Real Property Law
"Angela and Barbara, two sisters, were the joint owners of Clover Cottage, which was left to them when their mother died in 1995. In 1998 they were approached by their cousin Catherine, whose marriage had just broken down and who was desperately looking for somewhere to stay. They agreed to take her in temporarily and that since she was family, she did not need to pay any rent. They expected her to stay a few months while she 'sorted herself out', but since nobody did anything about it, she has lived with them ever since. She has never paid any rent but does help out with the household expenses, sharing the bills and doing some cooking and housework.
When the roof had to be replaced in 2004, Catherine paid for it out of her divorce settlements. Angela and Barbara are now thinking of selling Clover Cottage and moving. So far, they have said nothing to Catherine as she is very set in her ways and very bad tempered when she does not get what she wants.
They have found a property to buy, Hyacinth House, but there are few problems. The owners of Hyacinth House, Fred and George have fallen out. Fred still very much wants to go ahead with the sale, but George is less keen. When Angela and Barbara called in to Hyacinth House some time ago to measure up for curtains they noticed that an elderly lady appeared to be living in the house. They asked Fred who she was and he said "don't worry about her-that's our old mum. When we sell this place she is going into a home." Angela has seen this lady in and around Hyacinth House a few times. On one occasion she said hello to her and said that she and her sister hoped to be buying Hyacinth House soon. The old lady said she knew nothing of it, but that her sons, Fred and George had bought Hyacinth House with the help of money provided by her and that they had promised her she would always have a home with them. Fred telephoned Angela and Barbara recently and said that George was not willing to sell, but that he, Fred was taking him to court to make him sell. Fred told them there was nothing to worry about. When they raised the question of his mother, Fred said that she was now quite happy to move into the old people's home nearby.
It turned out that Catherine heard this conversation as she happened to pick up the extension in the kitchen. She is furious and is demanding an explanation. She also says that they will be selling Clover Cottage "over her dead body". Advise Angela and Barbara whether Catherine can stop them selling Clover Cottage. Also advise them of any possible problems they might encounter if they proceed with the purchase of Hyacinth House."
This question that arises is whether there are any occupier's rights for Fred's mother and Catherine. Therefore this discussion will consider whether Angela, Barbara, Fred and George can circumvent these rights. This discussion will also consider whether Fred has any rights to sell Hyacinth House without the cooperation of George. In order to do this discussion will explore occupier's rights under the LRA Section 70(1)g, as well as consider unregistered land. Then apply this to the case of Fred's mother and Catherine. Then the discussion will turn to the case of co-ownership and whether all owners have to agree a sale or whether it is possible for one party to force the sale of the property over another.
If there case was that an interest is not registered and post-1925 then it is possible, as mentioned earlier, that there is a possibility that it is an overriding interest as contained in Section 70(1) of the LRA 1925. These overriding interests include; common rights, right to drainage, public rights, profits a prendre, water, and other non-equitable easements ; liability to repair highways, crown rents, and other rents and charges until extinguished ; liability to repair the chancel of any church ; liability in respect to embankments, sea and river walls ; payments in lieu of tithe, redemption of tithe charges ; rights acquired under the Limitation Acts, e.g. squatter's rights (adverse possession) ; and occupier's rights . In most of the cases subsections (a), (f) and (g) will be the main overriding interests that will cause problems. However (a) and (g) could cause the most injustice for subsequent buyers because they have not had the appropriate notice through the land registry but are still bound to easements and occupier's rights. This may include the purchase or repossession of property where a spouse has not been advised or their rights have been overridden through duress, which has lead to the use of 70(1)(g) being used to protect the interests of a family home.
Prior to going into this case study the notion of actual possession needs to defined, as the following case study will illustrate these cases stem out of the Boland Case where this case held that the term actual occupation should come from its ordinary meaning. The problem with this term is that it could be applied to various situations, stemming, albeit not successfully, from; being physically in the property ; the intention of moving in ; being away on holiday ; sleeping elsewhere but coming back to look after the children and do the household chores ; to the storage of goods on unused and uninhabitable land . In the case of Hypo-Mortgage Service v Robinson it was contended that minor children were in actual occupation; however the court rejected this view and held the children were only there because there parents were there. Therefore the notion actual occupation covers a broad area of situations and causes much perplexity for subsequent buyers in respect to 70(1)(g) alone, never mind the other overriding interests.
