This Party Claim in Property Ownership

Property is one of the fundamental components of a successful economy. And as such, a transparent and cost-effective mechanism for the exchange of property is vital to commerce and everyday life. However, the desire for clarity must be balanced with certain social aims like protecting the family home. To achieve this, there has been two critical pieces of legislation in the last century – The Law of Property Act 1925 LPA, Land Registration Act 2002 LRA. It is the impact and operation of these statutes combined with common law precedent which the problems posed in our question will revolve around. These acts have established a land registration system for England where ownership to property and certain third party interests are registered. And in the absence of registration, these acts – amongst other things – seek to define what rights any third-party may have over a purchaser of the registered title.

Brian has recently purchased a registered piece of property, Greenacre, and is faced with three third-party claims over his property – which he obviously had no knowledge of. Generally speaking, one would assume that any dealing between a previous property owner and third parties would be of little concern to Brian because they would only generate mere personal rights. However, certain types of rights are proprietary rights and as such, may be enforceable against Brian’s property. The main focus of our attention will be the LRA 2002, which details the validity of any third-party claims against Brian’s registered property^[1]. We are specifically interested in the species of interests^[2] which would not have to be registered and so could potentially be unknown to Brian. We will refer to these as ‘over riding’ interests.

Part A

The first issue raised here is one of ‘easements’ and the impact they can have on Brian, the subsequent purchaser of a piece of land. At its core, an easement is a proprietary right – an interest – over another’s piece of land. The four essential elements of an easement were outlined in the seminal case of Ellenborough Park 1956^[3]; these are:

1) There must be a dominant and servient tenement. An easement must benefit one piece of land and be a burden to another. In our case, it is clear it benefits Stella’s land as it gives her access and is a burden to Brian’s land as he has someone driving over his land.

2) Each piece of land must be owned by different parties: this is clearly complied with as Brian owns his piece and Stella hers.

3) The easement must benefit the dominant tenement i.e. it must benefit the property not the person: It clearly benefits Stella’s land as it gives access to the property. Without this access, the use of the land would likely be diminished.

4) The easement must be capable of being conveyed by grant: this means it must be capable of being the subject matter of a deed and of reasonably exact description. This is obviously the case here as a deed has been granted and it is easily defined as a right-of-way.

Applying this to our facts, we can then state with some certainty that the right of way over Brian’s land is capable of being described as an easement; Stella utilizes his property to access hers on a regular basis. Case law such as Borman v Griffith 1930^[4] clearly supports the grant of a right of way as being classed as an easement. However, to be binding on Brian, it must be created in a certain way that – i.e. by a deed. We are told that Diane possesses a ‘deed’ – but we are not told specifically that it meets the requirements of a valid deed – as per S.1 LP(MP)A 1989^[5] – signed, attested and delivered. Which in effect means, that is clear on the face of it that it is a deed i.e. says deed – that it is signed by both parties and these are witnessed – and it is “delivered” i.e. the act has been made irreversible by handing it over^[6]. If we assume it is a formal deed then Stella appears to have a valid ‘legal’ easement .

However, in order to bind Brian – the new purchaser – it must be registered because s27(2))(d) of the LRA 2002 defines this as an interest which must be registered to be enforceable. The logic of such a requirement is clear – if you are going to have an encroachment on another persons property rights, then such a fact should be discoverable to any potential buyer of that property. But it obviously wasn’t registered otherwise Brian’s solicitor would have drawn his attention to it.

So the next question is whether the easement could in some other way amount to an overriding interest that would affect Brian’s property. These overriding interests are listed in Schedule 3 of the LRA 2002 . In general – and for obvious reasons – such rights are particularly limited in the interest of natural justice and efficiency of the exchange process. The main provision we are interested in is Schedule 3.3(1)-(2) which specifically deals with easements. This would create an overriding interest of the legal easement if she can prove Brian had “actual knowledge”, or it would be obvious on a “reasonably careful inspection” that it existed, or that she had exercised it in the previous year to the sale. This would turn on facts we don’t have. But if Stella can prove she met Brian and told him, or if a well worn path across his land to hers is obvious then Stella would likely have an overriding interest to his title and can continue to use it. Equally, if she can prove she used the right of way in the last year it will have the same effect. The last provision seems onerous, and of all the overriding provision in Schedule 3, it does put a greater onus on the purchaser to investigate any potential easements. But it would appear that Brian’s land would be subject to her right of way as Stella is using, and has been, using it frequently.

