Land Law Problem Question Example

Amarjit was the owner of a freehold property known as Ashdown Farm, title to which was unregistered when he purchased it in 1988.  The purchase did not trigger first registration at the Land Registry as the area that Ashdown Farm was located in did not become a compulsory registration area until December 1990.

In 2005, Amarjit granted his son, Sabeer, an option to purchase Oak Cottage, which was part of Ashdown Farm.  The option was for a period of twenty years from 2005.  The option agreement was in writing and signed by both parties.  The document provided that the option could be exercised by the service of a notice by Sabeer to Amarjit.

A couple of years later, Amarjit and Sabeer quarrelled and, without Sabeer’s knowledge, in 2009, Amarjit sold Oak Cottage to his brother, Caleb.  The purchase price Caleb paid for Oak Cottage was about half its market value.  Caleb was fully aware of the option granted in favour of Sabeer.  Caleb later sold Oak Cottage back to Amarjit.

Last year, Amarjit’s farm got into difficulties and his other brother, Daksha (who was in Australia at the time), agreed to lend him a sum of money to help him out. He lent him the money on condition that he could have a share of the farm if it was sold. 

Notwithstanding the loan, Amarjit’s business continued to struggle and he has now decided to sell the farm to a neighbouring farmer, Edwin.

He explains to Edwin all that has happened to the land and Edwin now seeks your advice as to whether he will be bound by any right or interest Sabeer or Daksha may have and, if he is, if there is any way he could avoid these.

Advise Edwin

Land Transfer law- Law of Property Act 1925

This area of law looks at two different ways that an owner of the land, can prove that he owns the land in question. Land registry records all relevant details of ownership relating to a particular piece of land. The unregistered land which is governed partly by the rules of common law and equity and partly by provisions contained in the 1925 Law of Property Act[1] and registered land system, which is governed by the Land Registration Act 2002[2]. Previously, before the land register was invented, all land in England and Wales was unregistered. The Idea of the land legislation is to define the power of the owner of the land and prove ownership, in a much cheaper and easier way. The way land was held, and the way property ownership was proven and different types of interest that could be protected in relation to land was complicated. Since 1990, the whole of England and Wales has been subject to compulsory registration.

Unregistered Land

In order to advice Edwin, how to transfer the legal estate free from any rights or interests. It needs to be established if the land is registered or unregistered land, and whether the interest in land is a legal or an equitable Interest, this will determine which prior property rights will bind the purchaser.[3] The aim of the provisions of the Law of Property Act 1925[4] is to effect as a “Curtain” between the legal estate in land and equitable interest. It seems that, based on the scenario, freehold property owned by Amarjiit is an unregistered land.[5]

If an interest is capable of existing as an interest in land, and it is capable of being legal, it is included in the Law of Property Act 1925 list section 1. Legal interest will then bind the whole world without the need for protection by registration. Section 1 of the 1925 act limited the number of legal estates and interests, because they will bind a purchaser automatically irrespective of notice.[6]

All other estates, interests and charges in or over land if not listed in section1 of the 1925 act, but as mentioned in section1(3), take effect as equitable interest and will bind a purchaser or not in accordance with the method used to protect it[7]. Sabeer’s interest is not listed in section1, it is therefore, to be deemed as an equitable interest. Protection of equitable interest falls into three types of categories. First protection by registration, secondly protection by doctrine of overreaching or protection by the doctrine of notice.[8]

Central Land Charger Register

According to Law of Property Act 1925 Section 198, If Sabeer’s commercial interest is in the list of “central land charges” section2 of Land Charges Act 1972[9], it must be registered against the name of the estate owner who entered into the arrangement in order to bind a purchaser.[10] If it is not, section 4 of the1972 act applies and it does not bind further transactions.

