Land Law (law of real property)

Land Law (law of real property)

Introduction

Land law or law of real property was formulated with the objective of ensuring that the individual’s rights over land and how such rights and interests in or over land are acquired and transferred are optimally protected. Land law has undergone extensive reforms over the years, which is evidenced by the formation of different Acts.  The Law of Property Act (LPA) of 1925 is the foundation of modern land law. According to LPA 1925, land is complex and entails different aspects that include, ‘land of any tenure, mines and mineral, buildings or part of building and other corporeal hereditaments.'  Moreover, land is also comprised of intangible elements such as incorporeal hereditaments, privilege, rights, and benefits in or over land.  

Development in land law has greatly contributed to improvement in the effectiveness with which courts undertake their role in adjudicating different issues related to land. One of the fundamental issues in land law relates to the registration of land.  The reason for registration is to enhance the transfer of land by ensuring that individuals intending to purchase land are adequately informed of the exact state of the title of land. Thus, an accurate register should provide a purchaser of land with adequate information on the encumbrances and rights attached to the land. In spite of this requirement, it is difficult to discover overriding interests by searching the register. According to Thompson, overriding interests are comprised of ‘a category of property rights that do not appear on the register, but which are immune from the defence of lack of registration’ (p.461).  Thus, overriding interests are binding in law and influence the transfer and sale of land. The overriding rights are categorised as unregistered interests under the Land Registration Act 2002. Considering the fact that overriding interests are not discoverable by assessing the register, the only way through which a party intending to purchase land can determine the existing overriding interest is by visiting the property. Failure to determine the existing overriding interests can create significant legal problems in the transfer of land. One of the fundamental categories of overriding interests that a purchaser should evaluate relates to the actual occupation of the property, which is stipulated under section 70 (1) (g) of the Land Registration Act 2002. Thus, it is critical for parties involved in the purchase of land to evaluate the scope of actual occupation as stipulated by the LRA 2002. This paper entails identification, explanation, and a critical examination of the more contextual approach in relation to the evaluation of the scope of actual occupation.

Analysis

Determining actual occupation

In purchasing property, the purchaser must undertake due diligence in determining the actual occupation associated with the property. In order to do this, the purchaser must understand what constitutes actual occupation. According to Bogusz and Sexton,  the LRA 2002 has not provided the actual definition of what constitutes actual occupation.  This has provided courts a significant degree of flexibility in determining whether a party was in actual occupation or not. Similarly, the party involved in the purchase of land must undertake a holistic investigation of the property in order to determine all the overriding interests associated with the property. The significance of undertaking due diligence is underlined by the fact that interests of persons in actual occupation constitute one of the key rights associated with overriding interests stipulated in paragraph 2 of Schedule 1 and 3 of the LRA 2002.

In undertaking due diligence with reference to actual occupation, the courts have shed light on a number of key issues that the purchaser should take into consideration.

Doctrine of notice

A party involved in the purchase of land is automatically bound by the existing interest of another party in the actual occupation of the property.  The physical presence of the party claiming actual occupation constitutes sufficient ground that binds the purchaser. The nature of actual occupation need not be active but can also be passive. This aspect is underlined in the case of Strand Securities v Caswell in which the judge ruled that a person can claim actual occupation by simply staying within a property but doing nothing.  Under schedule 3 para 2 of the LRA 2002, an individual involved in purchasing a property must undertake a reasonably careful inspection in order to discover the nature of the occupation. the purchaser must undertake extensive inquiries by questioning individuals present within the property.  This aspect indicates that a person with actual occupation on the property should not be considered as a mere or passive bystander but should be adequately involved in making inquiries on the purchase of the property.

Examination of continued and interrupted presence   

Possessing actual occupation does not mean that the party with overriding interests has to be continuously present in the property. On the contrary,  Megarry, Harpum, and Wade assert that one of the key determinants of actual occupation entails evidence of ‘some degree of permanency and continuity’ (p.208).  Under this requirement,  if a person who resides within a particular property is temporarily absent from a property for some time, he or she does not cease to possess the right of actual occupation.  Thus, if a party is temporarily absent from the property because of being hospitalised, or is regularly and repeatedly absent from the property as a result of travelling abroad, such a party continues to possess the right of actual occupation.  According to Bray, ‘a temporary absence from the property will not defeat the actual occupation. However, the fundamental issue is whether the party has a continuing intention to stay within the property.'

However, Wilkie, Luxton, and Malcolm argue that there must be some evidence of his presence within the property. This can be assessed by examining any evidence on the party’s personal belongings or furniture (p.159). The presence of personal belongings clearly indicates the existence of actual occupation and hence the party’s intention to stay within the property.

