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Published: Fri, 02 Feb 2018
Easements and incumbrances in property and land
Title: Objectives for Question 1.
To analyse relevant case and statutory sections in relation to the creation and acquisition of Easements by self-learning. (Prescription in outline only.
Gary Doe owns Berry Court, a large house with the lodge in the grounds. He allows his nephew, Derick to live in the lodge and keep wine in the cellar of Berry Court as well as to store apples harvested from the orchard adjoining the lodge. Derick is allowed to use the drive that goes past berry Court to save a mile and a half of the journey to the M4.
Gary dies and his executors sell Berry Court to Jane Clarke, with the remainder of its grounds to Derick. Neither conveyance mentions the above arrangements. Jane refuses to allow Derick to store wine or the apples and prevents him from using the driveway. (advise Derick 1000 words).
Objectives for Question 2.
To analyse relevant statutory provisions and case law in relation to protection of minor interest under the Land Registry Act 2002. Students should be able to select the relevant legal principles which apply to the practical situation given.
Mark collins takes an eight year equitable lease of Blueacre for which he paid the freehold owner, Lucy Smart, £30,000. Title to Blueacre is registered under the Land Registration Act 1925. one year later, in order to take advantage of an offer of £375,000 from Justine Wilson to purchase with vacant possession, Lucy Smart sells blueacre to her mother Catherine Smart, for £100 in expectation that lucy will be able to get possession as against Mark and then sell to Justine. They plan to split the Profit. Mark has not yet moved in. (Advise Mark 1000 words).
Objections for Question 3 is in relation to mortgages.
Sally Bean was the registered proprietor of the house where she lived with her husband. she had bought it entirely with her own funds and last year, in order to start a Dating Agency, she borrowed £40,000 from Shark & Co. On the security of the legal charge over the house. the charge contained the following terms:
1. The interest on the loan was to be 10% per annum, above bank rate, payable on the first day of each month.
2. The principle sum would fall due if there was a breech of any term of the agreement.
3. No tenancies of the house were to be created by the mortgagor.
One week after the deed was executed sally granted a weekly tenancy of the upper floors of the house to Anne Frog.
upon discovering that her husband was having an affair with Anne, Sally decided to leave her husband and moved out of the house and ceased to pay the interest due under the mortgage. (Advise Shark & Co 1000 Words)
The advice concerns the creation of easements and incumbrances on the property and land and whether these can be binding on successive owners of the land. In order to be able to advise Derrick in respect of his right to continue storing his wine in the cellar and the continued use of the driveway in order to get to his property it is necessary to look at the legislation surrounding the recording of such easements and incumbrances. Easements are a form of incumbrance and carry with them legal rights. These legal rights are classed as good against the world. This is irrespective of any notice being given to a third party informing them of their existence and such interests are often not registered. Easements that are attached to land are perpetual. The easements can be equivalent to a fee simple absolute in possession or they can be for a fixed period in terms of years absolute. Where this is the case then successive owners will be bound by the easements. An easement must be attached to land and cannot be a personal easement.
Some incumbrances are of a family nature and are generally equitable incumbrances that should be registered. When looking at the discovery of incumbrances on a property the doctrine of notice applies. This doctrine relies upon what a reasonable purchaser would have or ought to have discovered before completing the purchase. It is the duty of the owner of the incumbrance to register their interest. This interest should be entered on the Land Charges Registry if the land is unregistered land. if the property is registered an entry should appear on the property register so that any prospective buyer examining the register would know of its existence. A prospective buyer is under a duty to search the register before buying the land. if the incumbrance has been registered at the time of the sale of the property the new buyer will be bound by the incumbrance even if the new buyer failed to search the register. If there are no incumbrances registered at the time of the sale the buyer takes the land free of any incumbrances. This also applies even if the new buyer new of the existence of such incumbrances.
There are some instances when rights that are not on the register can still bind a new owner. These are classed as overriding interests. When land has been sold as registered land any dispositions must be done through the land registry if they are intended to create a legal estate or interest. Dispositions that are not entered on the register only allow the transferee an equitable right and not a legal interest. Overriding interests that can override title despite not being entered on the register include legal easements, squatter’s rights and the rights of any person in actual occupation of the land. The purchaser is under a duty to make enquiries of any occupier as to whether they have an interest in the property.
