Land Law

Land Law

Introduction

Land law or law of real property was established with the objective of governing rights in or over land and the processes through which rights and interests in or over land are created and transferred. Land law has undergone extensive reforms over the past decades. The Law of Property Act (LPA) 1925 forms the foundation of modern land law[1]. According to LPA 1925, land refers to ‘land of any tenure, mines and mineral, buildings or part of building and other corporeal hereditaments’[2]. Land also comprises easements, incorporeal hereditaments, privilege, rights and benefits in or over land. From this definition, it is evident that land is not only comprised of tangible components but also includes intangible components. Land law has played an essential role in adjudicating over different issues on land. 

To illustrate the applicability of land law, this paper entails an analysis on a scenario involving aspects of land law.  As a solicitor to Amna, Bob, Cathy and Dave, this paper provide advice on the fundamental issues related to the purchase of the property. The advice examines the steps that need to be taken into account in purchasing the land and the rationale of such steps. The paper further involves examination of the legal concepts that govern ownership of the property by the four partners.

  Scenario

            Amna, Bob, Cathy and Dave intend to purchase Rosewood House, a large country house with two acres of grounds in Buckinghamshire. The house is currently owned and registered under Eric’s name on a freehold basis. Each of the four partners will contribute 25% of the price purchase price. Upon purchase, the four intend to live in the house as their home. The current owner, Eric lives with her partner Frieda in the house. Additionally, Frieda’s mother, Gertrude lives spends part of the year in Rosewood House and the reminder in Italy. Moreover, Harry, who owns the neighbouring farm, claims to have an easement over a track that passes from his farm through the grounds of Rosewood House to the main road.

Analysis

In acting as the solicitor for the four parties, a number of issues will be taken into consideration as discussed herein.

Determination of the prevailing estates and interests

The process of purchasing the property will ensure that the nature of interests and estates over the property are established. The scenario underlines the prevalence of estates and interests over the Rosewood House. An estate refers to the right of an individual to own and enjoy land for stipulated duration. However, in the case of freehold, the duration of ownership can be indefinite[3]. Conversely, interest refers to a right that impacts another person’s land.  Estates and interests over land are classified into either legal interests or legal estates[4]. Legal estates are classified into either leasehold or freehold while legal interests are classified into legal mortgage, legal rent-charge, and legal easement and profits[5].

Legal and equitable interests

The scenario is characterised by existence of significant legal and equitable interests. As the current owner of Rosewood House under the freehold system, Eric has a legal estate over the property. Alternatively, Eric’s ownership over the Rosewood House and the 2 acres on which the house is situated can also be explained by the concept of ‘fee simple’. Under the fee simple ownership, the property can be freely sold and bought[6].

The scenario states that Eric lives in the house with his partner, Frieda. However, the scenario does not explicitly define whether Frieda is Eric’s wife.  In the event that Frieda is Eric’s legal wife, she retains equitable interest over the house.  The existence of equitable interest in such a situation is underlined by the case of Bull v Bull [1955] 1QB 234 (CA)[7].  On the basis of the concept of equitable interest, Frieda has beneficial interest under trust. Trust of land occurs if a party holds a legal title over property either for the benefit or on behalf of another[8]. In this situation, Eric, as the registered owner of the land, would be holding the house and land in trust of his wife.  Subsequently, he does not have the power to sell the house and the property without his wife’s consent[9].

 The above aspect is highlighted in the case of William & Glyn’s Bank Ltd v Boland [1981] AC 487[10].  In this case, the husband was solely registered as the owner of the matrimonial home in which he lived with his wife.  The wife had made substantial contribution in the purchase of the matrimonial home, which means that she was entitled to the property. However, her husband charged the house against a loan as security without her wife’s consent. Upon failure of the husband to repay the loan, the bank claimed repayment of the loan by possessing without enquiring whether the wife had equitable interest over the house. The court ruled that the wife had overriding interest under Section 70 (1) g of the Land Registration Act 1925 because she had partly contributed to the purchase of the house. Therefore, the bank could not possess the house under such circumstances[11].  This finding is further supported by a similar case in Thomas v. Clydesdale Bank, where the court ruled that a purchaser must have actual knowledge on the prevalence of equitable interest before making a purchase[12]. On the basis of this ruling, it would be advisable for Amna, Bob, Cathy and Dave to conduct an extensive evaluation on the ownership of the house. This move will caution the four partners against their purchase of the house being invalidated under the principle of equitable interest. 

