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Equitable rights to a property

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Date added: 17-06-26


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A) After considering the concern you have raised during our meeting I have prepared a summary of the law and advice. Although there is not any reference to notice or restriction on the property there are equitable rights which can bind the purchaser of a property even if there is not any reference to them on the register. Martin has stated that he has paid half the purchase price of the property when he and Penelope purchased the property. When an individual has paid towards the acquisition of the property they will acquire a resulting trust in the property. A beneficial interest awarded via a resulting is normally restricted to the actual amount invested by the individual. If Martin can prove that he did indeed pay more than half of the purchase price at the initial acquisition of Bylands It is likely that he has acquired a beneficial interest in the property by way of a resulting trust. As it is possible that Martin owns an equitable interest in the property he could therefore claim that his interest will bind the purchaser of the property. This will depend if Martin is deemed in actual occupation of Bylands under schedule 3 Paragraph 2 of the Land Registration Act 2002. A wife and husband occupation will be viewed as separate as expressed in William Glyn’s Bank Ltd v Boland. The wife has acquired a beneficial interest by way of a resulting trust her husband had remortgaged the property which was in his sole name. He fell behind on the payment and the bank sought to repossess. The wife claimed that her occupation an interest was seperate and would override the bank interest, the House of Lords held that her occupation could be distinguished from her husbands and her interest did in fact override that of the bank. At the time that the property was viewed Martin was on a two month tour with his modern jazz band. In the case Chhokar v Chhokar[1] a husband tried to deprive his wife of her equitable interest buy selling the property which was in his sole name while she was in hospital. On her return from hospital she was excluded from the property buy the purchaser the court of appeal held that she had an overriding interest. A persons belongings on their own will not suffice as occupation on their own Strand Securities v Caswell [2]. The case law therefore dose not exclude person who are on a temporary break if there has been belonging in are still in the and there has been previous occupation with the intention to return after the break. The court will consider if the occupation would be obvious after a reasonably careful inspection. The opening of drawers and cupboard would beyond reasonable inspection but making further inquires would not be as illustrated by Kingsnorth Finance Co Ltd v Tizardhref="#_ftn3" rel="nofollow">[3]. However, the occupation is required to be discoverable. It would depend on how obvious it would on a reasonable careful inspection and the availability of making additional inquires. For example if the presence of Martin’s belongings were obvious or his occupation would have been obvious by speaking g to the neighbours or estate agent. It is normal practice for the mortgage company to secure waver of all people living in the property, it is therefore worth checking with the mortgage company if you have a mortgage on the property. It is possible for Martin share to be overridden but the purchaser if there are two trustee but as is appears that the property was only in Penelope’s name it is apparent that there was only one trustee in this case and therefore it would not be possible. It is imperative that Penelope’s details are forward for communication to be established in order to recover the purchase price or for the correct proportion of the price paid is given to Martin depending on the establishing on further facts relating to Martin’s occupation. Declan states that he has a three year lease for the studio flat at the top of Bylands but he does not have any written evidence of the lease. A legal lease which is over three years must be made by deed section 52(1) of the Law of Property Act 1925 but a legal lease for term of three years or less there is no requirements of a deed. As Martin lease is for a term of three years or less there is no requirement for a deed and can validly be made orally. Lease are known as the second legal estate under section 1(1) of the Law of Property Act 1925 and are further defined in section 205 (1) of the Law of Property Act 1925 as an estate in land for a fixed maximum period. In addition there are certain requirements for a lease to arise these are defined by Lord Templeman in the Case Street v Mountford[4] as exclusive possession for a fixed period or periodic term certain in consideration of a premium or periodic payments. Rent or premium must be fixed amount that does not fluctuate from month to month .In addition the lease must be have a fix maximum term. In order for there to be exclusive possession the tenant must have control over the premises occupied and the area must be the