Part B

Brian will also wish to know if he is bound by Fred’s ‘lease’. A lease is defined as one of the potential legal estates in land by s.205. of the LPA 1925 – a “term of years”. The essential characteristics of a lease are, according to Street v Mountfield^[7] certainty of term, a fixed and certain duration and some form of consideration. On the facts, it appears to be for five years, and as the farmer is ploughing the land and planting crops the land cannot be used for anything else. We can also presume some consideration passed beteen him and Diane – although the payment of a rent per se is not necessary Ashburn Anstalt v Arnold^[8]

As in the easement in Part A , in order for it to be effective and potentially binding of Brian, it must be in the form of a “deed”. We are told that the terms are defined on a piece of paper and that it is signed by both parties. The critical element in this case appears to be attestation – if the signatures are not witnessed then it will not meet the requirements of a legal lease. We will look at both scenarios. If it is a legal lease, then the farmer was not required to register it because according to Schedule 3 (1) of the LRA 2002 of this act, we see that legal leases for less than seven years are an overriding interest and would bind Brian for the length of the lease. He could have registered it – but he was not required to.

If however, there were a lack of formalities in the original lease with the situation, becomes more complicated as he might only have an equitable interest. Equity might however step in to help the farmer. According to Walsh v Lonsdale ^[9], it could be claimed that an equitable lease could be as good as legal lease; in the eyes of equity what the farmer might possess is a contract creating an interest in land. As such he may be protected by the all important Schedule 3 of the LRA . This allows for the protection of people with ‘interests’ in the property who are in actual occupation. This is a ‘safety net’ clause which seeks to protect excessively “sharp” practices like selling a property with interested party unaware and in occupation. The kernel of the issue^[10] is outlined in 3(2) c and states that interests may override if their occupation would have been obvious “reasonably careful inspection”. This is an obvious balancing act between property rights and avoiding certain socially unacceptable practices.

Applying this to our farmer, he may have some problem as he is obviously not physically occupying the land in the sense of living on it. But in Abbey national Building Society v Cann^[11], it was said “occupation is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied”. So we should look at “occupation” in the sense of actively utilizing the land for farming – which he appears to be doing. But would this be discoverable upon reasonable inspection? It would obviously depend on facts we don’t have. If for example, there was always forty cows on Brian’s land it would only be reasonable for him to ask during the purchase “who owns the cows? And why they on this land?”. But he appears to be a tillage farmer as he is ploughing the land. If the land was lying fallow or had little activity, then I suggest, that a “reasonably careful inspection” may not have revealed his occupation. And would then not override Brian’s interest.

Part C

Brian faces another claim from John – and this one is more complex. The issue here again is a purported proprietary claim against his land. We are told John made a substantial contribution to the price but also that Diane was the sole registered – legal – owner. This situation clearly involves the utilization of the doctrine from the case of Pettitt v Pettitt^[12] and the creation of an implied trusts (specifically a resulting trust^[13]) because we have no indication of an express trust. This case, and others, reinforced the fundamental doctrine that one person might claim an equitable interest in the ownership of another’s property. It is not required that the couple are married or involved in any way in a relationship. All that concerns us is the fact that Brian contributed “substantial” amount of money to the purchase price. The court is likely to hold that the transaction has given rise to a trust – a resulting trust – of land because of this, as in Dewar v Dewar^[14] or Bull v Bull^[15]. In the latter case, a mother made a contribution to the price of the house and it was held she a joint equitable owner even though her son was the sole legal owner^[16] i.e. registered owner.

We can thus assume that Diane is the legal owner, and she was holding on trust the beneficial interest for herself and John – pro rata with their respective contributions to the price as per the facts ofBull v Bull. Brian’s primary concern is that in light of the existence of this trust of land what potential claims does John have against him. As with the previous problem this interest in the property should have been registered. And it wasn’t. It was clearly established in City of London BS v Flegg ^[17] that such interests can be ‘overreached”^[18] only on payment of money to two trustees. Brian could not do this as there is only one trustee, Diane. But as this interest was not registered John would again be falling back on the various over-riding interests exemptions as per the Schedule 3 paragraph 2, “safety net” element of the LRA 2002. The issue will again revolve around whether John was in actual occupation at the appropriate juncture in time^[19] and was this was discoverable. We are asking whether his occupation is “obvious on a reasonably careful inspection”. The logic is simple – if you see a person residing in a house you are about to buy then you should ask “who are you? Are you asserting any claim on this house?”. Equally if you see a wardrobe full of women’s clothes and a man claims he is the sole owner then this should raise your concern. In this case, we are told John is a seaman and obviously this necessitates long absences and that he had some boxes in the attic.