Constructive interest and detrimental reliance

In the event that Frieda is not Eric’s legal wife but they lived together through cohabitation, Frieda had constructive interest over the property if she had contributed towards the purchase of the house, even if not equitably[13]. Subsequently, Frieda had beneficial interest over the property. This aspect is illustrated by the case of Oxley v Hiscock [2005] Fam 211, CA[14]. In this case, the court ruled that despite that Mr. Hiscock, the sole owner of the home, and was cohabitating with Mrs Oxley; Mrs Oxley had constructive interest because she had partially contributed to the purchase of the home, its improvement and maintenance. Therefore, she was entitled to proceeds of the home[15]. Similarly, Frieda had contributed to improvement and maintenance of the property, her contribution would have in the process led to creation of constructive interest even if here share over the property would not have been equal to that of Eric.  

The existence of constructive interest is also supported by the concept of detrimental reliance[16]. For example, Frieda may argue that she lived with the property’s legal owner on the basis of an oral promise from Eric to benefit from the house. On the basis of detrimental reliance, Frieda may claim that she will suffer severe detriment if the house is sold. In such a situation, Eric would be forced to compensate Frieda for the detriment incurred. Similarly, the fact that Eric had allowed Frieda’s mother to live in the house, of which she does partly, gives her a legal right over the property. The family arrangement between Eric and Frieda’s mother may constitute a lease.  Therefore, she Frieda’s mother can claim right over the property such as continued stay in the house. Even if she moves out of the house, she can claim a share from the sale of the property. The concept of detrimental reliance is underlined by the case of Greasley v Cooke (1980)[17], in which the court argued that the burden of proof on the detriment suffered does not rest with the claimant. On the contrary, the fundamental aspect is that the claimant’s actions arose from an assurance from the property owners that she has a right to stay in the house[18]. This underlines the importance of the four partners ensuring that they understand all the legal and equitable interests associated with the Rosewood House prior to its purchase.

Right of way

The second aspect in the scenario shows that Eric has provided Harry pathway through the property. Subsequently, Harry claims to have easement over the track that passes from his farm through the ground of Rosewood House to the main road.  According to the Law of Property Act 1925, easement entails the right of an individual to allow or restrict use of another party’s land in a specific way[19]. Alternatively easement entails ‘ rights attached to one piece of land, entitling its occupants to do something on another’s property, or preventing the owner of that property from interfering with the passage of some benefits to the first piece of land’[20] . Easements arise from the creation of legal interest, which means that they are legally enforceable[21].  

 In this case, it is true that Harry has an easement over Eric’s property in form of right of way, which allows Harry to use the drive over Eric’s land.  By restricting Harry the right of way, Harry would be burdened since he is the sole beneficially of the drive which connects his farm to the main road. However, Harry would have to prove that his property is the dominant land, which would be affected if the right of way is restricted.  This aspect is illustrated by the case of Das v. Linden Mews [2002] EWCA Civ 590, [2002] 2 EGLR 76[22].   In this case, the claimants owned houses at the end of a private-no-through road. One of the claimants further owned a parking and a courtyard that end of the private road, which was used as parking by the two claimants. Despite the fact that the claimants ruled proved their right of way to their houses, the court ruled that the courtyard was not the dominant tenements.  Thus, the right of way was not applicable to the courtyard[23]. On the basis of right of way, Harry can seek legal redress to ensure that his right of way is not interfered with despite the transfer of property from Eric to the four buyers.