exclusion of the landlord from the area lived by the tenant of the. The flat is self contained and People and Martin were excluded from the are further enquires to ascertain Martin’s lease is also for a fixed term of three years. Further details is relation to the amount and regularity of rent paid would need to be clarified. Based on the facts before me it would appear that the requirement of a lease has been fulfilled. As Declan lease is for three years it is not necessary for any registration or to be evidenced by a formal written document. In the event of Martin’s lease was over three years it would be required to be in writing. If Martin’s lease was an equitable lease it should be entered as a notice on the lessor’s title to be binding, however , if the tenant is in actual occupation the lease will bind the purchaser of the property under paragraph 2 of schedules 1 and 3 of the Land Registration Act 2002. In addition Leases of less than seven years are also binding on the purchaser of the legal estate under schedules 1 and 3 of the Land Registration Act 2002. Therefore the purchaser of Bylands will be subject to Declan’s lease for the self contained studio flat on the top floor of the house. Declan has also asserted that he has paid £15,0000 for the option to buy Bylands within the next three years for £700,000. He has a written contract signed by Penelope and Martin. It appears that the document is a valid option to buy, but in order for the option to be bind the purchaser it must be registered. An option to buy is classed as an estate contract class C iv land charge which must be registered on the title before the purchase takes place as expressed in Philips v Mobil Oil Co Ltd[5]. If the charge is not registered it will be void against the purchaser for money or money worth under section 4(6) of the Land Charges Act 1972. The option will be void if unregistered even if the purchaser had actual knowledge of the option existing as illustrated in the case Midland Bank Trust Co v Green[6] Lord Wilberforce stated it is not fraud to rely on legal rights conferred by statute...notice and good faith are irrelevant. As there is not any sign of registration of the option to buy in favour of Declan therefore the purchaser of Bylands will not be bound by the option. It is likely that Martins has an equitable interest in Bylands by way of a resulting trust which may be binding on the purchaser of Bylands. In additional the purchaser will be subject to Declan’s lease. In order to terminate the lease the landlord will need to pursue the provision under the Protection from Eviction Act 1977. As the option to purchase in Declan’s favour is not registered the purchaser of Bylands will not be subject to the option. B) When a lease is created there are covenants contained in the lease. These are promises by which one party undertakes to do or not to do something these can be implied or express covenants. The tenants implied obligation are keeping property in a tenant-like manner Warren v Keen[7], allowing the landlord to enter the property to inspect Mint v Good[8] and to pay rent and taxes. The landlords implied obligations are to permit the tenant quiet enjoyment of the premises and keep the property fit for human habitation under section 8 of the Landlord Tenant Act 1985. There are many types of express covenants which will be written in to the contract the most common is not to sub-let the property. The enforcement of covenants were dramatically different before the Landlords and Tenants (Covenants) Act 1995. The contractual relationship arising from the covenant will continue even after the tenant has assigned the lease or the reversion of the freehold has been sold by the landlord. Therefore the original tenant would have only covenanted for there own conduct but that of those who are assigned the lease. The previous landlord will also be liable for a breach of a covenant when they are no longer the owner of the freehold. Even if it is not expressed that the covenant related not only to themselves but there successor of the title it will be implied through virtue of section 79 of the Law of Property Act 1925. Therefore if the assigned tenant breaches a covenant the original tenant will still be liable to be sued by the landlord for their successor breach Thursby v Plant[9]. Likewise the landlord who has sold the freehold will be liable to be sued by the tenant for a breach of a covenant by the new landlord. The tenant would be liable for the term of the lease for any breach of covenants by their successor. The burden of most covenants will also pass to the new tenant under the assignment of the lease and they will be personally liable for the breach. This means a choice of who to sue was provided the original tenant under privity of contract or the new tenant under the assignment of the lease. It is usually more convenient to sue the new tenant who has caused the breach, but if the new tenant disappears or not worth suing the landlord can recover his loss from the original tenant. As mentioned previous the same rules apply to the liability of a landlord who has sold the property. If the original tenant or landlord had been sued it is possible they could