Williams & Glyn's Bank Ltd v Boland is a case where the use of overriding interests came to light. This is the traditional situation of matrimonial home ownership, where the husband was the sole proprietor; however the wife had made substantial contributions to the home, which means that through equity create a resulting trust in the favour of the wife . The bank when creating a charge on the home for a loan to benefit his business did not take steps to ensure that the wife had no interest in the property, because it should have investigate the rights of every person in actual occupation of the land and will be bound by these occupiers rights save when an enquiry is made of such a person. Therefore in this case the bank did not make enquiry of the wife, which meant that the wife was held to have an overriding interest respect to both the home and the charge on the home. In this case Lord Wiberforce distinguishes the difference between notice and enquiry, holding that notice has no effect with respect to registered land and sufficient enquiries of occupiers can be simply and straightforwardly made. Lord Wilberforce in this case also discusses the need for overriding interests, because certain equitable rights, which can only be registered as minor interests are important in respect to fairness and justice:
The Act recognizes also an intermediate, or hybrid, class of what are called overriding interests: though these are not registered, legal dispositions take effect subject to them.
This is a nice idea and does ensure that certain equitable rights are protected, however with rights such as matrimonial rights and occupiers rights this may seem easy for the prospective buyer or the creditor to investigate. However how about the other myriad of overriding interests, which include equitable easements etc. Also is it not possible to create legal rights for the areas that need to be protected, such as occupiers' rights which means registry for these persons. This would cause the sale and use of land as a charge against credit to be a lot easier, as well as ensuring that the rights of the occupier are protected. However the confusion of overriding interests have tried to bring notice back into the equation which the LPA 1925 and the LRA 1925 were introduced to eliminate, as Lord Wilberforce indicates in the Boland Case , where the only kind of notice recognised is notice on the registry. However, it is not always so simple for occupiers under 70(1)(g), as in the case of Abbey National Building Society v Cann where the property was bought with the intention that Cann's mother would live there; however Mr. Cann stated it was for sole occupation and registered a charge for a loan prior to his mother's occupation, i.e. she was away on holiday and would take occupation as soon as she got back. However the initial intention of Mr. Cann was evident as he moved her furniture and carpets prior to the completion of the charge. However the court held there was no occupier's right as Cann's mother was not in actual occupation until after the completion, as her holiday ended then. This seems to be unfair as Cann's mother was under the impression she had rights to the property, also would it not have been different if she had occupied at 10am when the furniture was moved in? This shows that the system of overriding interests is not always fair and can cause injustices in situations where another system of dealing with occupiers' rights would hold that Mrs. Cann would have continued to hold interest.
Another case that illustrates the problems with overriding interests is the case of Chhokar v Chhokar , in which a husband and a wife contributed to the purchase price of their family home. The couple went to India in 1978 and the husband deserted his wife and returned home, whereby he sold the home where the cash proceeds were delivered into his hands and he paid off his debts and returned back to India. His wife who was seven months pregnant returned home a few weeks later than her husband to find the locks changed and when she entered the home was ejected by the then owner Mr Parmar, but some of her furniture was still there. The court held that the wife was still in actual occupation and Mr Parmar has the conveyance of the house subject to Mrs Chhokar's overriding interest; holding half the interest in trust to her benefit. This case is an example that fraudulent acts by the husband harmed both his wife and subsequent purchasers; however if there was women's furniture in the home this should have caused Mr. Parmar to make enquires and by not doing so this means he is penalized by this overriding interest. This is a case where there was knowledge of the wife and the sale was well below the market price, i.e. fraudulent acts on both parts therefore the only just action was to protect Mrs Chhokar.
Although overriding interests have been used to protect what is just and equitable it seems that it is very uncertain, because is there much difference between the Chhokar Case and the Cann Case with respect to the actual occupation, i.e. there was furniture there? In 2002 there changes in respect to overriding interests which were minimal, the law reform has eliminated some of the obsolete interests but it has not properly cleared up the problem of occupiers rights. It has defined what actual occupation is but if this definition holds how would this have effected the case of Chhokar v Chhokar because Mrs Chhokar was not in physical occupation, but it would be unjust for Mr Chhokar and Mr Parmar to succeed in their unjust and fraudulent dealings; which goes against the purpose of overriding interests, which is to ensure fairness and justice. Therefore the uncertainty and confusion in this area will still be apparent and even if clarified injustices may occur. This is applicable to whole area of law concerning overriding interests, except for the minor adjustments contained in the LRA 2002, which may be detrimental to possible beneficiaries and further helps protect lending facilities; therefore creating some uncertainty for subsequent buyers; whereby there will be tensions between the justice in respect to occupiers and prospective buyers; even though the LRA 2002 proposes to simplify and protect third party buyers. The question of clarity in the law may create uncertainty in the judicial arena, due creating injustices:
For example, under Schedule 3 an interest which was not within the actual knowledge of the transferee and where the occupation was not obvious on a "reasonably careful inspection" of the land will lose overriding status.