To be able to advise Derrick as to whether he will be allowed to continue to use the cellar and the easement over the land to get to his property it is necessary to establish whether his right exists in equity or in law. The difference between equitable rights and legal rights is that legal rights of ownership are gained by registration with the person named on the register acquiring rights in rem property. Equitable rights are rights in personam and cannot exist without the law. Equity attempts to right a wrong but is also based on the principle of fairness or justice. Equity cannot alter the law and cannot deny a person their legal rights but operates on the conscience of the legal owner by instructing them on how they should behave. In this manner equity can impact on the law without altering it. With legal ownership the owner can dispose of the property or use it in any manner they choose. Equity only intervenes in these rights if the actions of the legal owner would be unfair or unjust to those claiming an interest in the land.
As there is no entry on the register in respect of Derrick he would only have an equitable interest. Having established that his interest is only equitable it is possible to advise on the likelihood of his claim succeeding.
It could be argued that because Derrick has his wine stored in the cellar as well as the apples that have been harvested from the land adjacent to the lodge that he is in actual occupation of the cellar. On this basis he might be able to claim an overriding interest in the property. A difficulty could arise in this instance as Derrick only has an oral agreement with his uncle and he therefore has no written proof to show that he is entitled to use the cellar. Had he been granted a lease over the cellar this would have been entered onto the register, thereby giving the prospective buyer notice of the existence of such a right.
In this instance Derrick should be allowed to remain living in the lodge as he was in occupation at the time that the property was sold. In the case of Abaronye v Finsbury Park Mortgage Funding Ltd t/a Kensington Mortgage Co the court dismissed an appeal against the possession order granted to the respondent on the grounds that the claimant was not in actual occupation and was therefore not entitled to claim for a protected tenancy. This was in despite of the fact some of the claimants belongings were in the property. It follows from the above that Cheng may not be able to enforce his rights to the tenancy as he was not in actual occupation at the time that the mortgage was created. It is unlikely that Derrick will be allowed to continue to use the cellar as there is nothing in writing to show that the uncle intended Derrick to continue using the cellar after the property was sold.
The nest issue is whether Derrick should be allowed to continue to use the drive as a right of way. As there is nothing on the register creating a legal right Derrick would have to rely on the principle of implied legal right. In order to establish this he would have to show that the easement is either a necessity, an intended easement, an easement under the ruling in Wheeldon v Burrows or can be implied as a grant by virtue of s62 of the Law of Property Act 1925. In this instance the easement is not a necessity as there is an alternative entrance to the lodge despite this being further away for Derrick. He could attempt to argue using Wheeldon and Burrows that the easement is continuous and apparent and necessary for the reasonable enjoyment of the part transferred and that at the time of the transfer the right was used and enjoyed for the benefit of the transferred part.
If Derrick is unable to establish a claim using the above manner he would only be able to continue toe use the drive if he could establish a presumed grant or prescription. This would only apply if he has been using the drive for a period in excess of 20 years.
The advice in this matter is centred on the protection of minor interests under the Land Registration Act 2002. With a lease there is a legal requirement that any lease that is for more than seven years must be registered. It is not stated above whether the lease was entered on the register though the implication is that it has not been entered on the register as it is stated that the lease is an equitable lease. Under the Law of Property Act 1925 s54(1) the law states that if the intended tenant enters into possession of the property with the consent of the intended landlord he becomes a tenant at will.
There are some circumstances where the courts have accepted the validity of a lease in equity when the lease has not been properly registered. In Browne v Warner (1808) 14 Ves Jun 156 the court held that a lease that was void for lack of formality was recognised in equity as an agreement for a lease. In Parker v Taswell(1858) 2 De G & J 559 it was argued that that decision had not survived the enactment of the Real Property Act 1845 and the formal requirements for the legal leases contained in section 3 of the Act. In this instance Lord Chelmsford stated
The legislature appears to have been very cautious and guarded in language, for it uses the expression ‘shall be void at law’ –that is as a lease. If the legislature had intended to deprive such a document of all efficacy, it would have said that the instrument should be ‘void to all intents and purposes’. There are no such words in the Act. I think it would be too strong to say that because it is void at law as a lease, it cannot be used as an agreement enforceable in equity, the intention of the parties having been that there should be a lease, and the aid of equity being only invoked to carry that intention into effect.
In this case equity deemed the defective lease to be a contract for the intended lease and as a contract equity would normally grant a decree for specific performance in respect of it. Equity normally requires that the deemed contract is for valuable consideration. In the case with Mark he has paid Lucy £30,000 for the lease and therefore has given valuable consideration in respect of the contract.