“The registration of any instrument or matter under the provision of the Land Charges Act, shall be deemed to constitute actual notice of such instrument or matter “

Amarjit granted Sabeer an option to purchase Oak Cottage, which was part of Ashdown Farm. The register composes of six sections from A to F. An “option to purchase” is listed under “class C interest” as an estate contract under section2 of the 1972 Act. The option agreement was in writing signed by both parties, which satisfied s2(1) of Law of Property (Miscellaneous Provisions) Act 1989[11], the contract for sale. Moreover, the document provided that the option could be exercised by the service of a notice by Sabeer to Amarjit.

Under Section32 of Land Registration Act 2002[12] a notice is a protection to other rights in land, to potentially stop them from being destroyed. The question in Spiro v Glencrown Properties Ltd and another 1991[13] was whether, the contract was the agreement by which the option was granted, if so it complies with the Act. However, if the contract was made by the letter exercising the option then it did not comply with the Act. If the interest was registered Edwin will be bound by Sabeer’s overriding interest. At the time the plain purpose of the option agreement under section2(1) of 1989 Act[14] ,was to record the consent of the parties. If the interest was not registered, the effect of non- registration is that it will be void against a purchaser of the legal estate for money or money’s worth such as land.[15]

Section 205(1)(xxi) of LPA 1925 Act[16] ,defines a “purchaser” as a purchaser in good faith for valuable consideration. In Midland Bank Trust v Green 1981[17] House of Lords decided that there was no requirement of good faith and it was irrelevant under Land Charges Act 1972.In this case a father has granted his son an option to purchase his farm, it could be argued that the system is unjust, but some may argue that it is certain.

Overreaching

If the interest is not listed in Central Land Charge, because it does not fall within one of the classes mentioned in section2 of Land Charges Act 1972, then it may be overreached. Overreaching is defined in section2(1) of the Law of Property Act 1925, it allows a purchaser to take free from prior family-based interest, whether he had notice of those interests or not. Not every equitable interest can be overreached. Interest which fall within the list of Central Land Charges cannot be overreached. Not only is Sabeer’s equitable interest listed under class “C” in central land charge register, but also the principle of two-trustee rule has not been satisfied by Edwin.[18]

Doctrine of Notice

Furthermore, if the equitable interest was not registered by Sabeer in the Central Land Charge Register and it cannot be overreached, doctrine of notice is the last category. The doctrine of notice applies in unregistered land to determine priority of equitable interests not governed by the Land Charges Act 1925. The issue here is whether the purchaser had “notice” of the equitable interest, in order to take a legal estate in land free from prior equitable right, the purchaser must have not had notice of the right. Equitable rights bind the whole world except a bona fide purchaser of a legal estate for value without notice of the prior equitable right. A purchaser with actual, constructive or impute notice, of a prior equitable right will take the estate subject to that right.[19]

If Edwin obtain an actual notice, he will take subject to rights that he actually knew about. To rights he would have known about had he inspected the land, like considered in the case of Kingsnorth Finance v Tizard 1986[20]. Where the lender had failed to take reasonable steps to avoid being fixed with constructive notice, and also in the case of Hunt v Luck 1902[21]. Additionally, in section 199(1)(ii)(b) of Law of Property Act 1925[22] he is deemed to have the same actual notice as his professional advisor.

A person who purchases the legal estate in land, in this case Edwin, must give value, not necessarily mean full or market value for the land in question. On the facts given, Edwin has been informed of all that has happened previously to the land, meaning that he has had an actual notice of the rights that could possibly bind him. To advise Edwin he could possibly appoint a second trustee to overreach the interest.

Land Registration Act 1925

In 1925 two main legislations came into existence, the Land Registration Act 1925 and Law of Property Act 1925. Land Registration Act 1925 introduced a different way of proving ownership of land to title deeds which it the unregistered land system. Nevertheless, the later act of Land Registration Act 2002, which repeals and replaces the Land Registration Act 1925 came into force.

