the matters to which the court is to have regard in determining an application for an order under section 14 include: (a) the intentions of the persons who created the trust, (b) the purposes for which the property subject to the trust is held. (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land…as his home, and (d) the interests of any secured creditor of any beneficiary”. However, the inherent flaw of section 15 is that there is no guidance given with regard to the importance to be attached to the various factors set out when the court is exercising its powers. This is further compounded by the inconsistency in judicial decisions. Nevertheless in the case of Bank of Ireland v Bell54 it was commented obiter, that there should be a flexible interpretation of section 15. Peter Gibson asserted that “the 1996 Act, by requiring the court to have regard to the particular matters specified in section 15 appears to me to have given some scope for change in the court’s practice. Nevertheless a powerful consideration is and ought to be whether the creditor is receiving proper recompense for being kept out of his money, repayment of which is overdue.55” If we apply this to the current scenario, in light of the principles of the TLA and the rights of Flash, Dale and Hans to overreach Barin’s interests in the property, it is highly unlikely that he will succeed in an attempt to force a sale of the land. BIBLIOGRAPHY Blackstone’s Statutes on Property Law., (2007-2008). 15th Edition Oxford University Press. M. Dixon (2005) “Principles of Land Law”, 5th Edition. Routledge –Cavendish Publishing Alistair Hudson (2007). Equity and Trusts. 5th Edition Routledge-Cavendish. J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. A J Oakley (2001) Megarry’s Manual of the Law of Real Property 8th. Sweet & Maxwell R J Smith (2003) Property Law 4th Edition, Longman R J Smith (2003) Property Law Cases & Materials 2nd Edition, Longman Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell Law of Property Act 1925 Landlord and Tenant Act 1954 Landlord and Tenant Act 1995 Trusts of Land and Appointment of Trustees Act 1996 Land Registration Act 2002. Read More