Minor interests have to be protected by an entry on the title otherwise a new purchaser will take the property free of any minor interests. Minor interests include incumbrances such as restrictive covenants or beneficial interests under a trust and these are not registered interests or overriding interests. Overriding interests include such things as legal easements, squatter’s rights and the rights of any person in actual occupation of the land. These do not necessarily appear on the title and can override the registered title. Occupation may protect a persons rights and it is for the purchaser to inquire of any occupier whether they have any interest in the property.
If the lease granted to Mark was for less than three years this lease would not be required to be registered and would therefore not trigger a registration of title. In cases where the lease is three years despite the fact that there is no need to register such a lease a legal lease is still deemed to have been created provided that the lease is for not more than 3 years, the rent is the market rent for such land and the tenant takes immediate possession. In this instance the lease is for more than three years and son Mark cannot claim protection under this. In Mark’s case the lease should have been registered as it is for a period of 7 years. As there was no formal entry on the register Mark would have to rely on the rules of equity to safeguard his tenancy.
Using the doctrine of equity Mark may be able to retain his tenancy for the term agreed of eight years. Equity adopts a four step approach in determining whether a formal lease can be inferred. The first thing required by equity is proof that there is a contract to grant a lease. Mark would therefore have to prove that there was a contract between him and Lucy for the lease of the land. This can be evidenced by the production of the lease agreement. The next stage in equity is to establish that the contract is enforceable. According to the ruling in Walsh v Lonsdale if the failed lease is in writing the contract is enforceable. If the courts are satisfied that the lease agreement is evidence of a contract between the partes then the contract would be enforceable.
The third stage in equity is to show that the contract can be specifically enforced. Where the contract is in respect of land as opposed to chattels an order for specific performance is likely to be ordered in equity. The fourth step is for ‘equity to regard as done that which ought to have been done’. This would mean that the parties would be treated as though the lease had been duly registered and Mark would be entitled to the 8 year occupation as agreed.
Specific performance is at the discretion of the court. Even if the plaintiff can establish that the contract is valid the court still has the power to refuse specific performance. In general terms the courts only refuse specific performance if the intended tenant has breached a condition of his intended tenancy or if the person offering the lease would be in breach of their own head-lease by doing so.
Having looked at the ways in which the lease can be upheld it would appear that despite the lease not being formally created, equity would allow Mark to continue his tenancy. Lucy would still be entitled to sell the land but she could not sell it as vacant possession.
The advise in this particular scenario is concerned with the rights of Shark and Co to be able to obtain possession of the property. With legal mortgages the mortgagee is entitled to possession of the mortgaged land. This power is usually only exercised in cases where the mortgagor defaults on the repayments. A mortgagee is also entitled to possession if the mortgagor does not abide by the conditions of the mortgage. Legal mortgages equate to a conveyance and must be created by deed.Under s65 of the Land Registration Act 1925 the land certificate for the property will be deposited at the Land Registry throughout the duration of the mortgage.
When a mortgagor defaults on the repayments the mortgagee has a number of remedies open to them. Foreclosure and sale of the mortgaged land are used to recover the loan amount outstanding. A receiver can be appointed whose purpose would be to recover the interest payable on the loan. The third option is possession of the mortgaged land. Possession is the most common method used as this entitles the mortgagee to sell the property with vacant possession.
The mortgagee is entitled to exercise more than one remedy in order to recover the loan. The courts have made it a requirement that were the mortgagee is forced to exercise one of the above options they have a duty to act fairly towards the mortgagor.
The right of the mortgagee to foreclose cannot arise until the equitable right to redeem has arisen or there has been a breach of a condition which has to be complied with to keep the legal right of redemption alive. When such a breach has occurred the mortgagee is entitled to request repayment of the loan in full and if the mortgagor fails to make such a payment then the mortgagee can apply to the court for foreclosure. This method allows the mortgagor to make the repayment within a specified time or face foreclosure proceedings. If at the end of the specified time the repayment has not been made then the court may make an order of foreclosure absolute which entitles the mortgagee to possession of the mortgaged property free from the rights of the mortgagor. The order for foreclosure absolute deprives the mortgagor of all interest in the mortgaged property even if its value exceeds the amount of the outstanding loan.
Under s91(2) of the Law of Property Act 1925 the court may direct a sale of the mortgaged property in lieu of foreclosure. This is more likely to happen where the value of the mortgaged property far exceeds the amount of the outstanding loan. This remedy can only be pursued if the mortgagor agrees to the sale. Generally speaking the mortgagor’s usually fail to attend the hearings for foreclosure so this option is then denied to them.