According to the scenario, Oak Cottage was later sold by Amarjit to his brother Caleb without Sabeer’s notice in 2009. Caleb was aware of Sabeer’s option to purchase, could be said that he did not act in good faith. As mentioned before, in 1990 a compulsory land registration came into place, meaning that when Amarjit sold Oak Cottage to Caleb it would have triggered the first registration of the freehold estate. Section 4 of Land Registration Act 2002 lists events that trigger the compulsory registration, most notable one is, the transfer of freehold estate in land.[23]

Caleb would have been under a duty to register the estate within time, section7(1) of the 2002 Act provides 2 months to complete the legislation otherwise, the effect of non-registration would be that that the transfer becomes void Under s7(2)(a) and land would have remained with Amarjit. Caleb later sold the Oak Cottage back to Amarjit. If Oak Cottage was not registered by Caleb it might still have an impact on the land and later been registered by Amarjit. It is important to note that the Oak Cottage was sold, and not the entire Ashdown farm to Caleb. This can be perhaps seen as two lands and interests in both registered land an unregistered land. However, either way it does not have an effect on the option to purchase because it is still binding on Edwin and the registration would only affect future Interests.

Last interest that could potentially bind Edwin. Daksha’s Interest, who agreed to lend Amarjiit a sum of money, on the condition that he could have a share of the farm if it was sold. The two-potential land are now owned by solo owner, but the Oak Cottage could be registered, and Ashdown Farm is not. Edwin will be bound to register the Ashdown Farm as a whole and could be bound by interest which have an overriding status without being on the register.

In this matter, it needs to be established whether Daksha’s Interest in land is a legal interest or an equitable interest. Section 1 of Law of Property Act 1925, does not mention Daksha’s Interest, which means that Section1(3) applies and his interests take effect as an equitable interest. As to the potentially registered part of the farm, Oak Cottage, the system of protecting is quite different from registered and unregistered titles. Daksha wants the share of the entire farm not just Oak Cottage. Section11 of Land Registration Act 2002, outlines that when Edwin is registered as proprietor, and he has given valuable consideration, he will take free from pre-existing property rights, unless an interest is Registered against the title or is classified as an “overriding interest”.[24]

Registrable Dispositions

Where title to an estate in land is already registered, certain transactions with that tittle must be registered. Otherwise they do not take effect in common law and take effect as an equitable interest which leaves interests very vulnerable. The list with registerable dispositions are listed in section27 of Land Registration Act 2002 and include transfer of land. There is also a priority rule, section29 and 30 of Land Legislation Act 2002 contains the rules that tell when an interest in land will affect a later transaction with the land. As for interests protected by an entry on the register, there are two methods of protection, restrictions and notices governed by section 40 and 32 of the 2002 Act. Notice is an entry on the register of title that seeks to give priority to an interest affecting that land, this would not be available to Daksha as section 33 excludes interests under a trust. Whereas restrictions are protecting rights in land against a later sale of that land, it is a control mechanism. [25]

Overriding Interest

Overriding Interests are not protected on the register and S29(2)(a)(ii) Land Registration Act 2002 gives priority to them. The categories are set out in schedule 3 of the Act. Darsha could potentially have a family right, as with the borrowing of the money to Amarjiit he has a beneficial interest held behind a trust of land.Similar issues were considered in the case of Williams & Glyns Bank v Boland 1980[26]. Mrs Boland did not have any legal interest listed in section 1(2) of LPA 1925. She had contributed to the cost of the land creating a trust and was in actual occupation of the land. Lord Wilberforce held that her beneficial interest was therefore overriding by virtue of her actual occupation.

In order to establish an overriding interest, the claimant must prove two elements. Firstly, that they have an interest in land at the time of the disposition and secondly that they are in actual occupation.[27] In Daksha’s case he is not in actual occupation mentioned in section 70(1)(g) and only wants a share from the profit made when the farm is sold. He will also be bound by Sabeer’s interest in Oak Cottage if he knew about the interest in question. Edwin will not be bound with Daksha’s interest as to the Oak cottage if it was registered previously by Caleb.