In short as Catherine and Fred's mother occupation was obvious on careful inspection and they had contributed to the home improvements/the purchase price then they would have occupier's rights, but also be a beneficiary under a constructive trust because of their substantial input into the home. Therefore any sale of either home is subject to their rights. This would be the same if it was pre-1925 as well because the constructive trust would be the same and if the buyer had notice, which Angela and Barbara have had in respect to Fred's mother and be bound by her interests. In respect to Catharine it will be obvious on inspection that she is occupying the property, therefore notice will be there and any third party buyer would be bound by her interests. This is assuming that both properties are legal estates and if created prior to 1925 they are subject to equity's darling of bona fide purchaser without notice plays a role; whereby if you fall under this category the buyer is not bound by equitable interests . If a subsequent purchaser never had actual or constructive notice and made sufficient enquiries he is not bound . If he never made sufficient enquiries then he is bound , in respect to the drainage system it is probable he would be bound because there would be positive evidence of a right against the property, if there is no evidence and all proper enquires are made there is no binding interests and creating a situation whereby a subsequent purchaser would not be bound.
In the case of Fred and George in respect to the sale of the home where both are joint owners in the property creates a tenancy in common or joint tenancy post 1925, i.e. creating a trust for sale, depending on how the property was conveyed i.e., the express statement of one or the other. If the sale was prior to 1925 there could be a sale with no trust where the sale is subject to the knowledge of buyer and if they purchased from only one of the sellers was there reasonable enquiries into whether there was another owner, i.e. if the deeds noted this. After 1925 all co-ownership was subject to trust, in this case it is most likely a tenancy in common. Prior to 1996 this was a highly confused area where it held that a sale can be made if a majority of the parties call for a sale but if it is equally divided then the land is retained. Therefore the land would have to be retained; especially since there is also the beneficial interest that the court will most likely divest in Fred's mother. Hence if the mother agrees then the sale can go ahead; however if she does not then there is no sale; however Fred can apply to the court to order a sale. This leaves open the possibility for George and Fred's mother to buy the property as first option and they pay out Fred's share or the court can not enforce an order of sale as long as this share is paid out in a specific time. Therefore Fred going to court may not leave him free to sell the property to a third party; hence it is advisable that Angela and Barbara do not buy the property till this is sorted out. If an order for sale is enforced and George and his mother do purchase the property then Angela and Barbara are free to do so. This is an important area to remember in respect to Catharine because a sale can be forced by Angela and Barbara after the period of time that Catharine's occupier's interests are fulfilled, they are subject to paying out her share of the property determined under the constructive trust.
Therefore it important that Catharine and Fred's mother ensure that any buyer has reasonable evidence of their occupation in order to ensure that their Section 70(1)g rights are enforceable. In addition to this they should apply to the courts for a constructive trust in the home as they both paid contributions to the property purchase price or improvements of the property, which will bind any subsequent buyer. In addition Fred's application for a forced sale may result in Fred's mother and George buying the property and not leaving it free for Angela and Barbara so they should not buy the property till its legal status is sorted out. Also is Fred's mother agrees with Fred, which is same for the case of Angela and Barbara they can enforce a sale in the property as they overreach the rights of Catharine. If George and Fred agree to a sale together they can overreach Fred's mother and this is the same if Fred and his mother agree to a sale they can overreach George, but there needs to be two trustees to do this.
- Burn, 1998, Maudsley and Burns: Land Law Case and Materials 7th Edition, Butterworths
- Finance and Credit Law, 2003, Land Registration Act 2002, F & CL 5.8(3)
- HM Stationary Office, Land Registration Act 2002, Chapter 9 of Explanatory Notes, at 118 & 119 can be found at: http://www.hmso.gov.uk/acts/en2002/02en09-c.htm
- Jackson, 2003, Title by registration and concealed overriding interests: the cause and effect of antipathy to documentary proof, 119 LQR 660
- Law Commission Report 271
- The Lawyer, Real Estate: Land Registration Act 2002 - the main changes, The Lawyer November 17th 2003, 31
- Riddell, 1997, Land Law, Butterworths
- L. Small & R. Pain, 2003, Land Registration Act 2002, JJ 78(1)