Co-ownership and severance

            In purchasing the house, the four partners intend to contribute 25% of the purchase price, which gives rise to co-ownership[24].  Considering the fact that the four parties contributed equally to the purchase of the property, they possessed tenancy in common[25].  Tenancy in common occurs in ‘an undivided share in land with each co-owner being able to identify their portion of ownership, for example one-quarter or one-fifth’[26]. The four parties have a defined share to the house. Under this arrangement, the four partners act as each other’s trust because they are the property’s legal owners and they own the house collectively. Thus, their interest over the property would be collective[27].   

In the event that one of the partners wants the property sold against the will of the other three parties, the four agree to severe the property due to the prevalence of unity of possession under Section 36 (2) of the Law of Property Act 1925[28]. However, the party intending to sell the property must give a notice in writing to the three parties. This aspect is underlined by the case of Harris v Goddard (1983) 1 WLR 1203. In this case, the Court of Appeal was of the opinion that ‘any written statement by a joint tenant either expressly indicating or implying that he wishes to immediately end the joint tenancy relationship will sever the joint tenancy, provided the statement is received or deemed to have been received under s196 (4)’[29]. Therefore, under the concept of severance, it might be possible for the said party to sell his share of the property.

Breach of contract

            In the event that the four partners decide to pull-out of the sale after contracts for sale are exchanged, they would be in breach of contract. ‘An agreement to buy land is not binding until signed written contracts have been exchanged’[30]. In this case, the four partners may be liable to compensate the seller for damages incurred. Examples of such damages may relate to the cost incurred in preparation of performing the contract and the amount of time spent.

Equitable mortgage

            Considering that the property is co-owned by different partners, it is thus characterised by many interests. In such a situation, the partners can charge an equitable mortgage against their equitable interest in the property. Therefore, it is possible to secure a loan using equitable interest in a property. However, the mortgage or charge can only take effect in equity and in the consent of the partners.  In the event that one of the partners takes a mortgage against the house without the consent of the co-owners, the mortgage would not be enforceable. Therefore, if the individual who charges a mortgage over his equitable interest in the property fails to pay the credit, the credit financier does not have statutory capacity to wholly repossess or sell the property under s 101 (1) (i) of the LPA 1925 (Burrows, p. 299). On the basis of the above aspect, the mortgagor can only redeem in equity of the mortgagee[31].

Reasons for the 1925 land reforms

            The land reforms of 1925 were intended to abolish ‘unfree’ tenures. On the basis of the unfree tenure, it would have been difficult for a land owner to transfer ownership to a third party. Prior to 1925, the ownership of land reverted to the superior lord in the event that the tenant dies without any heirs.  On the basis of this aspect, it would have been difficult for the four partners to own the house prior to 1925.  Prior to the land reforms, individuals held limited rights over the property. Transfer of rights would have been difficult because the transferee had to prove equitable interests under the doctrine of notice. Moreover, purchasing the property would have been difficult because the duty to prove the prevailing constructive interest rested with the purchaser. Therefore, the purchaser would have been required to conduct extensive inquiries on the prevailing legal interests as illustrated in the case of Hunt v Luck [1902] 1 Ch 428[32].  

Conclusion

In purchasing the property, it is imperative for Amna, Bob, Cathy and Dave to ensure that due diligence is undertaken. One of the ways through which the four parties can achieve this is by evaluating the prevailing legal equitable estates and interests over the property. This move will play a critical role in avoiding legal difficulties that would make transfer of property to the four partners.  Amongst the fundamental types of legal interests that the four parties should take into consideration entail equitable interests, constructive interests and overriding interests. Moreover, it is also important for the four parties to understand the nature of equitable interests that arise from the purchase of the property. Through this move it will be possible for the four parties to effectively manage the property under the co-ownership relationship. Knowledge on co-ownership will adequately inform the partners in making decisions related to the right to mortgage in using the property. It is also imperative for the four parties to understand actions that might lead to breach of contract and the resulting consequences. The analysis of the scenario has also led to an understanding on actions by property owners that might lead to the development of implications that are enforceable under law.

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