As to the Land, if the whole farm was not registered, Darsha could see if his equitable interest would be protected by the unregistered provision, for example overreaching or protection by the doctrine of notice. In order to advise Edwin, he would have to overreach that beneficial interest that exist and ask Amarjiit to appoint a second trustee and pay to at least two trustees. If only one trustee and third parties interest may be bound.

Bibliography

Barbara Bogusz and Roger Sexton, Complete Land Law,5th edition, 2016, Oxford University Press.

 Diane Chappelle, Land Law,9th Edition, Pearson Publishing 2009.

Elizabeth Cooke, Land Law, Clarendon Law Series, 2006

 John Stevens and Robert Pearson, Land Law, 5th edition, Sweet and Maxwell Publishing

Mark P. Thompson, Modern Land Law, 5th edition, Oxford Publishing, 2009,

Martin Dixon, Modern Land Law, 10th edition, 2016, Routledge Publishing

Meryl Thomas, Property Law 2017-2018, 25th Edition, Blackstone Publishing

  Mark Davys, Land Law,9th Edition, Palgrave Publishing.

Paul Richards, Land Law, 2014, Pearson Publishing.

Sandra Clarke and Sarah Greer, 5th Edition, Oxford Press.

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[1] Law of Property Act 1925, https://www.legislation.gov.uk/ukpga/Geo5/15-16/20/contents.

[2] Land Registration Act 2002, https://www.legislation.gov.uk/ukpga/Geo5/15-16/21/contents.

[3] Diane Chappelle, Land Law,9^th edition, Pearson Publishing 2009, P109.

[4] Law of Property Act 1925.

[5] Paul Richards, Land Law,2014, Pearson Publishing, P121.

[6] Law of Property Act 1925, S1,op.cit.

[7] Sandra Clarke and Sarah Greer,5^th edition, Oxford Press, P111.

[8] Mark Davys, Land Law,9^th edition ,Palgrave Publishing ,P25.

[9] Meryl Thomas, Property Law 2017-2018,25^th edition, Blackstone Publishing, P167.

[10] Meryl Thomas, op.cit,(footnote 9), P107.

[11] Meryl Thomas, op,cit.(footnote 10),P236.

[12] Land Registration Act 2002, Section 32, https://www.legislation.gov.uk/ukpga/Geo5/15-16/21/contents.

[13] Spiro v Glencrown Properties Ltd and another 1991, 1 All ER 600,

[14] Law of Property (Miscellaneous Provisions) Act 1989, Section 2(1), https://www.legislation.gov.uk/ukpga/1989/34/contents.

[15] Diane Chappelle, Land Law,9^th edition, Pearson Publishing 2009 P109.

[16] Law of Property Act 1925, Section 205(1)(xxi).

[17] Midland Bank Trust v Green 1981, 2 WLR 28.

[18] Barbara Bogusz and Roger Sexton, Complete Land Law,5^th edition,2016, Oxford University Press.

[19] Martin Dixon, Modern Land Law, 10^th edition,2016, Routledge Publishing, P42.

[20] Kingsnorth Finance v Tizard 1986, 1 WLR 783.

[21] Hunt v Luck 1902, 1 Ch 428.

[22] Law of Property Act 1925, S199(1)(ii)(b), https://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/199

[23] Elizabeth Cooke, Land Law, Clarendon Law Series,2006, P28

[24] Mark P. Thompson, Modern Land Law,5^th edition, Oxford Publishing,2009, P 64

[25] Sandra Clarke and Sarah Greer,5th edition, Oxford Press, P111

[26] Williams & Glyn’s Bank v Boland ,1981 AC 487

[27] John Stevens and Robert Pearson, Land Law, 5^th edition, Sweet and Maxwell Publishing , P55