In the case of Chhokar v Chhokar^[20], the court held that a temporary absence from the house due to a stay in the hospital was within the term occupation It is clear from this case that the courts are intent on protecting the family home from those with claims against the property. . And they will go far in this In Lloyds Bank v Rosset^[21] the presence of builders renovating a property and the odd overnight accommodation was deeded to be actual occupation. The HOL held that the builders were working for someone and the bank should have asked themselves questions. But John’s intermittent presence would likely cause problems as per Stockholm Finance Ltd V Garden Holdings^[22] unless he can show some physical symbol of his residence as per Kling v Keston Properties Ltd^[23] which is an indicates an occupation of sorts and an intention to return (a parked car in that case). If we apply these two cases to John would find it difficult to arrive at “actual occupation” because there was no visible indications of his presence. He was a seaman who would obviously spend long periods abroad. And the fact that a “search” of the attic was required to find his boxes indicates that they were well hidden. It would turn on certain other facts but it is extremely unlikely a court would allow his rights to override Brian’s. But what of his actual money he invested in the property? This would be likely converted to a money interest and held on trust by Diane . He was effectively overreached and his property interest converted into a money interest. It is worth nothing that should any of these interests override Brian’s property rights he would likely have a contractual action against Diane and the onus was clearly on her to disclose such interests as per Ferrishurst Ltd v Wallcite Ltd^[24] and under statute LRA 2002, S 71,(12)15.

To conclude, we can say that in a perfect world the land registry should accurately mirror to a prospective buyer every single propriety claim against his intended purchase. However, as Brian has discovered that we don’t live in a perfect world and that the law allows for certain unregistered claims to override his interests as the owner. This results from societies demands to protect certain categories of people who might suffer harshly from the “perfect world”.

Bibliography

Textbook on Land Law, Mackenzie, Phillips, 2004, Oxford University Press

Land Law – Cases and Materials,2004 Burn, OUP.

Land Law Q&A 4^th Edition, 2002, Dixon, Cavendish Publishing.

Land Law Core Text 4^th Edition, 2006, Gray & Gray, OUP.

1

Footnotes

^[1] This act came into force on Oct. 13^th 2003 Schedule 3 modifies and restricts the third party rights in S.70(1) of the LPA 1925

^[2] The interest must of course be one recognisable by the court: established in National Provencal Bank v Hasting Car Mark 1964 CH 665 such as an easement, lease etc.

^[3] 1956 Ch 131CA

^[4] 1930 1 CH 493

^[5] Law of Property (Miscellaneous previous) Act 1989

^[6] see Shah v Shah 2002 for a discussion on the area of requirements.

^[7] 1985 AC 809

^[8] 1989 Ch1, 1988 2 All ER 147

^[9] 1882 21 ch D9

^[10] I am ignoring the other provision that John had actual knowledge as we are clearly told he doesn’t. Although, for completeness it might be sufficient that his agent had knowledge – but again no facts were provided.

^[11] 1991 1 AC 56

^[12] 1970 AC 777

^[13] S.53(2) of the LPA excludes these from having any formalities associated with them, which is why they are ‘popular’ in situations where nothing has been expressly agreed.

^[14] 1975 1 WLR 1532

^[15] 1955 1 QB 234

^[16] Section 1 of TOLATA has formalized this situation to a large degree and an implied statutory trust of the land may have come into existence.

^[17] 1988 AC 54

^[18] i.e. converted into a money interest rather than a property interest see Land Law – Core Text 4^th Edition, OUP, P444 for a discussion of this area.

^[19] established as the date of completion of the sale not registration see Abbey national Building Society v Cann 1991 1 AC 56

^[20] 1984 Fam Law 269

^[21] 1991 1 AC 107

^[22] 1995

^[23] 1995

^[24] 1999 1 ALL ER 977