Under s101 (1) (1) and (4) of the Law of Property Act 1925 the mortgagee has a statutory power of sale when the mortgage money has become due. This applies in respect of any missed instalments on the mortgage.
In this particular case this would effectively mean that Shark and Co could apply for foreclosure or sale of the property as soon as Sally fails to make the payments on the mortgage. There may be difficulties in respect of requiring Sally’s husband and Anne Frog to vacate the premises, however, as the husband is not named on the property and has not contributed anything towards the purchase price of the property he has no legal interest in it.
In relation to Anne a mortgagee can be prevented from taking possession of a mortgaged property were the tenancy came into existence before the mortgage was obtained. Applying the Land Registration Act s70 (1) (g) the court held in Woolwich Building Society v Dickman that were the tenancy was granted prior to the creation of the mortgage the mortgagee would not be entitled to possession when the landlord defaulted on his payments. Such tenancies have been held to be enforceable against a mortgagee as an overriding interest. Similarly an overriding interest has been established were the tenancy was granted after the creation of the mortgage but before the mortgage had been registered. Where a protected tenancy has been granted after the completion of the mortgage the mortgagee will not be bound by the tenancy.
However in this particular case Sally had agreed not to sublet and therefore by letting the upper rooms to Anne she is in breach of the conditions of the mortgage. This would entitle Shark and Co to foreclose and entitle them to take the property as vacant possession.
It would appear from the above that Shark and Co would be entitled to both foreclose on the mortgage and order the sale of the property thus depriving Sally of any interest in the property or for them to be bale to gain possession of the property and sell it to redeem the amount owing to them. As the property is not in the husband’s name he does not have a legal interest in the property and could only prevent Shark and Co from making him vacate the property if he can establish that he has contributed in some way towards the purchase prise or that a constructive trust can be inferred on the basis that he has acted in his detriment when he moved into the property. He would have to show that he believed that when Sally bought the house he was under the impression that he was to acquire an equitable interest in the property. If he is unable to show this he will be made to leave. Anne is not a protected tenant as Sally was in breach of her mortgage agreement when she let the rooms to her and therefore Anne would not be entitled to remain in the property.
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Solicitors Journal, 13 September 2002, p801
Table of Cases
Abaronye v Finsbury Park Mortgage Funding Ltd t/a Kensington Mortgage Co  EWHC 2519
Abbey National Building Society v Cann  1 A.C. 56  2 W.L.R. 833  1 All E.R. 1085  2 F.L.R. 122 (1990) 22 H.L.R. 360 (1990) 60 P. & C.R. 278 (1990) 87(17) L.S.G. 32 (1990) 140 N.L.J. 477 Times, March 30, 1990
Barclays Bank Plc v Zaroovabli  Ch 321
Bradshaw v Pawley  1 WLR 10
Browne v Warner (1808) 14 Ves Jun 156
Celsteel Ltd v Alton House Holdings Ltd (No.1)  1 W.L.R. 204  2 All E.R. 562 (1985) 49 P. & C.R. 165 (1985) 82 L.S.G. 1168 (1985) 129 S.J. 115
City Permanent Building Society v Miller  Ch. 840  2 All E.R. 621  2 T.L.R. 547
Connely Brothers (No.2), Re  2 Ch. 25; Coventry Permanent Economic
Building Society v Jones  1 All E.R. 901
