Law of Property

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Date added: 17-06-26

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In this scenario, there are several parties who have, or who acquire, an interest of some sort in the property known as Greyoaks, a large freehold, registered property. Briefly, the principal parties include the registered proprietor of Greyoaks, Ophelia. As the registered freehold proprietor, it is Ophelia who has the ability to grant the various rights and interests which she subsequently does. From the outset, she is free to dispose of the property howsoever she wishes. She begins a relationship with Paul, a landscape gardener, who becomes the first of the parties to acquire an interest in the property. This is merely an equitable interest, but as we shall see, it might well be enforceable against later purchasers of the property. Secondly there is Rick, an old friend of Ophelia, who also, ostensibly, gains an interest in the property. This is the first legal interest created by way of a disposition by Ophelia of a lesser estate in the property than her own freehold estate. Rick enjoys a legal term of years absolute, or a leasehold. The lease, however, refers to the period commencing in January 2006, and as such, he is storing his belongings there merely as a licensee. Nest there is Susan, who is a guest in a distinct part of the property known as ‘the Stables’ which have been converted into holiday homes. In this capacity, Susan is a mere licensee, with the same rights as any hotel guest. When Susan seeks to purchase the freehold of this part of Greyacre, it seems as though contracts are exchanged for this. An agreed date for completion (that is, when Susan can take possession of the property and when legal title passes to her name) is set at 1 November. Until such time as completion takes place, Susan remains a mere licensee on the property, and has only a contractual right as opposed to a proprietary interest in the property. This will afford her less protection against Forecast Developers Ltd, and will be considered in more detail later. The decorator, Ron, acquires no interest whatsoever in the property. When Ophelia becomes ill and her relationship with Paul breaks down, Tabitha, her sister, assumes responsibility for dealing with the property. This is where the problems begin to develop. From Forecast Developers Ltd’s point of view, they believe they are dealing with someone with full authority and full knowledge of the property in question. In fairness to Tabitha, Ophelia does not inform her of the interests which are already in existence at the time of her illness (that is, September 2005). As far as Tabitha was aware, she was granted the authority to dispose of the whole estate, unencumbered by subsisting interests of which she was unaware that any existed. This is complemented by the fact that the Register shows no ‘adverse entries’ when the solicitor acting for Forecast examined it. This fact also throws doubt on whether the interests which were created by Ophelia earlier on are valid (at least legally as opposed to merely equitably). During the pre-contract searches which the representatives of Forecast are carrying out, Tabitha makes various misrepresentations, some innocently, others deliberately. This in turn will have an effect on the interests enjoyed in the property by each of the parties. The situation with regard to all the various interests develops after completion of the sale on 17 October 2005 of Greyacre to Forecast. As there are apparently no interest recorded on the Register, it appears as though Forecast take possession free of all the interest mentioned above. Each person’s interest will now be considered in more detail in order to assess what the legal position of Forecast is in relation to each one. Paul is a landscape gardener. When he commences a relationship with Ophelia in January 2001, Ophelia invited him to share occupation of the property with her. No formal agreement of co-ownership or lease, or even an express licence was agreed. This would, at first sight, appear to put Paul in a very unfavourable position when it came to subsequent dispositions of the property. Ophelia’s subsequent representations to Paul, however, create a rather different situation. He was informed by Ophelia that ‘he would always have a roof over his head somewhere in the property’ so long as he tended the extensive gardens. This could be seen as an oral contract, and if it had been in any other circumstances than the creation of an interest in land, it probably would have been held to be binding. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 stipulates, however, that contracts for land must be in writing. There has been no legal transfer of an interest in the property to Paul, but his right might be protected in equity. It is, however, an established principle of land law that an interest of a person in actual occupation must be founded on a proprietary right of some kind (Lloyds Bank v Rosset). In this case, it was found that there was insufficient evidence for the court to infer that there was common intention between a husband and a wife that the property the legal title of which was in the husband’s name was held on constructive trust for the wife. Ophelia’s words in this scenario, however, might be construed to suggest that there was a common intention for her to hold the property (or at least Paul’s share) on trust for him. If this fails, it seems very likely that Paul will be able to use the doctrine of proprietary estoppel to protect his interest. The modern position in relation to this is that for it to be established, it must be shown that the assertion of strict legal rights is unconscionable (Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd). There are also three essential elements which must be satisfied. The first of these is assurance or expectation which must have been given by one party to the other (Ramsden v Dyson). Ophelia clearly gave such an assurance to Paul with her statement that he would always have a roof over his head. Secondly it must be established that the party to whom the assurance was given has been relied upon (Pascoe v Turner). Paul clearly relied upon the assurance by tending to the gardens. He performed in his professional capacity assuming that his services were being paid for by his presence in the property. It is also worth noting that according to Re Basham, the doctrine of proprietary estoppel is not restricted to acts done in reliance on a belief relating to existing rights, but can also be based on the belief that future rights would be granted. In the present context, tit is possible that Paul felt his rights would be legally acquired in the future. Although this is not necessary for establishing the proprietary estoppel, it might help make Paul’s case stronger. The final element required to establish an estoppel is detriment on the part of the party who relied upon the assertion (Dillwyn v Llewelyn). Paul clearly suffered detriment in this case as he gave up his own flat in order to move in with Ophelia. It seems certain, then, that Paul would be able to establish a proprietary estoppel which Forecast would have to consider. It is worth noting that even if Paul’s beneficial interest is overreached by the transaction, his interest in the property will be converted into an interest in the proceeds from the sale and Forecast will therefore be liable to pay Paul this value out of the proceeds of the sale. The next interest which Forecast will have to consider, and for which they may be liable, is that of Rick, Ophelia’s friend. This interest was a lease for a period of two years of a distinct part of the property known as the Coach House. In this case, much depends on how the lease was created. The fact that it was executed by a deed suggests that it was created properly and would exist at law. According to the Law of Property Act 1925, section 52(1), the only requirement is that a legal estate be created or transferred by deed. This, however, applies to unregistered land. In the present context, Greyacre is a registered property, and as such has its own unique title number. The register is supposed to reflect, at any given time, the state of the title to the property and any interests which affect it. The relevant provision in the LPA 1925 for the lease granted to Rick is section 52(2) and section 54(2). This states that no deed is required for a legal lease or sublease which takes effect in possession at an open market rent without a premium for a period not exceeding three years. An exception to this was established in the case of R v Tower Hamlets London Borough Council, ex parte Von Goetz. In this it was stated that a term which does not take effect immediately (as is the case for Rick), the lease can only be created by deed. This requirement, then, was complied with. The next issue with regard to Rick’s lease is whether it should have been registered. A lease term for not more than three years can generally be created at law by simple writing or even orally. This would mean that Rick and Ophelia were under no obligation to register the lease, and that it enjoys legal statue which would, obviously, survive the disposition of the freehold estate to Forecast. The Land Registration Act 2002 states, however, that a reversionary lease taking effect in possession more than three months after the date of the grant must be registered. As the lease was granted in March 2005, and it was intended to take effect in January 2006, it should have been registered under this provision (LRA 2002, ss4,27). This lease, however, will probably be deemed to override the subsequent disposition of the freehold estate to Forecast. It is possible that Forecast will be able to argue that the lease has been frustrated following the case of National Carriers Ltd v Panalpina (Northern) Ltd. The final party whose interest in the property needs to be considered by Forecast is Susan. It is Susan’s solicitors who contact Forecast and tell them of Susan’s right to purchase the Stables for £100,000. Susan’s position and rights in relation to the property change substantially throughout the period of the scenario. As a paying guest at the Stables (which have been