recover their losses. The original tenant or landlord can directly sue the person who committed the regardless of the number of times it has been assigned through the rule in Moule v Garret[10]. This is that where one person is compelled to pay damages by the legal default of another, he is entitled to recover from that person the sum paid. He may also who will then recover their loss from their assignee as so on until the loss is recovered from the person who has committed the breach. The fact that the original tenant or landlord remained liable for any breach of covenant by their successors throughout the whole term of the lease had produced unfair results main due to the fact tenant and landlords were not always a ware of the true nature of the provisions. During economic difficulties in the 80’s the hardship was intensified for original landlords and tenants which led to pressure for a change in the legislation. Many found themselves in the position of being sued as the current tenant could not afford to pay in many cases the lease had passed several times and the original tenant knew nothing of the current tenant or landlord. The 1995 Landlord and Tenant Act provides for the release from covenant except personal ones for the original landlord and tenant. For the tenant the release is automatic section 5 of the 1995 Act provides that from the assignment of the lease the tenant is released from the burden of the covenants. The section relates to any assignment of the lease and will cover all assignment not just the one from the original tenant. Although the original tenant will be freed automatically from the burden of the covenants the landlord may requires him to entre in to an authorised guarantee agreement by which he guarantee the assignee’s conduct. The landlord is permitted to offer such agreement when either it is a condition that his permission is required at the assignment of the lease or when it is a condition to consenting to the assignment of the lease. Although the 1995 Act provides that landlords are released from the burden of the covenants the release is not automatic on the reversion of the lease. The Act provides a procedure under section 8 by which the landlord is required to give notice of the intended or actual assignment of the reversion and request release from the covenants. When tenant doses not respond or consent the landlord can apply to the court for an order that it is reasonable that he is released from the covenant. The tenant has the right to oppose the assignment and release from the covenants. Under section 11 of the Act the burden can still continue for the original landlord or tenant when an assignment has taken place contrary to a covenant forbidding the assignment or assignment by law through bankruptcy or death. Only covenants which are not truly personal will pass. An example of a personal covenant is in BHP Petroleum Ltd v Chesterfield Ltd[11], in this case the original landlord had promised to undertake certain remedial work to the property and it was clear that this was to be a personal obligation that could not be enforced against the landlord’s successors. The court held the nature of the covenant was did not fall under the scope of landlord’s covenants and therefore was not subject to the Act. The benefits of the Act for original tenant is that section 17 provides that the landlord cannot recover arrears of rent or other fixed sum from a former tenant unless within six months of the money falling duje the landlord has served a notice of the intention to recover. This prevent landlords from allowing rent arrears accumulating and then pursuing the original tenant where they have not been released from their obligation .Section 18 negates the rule in Centrovincial Estates Plc v Bulk Storage Ltd[12] that the original tenant will be liability can increase with variation of the lease after the assignment. An original tenant also has the right under section 19 to grant an overriding lease in which will take effect as a concurrent lease or a lease of the reversion. This will have the effect of investing the landlord’s powers of enforcement in the original tenant allowing him to limit his liability. The limitation of the landlords and tenants id not yet absolutely resolved but the Act has made huge improvement. Despite the fact it can be undoubtedly unjust that the original tenant or landlord can be liable In some cases it may be unjust that there no other recourse when the original landlord or tenant has knowingly re-assigned the reversion or the lease knowingly to an unscrupulous tenant or landlord. Bibliography Burn, EH & Cartwright J Cheshire and Burn’s Modern Law of Real Property (17th edition, 2006) Oxford: OUP BLACKSTONE’S STATUTES ON PROPERTY LAW 2007-2008 OXFORD 14TH Edition April Stroud, Making Sense of Land Law (2nd edition, 2008) Palgrave Macmillan Judith-Anne Mackenzie & Mary Philips Textbook on Land Law 12TH Edition OXFORD 1

Footnotes

[1] 1984 FLR 313 [2] 1965 Ch 958 [3] 1986 1 WLR 783 [4] 1985 AC 809 [5] 1989 1 WLR 888 [6] 1981 AC 513 [7] 1954 1 QB 15 [8] 1951 1 KB 517 [9] 1 Saund 230 [10] 1872 LR 7 Ex 101 [11] 2002 Ch 194 [12] 1983 46 P & R 393
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