Connely Brothers (No.2), Re  2 Ch. 25
Coventry Permanent Economic Building Society v Jones  1 All E.R. 901
Four Maids Ltd v Dudley Marshall (Properties) Ltd  Ch 317
Freeguard v Royal Bank of Scotland Plc (2000) 79 P. & C.R. 81 (1998) 95(13) L.S.G. 29
Gissing v Gissing  AC 886
Gordon Grant & Co Ltd v F L Boos  AC 781
Horrill v Cooper (2000) 80 P. & C.R. D16
Lloyds Bank Plc v Rosset  Ch. 350
Massey v Glover  EWHC 2323
Palk v Mortgage Services Funding Plc  Ch 330
Parker v Taswell(1858) 2 De G & J 559
Pattni v Ali  UKPC 51
Payne v Adnams  C.L.Y. 6486
Payne v Cardiff RDC  1 KB 241
Pilcher v Rawlins (1871-72) L.R. 7 Ch. App. 259 (1872) 20 W.R. 281 (1872) 41 L.J. Ch. 485 (1872) 25 L.T. 921
Prazic v Prazic  EWCA Civ 497  2 F.L.R. 1125  Fam. Law 745
Prestige Properties Ltd v Scottish Provident Institution  EWHC 330  Ch. 1  3 W.L.R. 1011  2 All E.R. 1145  13 E.G.C.S. 98  N.P.C. 41 Times, May 23, 2002
R. v Tower Hamlets LBC Ex p. Von Goetz (1998) 30 H.L.R. 950
R Griggs Group Ltd v Evans (No.2)  EWHC 1088  Ch. 153  2 W.L.R. 513  E.C.D.R. 12  F.S.R. 48 (2004) 27(9) I.P.D. 27095 Times, May 27, 2004
Re Evans Contract  1 W.L.R. 583  1 All E.R. 1236 (1970) 21 P. & C.R. 268 (1970) 114 S.J. 189
Rowhook Mission Hall (Horsham), Re  Ch. 62  3 W.L.R. 710  3 All E.R. 179 (1985) 49 P. & C.R. 349 (1984) 81 L.S.G. 2218 (1984) 128 S.J. 433
Rudge v Richens (1873) LR 8 CP 358
Sawden v Sawden  EWCA Civ 339  1 F.C.R. 776
Sharp v Thomson 1995 S.C. 455 1995 S.L.T. 837 1995 S.C.L.R. 683  B.C.C. 852 Times, July 25, 1995
Short’s Trustee v Keeper of the Registers of Scotland 1996 S.C. (H.L.) 14 1996 S.L.T. 166 1996 S.C.L.R. 571 Times, December 26, 1995 1
Swain v Ayers (1888) 21 QBD 289
Treloar v Nute  1 W.L.R. 1295  1 All E.R. 230 (1977) 33 P. & C.R. 41 (1976) 120 S.J. 590
Twentieth Century banking Corp Ltd v Wilkinson  Ch 99.
Union Lighterage Co v London Graving Dock Co (1902) 2 Ch 557
Wallcite Ltd v Ferrishurst Ltd  Ch. 355  2 W.L.R. 667  1 All E.R. 977  1 E.G.L.R. 85  05 E.G. 161  E.G.C.S. 175 (1998) 95(47) L.S.G. 30 (1999) 96(4) L.S.G. 39 (1999) 143 S.J.L.B. 54  N.P.C. 157 (1999) 77 P. & C.R. D20 Times, December 8, 1998
Western Bank Ltd v Schindler  Ch 1
Wheeldon v Burrows (1879) L.R. 12 Ch. D. 31 [1874-90] All E.R. Rep. 669 (1879) 48 L.J. Ch. 853 (1879) 41 L.T. 327
Williams v Morgan  1 Ch 804
Woolwich Building Society v Dickman  3 All ER 204
Zimbler v Abrahams  1KB 577
Table of Statutes
Housing Act 1988
Land Charges Act 1972
Land Registration Act 1925
Land Registration Act 2002
Law of Property (Miscellaneous Provisions Act 1989
Law of Property Act 1925
Prescription Act 1832
 Celsteel Ltd v Alton House Holdings Ltd (No.1)  1 W.L.R. 204  2 All E.R. 562 (1985) 49 P. & C.R. 165 (1985) 82 L.S.G. 1168 (1985) 129 S.J. 115
 Rowhook Mission Hall (Horsham), Re  Ch. 62  3 W.L.R. 710  3 All E.R. 179 (1985) 49 P. & C.R. 349 (1984) 81 L.S.G. 2218 (1984) 128 S.J. 433; Treloar v Nute  1 W.L.R. 1295  1 All E.R. 230 (1977) 33 P. & C.R. 41 (1976) 120 S.J. 590
 R. v Tower Hamlets LBC Ex p. Von Goetz (1998) 30 H.L.R. 950
 Evans Contract, Re  1 W.L.R. 583  1 All E.R. 1236 (1970) 21 P. & C.R. 268 (1970) 114 S.J. 189
 Law of Property Act 1925 s1 (2)
 Pilcher v Rawlins (1871-72) L.R. 7 Ch. App. 259 (1872) 20 W.R. 281 (1872) 41 L.J. Ch. 485 (1872) 25 L.T. 921
 Land Charges Act 1972
 Prestige Properties Ltd v Scottish Provident Institution  EWHC 330  Ch. 1  3 W.L.R. 1011  2 All E.R. 1145  13 E.G.C.S. 98  N.P.C. 41 Times, May 23, 2002
 Horrill v Cooper (2000) 80 P. & C.R. D16
 City Permanent Building Society v Miller  Ch. 840  2 All E.R. 621  2 T.L.R. 547
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