converted into holiday homes), she is a mere licensee, present with the permission of the owner of the estate, Ophelia. Because Susan likes the property so much, she convinces Ophelia to enter a contract for the sale of the Stables, and therefore the creation of a freehold estate carved out and distinct from Greyacre. It would appear that the document which Susan’s solicitor drew up relating to this sale constitutes the contract for the sale of the property, and as such, Ophelia is bound to complete the sale on 1 November. There is, apparently, sufficient clarity with regard to what part of the property is being sold to Susan, so that it is a valid contract. In the period between the contract being exchanges, and 1 November when completion is due to take place, Susan’s status remains that of a mere licensee. Her continued (albeit sporadic) presence is simply by virtue of her booking the premises out as a paying guest. She has acquired no proprietary right in the interim. The significant change in circumstance relates to the fact that although still only a licensee, she now has a contractual right to purchase the property. The doctrine of privity of contract states that only the contracting parties themselves will be bound by the contract. In the context of land law, however, this doctrine has been undermined by the Landlord and Tenant (Covenants) Act 1995. The effect of this Act on the present scenario is that Forecast will not take the property free of pre-existing contractual obligations which Ophelia has entered into for the disposition of part of the land. A common law requirement for contracts for the sale of land is that there must be one document containing all the terms of the agreement (Commission for the New Towns v Cooper (Great Britain) Ltd). This appears to have been complied with. The contract has not had a chance to be completed, however, because prior to completion, a disposal of the entire Greyacre estate takes place benefiting Forecast. In the circumstances, it seems likely, however, that a court would order specific performance of the contract, even though it is now Forecast who stand to lose out. Susan should be able to purchase her new freehold estate in the Stables for the agreed sum. There are, or course, certain preconditions to specific performance being granted. Firstly there must be a transaction for value (this has been agreed but has not yet taken place; it should have taken place on the day of completion). Secondly there must be a contract in writing duly signed (under the Law of Property (Miscellaneous Provisions) Act 1989). The party seeking specific performance must come ‘with clean hands’ (see Coatsworth v Johnson). As Susan is innocent in this scenario of any wrongdoing, she meets this requirement. It is, however, the final requirement of specific performance on which Susan falls down, and which will offer Forecast a reprieve. This is that the specific performance must not prejudice third parties or cause excessive hardship. This was established in Patel v Ali, in which it was held that where the subject matter of the contract had already been transferred to a third party, specific performance will not be available. The situation with regard to Susan, then, is unclear. It is possible, then, that Forecast will be liable to various parties who have acquired rights and interests of varying degrees in the property. The fact that Tabitha misrepresented about Paul’s situation will add strength to Paul’s case, and will also offer Forecast a remedy as they presumably can show that they relied upon this representation. Paul’s case is also the strongest for the simple reason that he is already in possession of the property. The problem with Paul’s situation, however, is that it remains unclear what part of the property Paul has an interest in. Ophelia’s original words to him simply guaranteed him a roof over his head in some part of the property. At no point was this specified. Tabitha herself might be liable in negligence for her dealings with the estate, as it became her duty to find out fully the condition of the title to the property when she was granted the right by Ophelia to handle the sale of it. Forecast will certainly not, however, take the property free of any of the subsisting interests. BIBLIOGRAPHY Statute Landlord and Tenant (Covenants) Act 1995 Land Registration Act 2002 Law of Property Act 1925 Law of Property (Miscellaneous Provisions) Act 1989 Cases Coatsworth v Johnson (1885) 55 LJQB 220, CA Commission for the New Towns v Cooper (Great Britain) Ltd [1995] 2 WLR 677 Dillwyn v Llewelyn (1862) 4 De GF & J 517 Lloyds Bank v Rosset [1991] 1 AC 107 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, HL Pascoe v Turner [1979] 1 WLR 431 Patel v Ali [1984] Ch 283 Ramsden v Dyson (1866) LR1 HL 129 Re Basham [1986] 1 WLR 1498 R v Tower Hamlets London Borough Council, ex parte Von Goetz [1999] QB 1019, CA Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133 Secondary sources Gray, K., and Gray, S.F., Land Law (LexisNexis, 2004) Gray K., and Gray, S.F., Elements of Land Law (Oxford, 2005)
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