The fact that one does not have to be continuously present within the property and the subsequent requirement for evidence of continued stay in determining the existence of actual occupation is underlined in the case of Chhokar v Chhokar [1984] Fam Law 269. In this case, a husband sold their matrimonial home secretly while his wife was in hospital to deliver a baby because he was the legal and sole owner of the home.  However, this constituted an illegality since he held the title to the matrimonial home in the trust of his wife and himself. Upon return, the wife found that she was locked out of the house. In making a determination, the court ruled that the wife since her personal property and furniture were in the house, possessed actual occupation despite her temporary absence. Thus, the duration of absence does not constitute loss of actual occupation in a property. This is illustrated in the case of Link Lending Limited v Bustard [2010] 2 P & CR DG15 in which the court held that Mrs Bustard possessed an overriding interest in the property despite the fact that she was involuntarily detained in a mental hospital for a long duration. In making the ruling, the judge argued that she had indicated her intention to return to her property and that she frequently visited her property while still in hospital.

 In addition to evidence of the presence of personal belongings and furniture, this aspect underlines the importance of evaluating the existence of equitable and beneficial interests as one of the key elements in assessing the existence of overriding interests in purchasing property. The rationale of this argument is aspect is underlined under Section 70 (1)g of the Land Registration Act 2002.  Similarly, the judge in the case of Thomas v. Clydesdale Bank held that a party involved in the purchase of property must possess actual knowledge on any existing equitable and beneficial interests before making a purchase. McKenzie asserts that ‘where a beneficiary under a trust is in actual occupation of the land her rights have been held to be overriding and binding on the purchaser.' This aspect is underlined in the case of William & Glyn’s Bank Ltd v Boland [1981] AC 487.  Nevertheless, the court argued that the occupier’s rights over property are only limited if they amount to overriding interests.

Actual occupation amongst children

In applying a contextual approach in determining actual occupation with regard to the purchase of land, it is imperative for one to assess the possibility of children having an overriding interest in land.  A number of judgements that have been made on this issue affirm that minors do not have an actual occupation on their own. On the contrary, the court ruled that children can only possess actual interest through their parents.  This indicates that children’s rights over property are dependent on the extent to which their parents hold rights in such property.   This aspect further underlines the possibility of one party being in actual occupation of another. This aspect is underlined in the case of Hypo-Mortgage Service v Robbinson [1997] 2 FLR 71 in which the court held that infants cannot be in actual occupation of property because their existence over property depends on their parents.  Similarly, the judge in the case of Bird v Syme-Thomson [1979] 1 WLR 440 defined children as ‘shadows of occupation by their parents (McKenzie p. 124).

Occupation by third parties

The process of determining actual occupation over property should also take into consideration the element of third parties.  In the case of   Strand Securities V Caswell [1965] Ch 958, the court argued that a third party cannot be in actual occupation over land. In this case, Caswell entered into a lease agreement on a flat in London that would last for 21 years. However, the lease was not duly registered.  The fact that the lease was not registered means that the lease took effect as an equitable lease.  Caswell did not live in the flat but visited it from time to time at night while he was in London. Her stepdaughter was the permanent occupant of the flat.  However, she did not pay rent.  In making a determination over the case, the Court of Appeal held that Mr. Caswell was not in actual occupation of the property. Subsequently, he did not have overriding interest as stipulated under s 70 (1) (g) of the LRA 2002.  Mr Caswell’s lack of overriding interest arises from the fact that he did not charge her stepdaughter rent, and hence he was not in receipt of the property’s rent which was a key requirement of actual occupation under s 70 (1) (g) of the LRA 1925.

In spite of the fact that a third party can have actual occupation over property as a result of the existence of overriding interests, schedule 3, para 2 of the LRA 2002 limits the existence of overriding interests in cases involving subleasing. According to LRA 2002, overriding interests are only limited to the owners of property who possess actual occupation]. Thus, being a mere recipient of rent does not translate into possession of actual occupation.

 Alternatively, Mr. Caswell would have developed actual occupation over the property if he had employed her stepdaughter as a caretaker of the property. In this case, Mr. Caswell would have established an agency relationship between himself and her stepdaughter.  On the basis of this ruling, it is evident that actual occupation can arise from the development of an agency relationship between the owner of a property and a third party. This aspect is underlined in the case of Lloyds Bank v Rosset [1989] Ch 350. In this case, the couple purchased a semi-derelict property, which was registered under the husbands’ name. Nevertheless, the couple did not move into the property due to the fact that some renovations were required. The wife undertook much of the inspection from time to time. The issue in this case was whether the wife possessed actual occupation. The court ruled that it was the builders who possessed actual occupation because they were working permanently within the property’s premises. This aspect underlines that it is possible for an individual to be an actual occupation on behalf of his or her client.

Conclusion

The analysis underlines the significance of undertaking extensive due diligence in purchasing property. One of the fundamental issues that purchasers of land should take into consideration entails assessing the existence of overriding interest. The rationale for evaluating the overriding interest arises from the fact that not all aspects associated with land can be discovered by assessing the registration of land. One of the overriding interests that purchasers of land should take into consideration relation assessing the actual occupation associated with the property in question. Failure to examine actual occupation may create legal difficulties in transferring the property to the purchaser.

In assessing actual occupation, the purchaser should adopt a more contextual approach. In applying the contextual approach, the party should take into consideration a number of issues which entail determining existing equitable and legal interests and trusts.  Available court cases shed light on a number of issues associated that parties involved in purchasing property should take into assessing actual occupation. Amongst the issues on actual occupation that courts have ruled on related to permanency or temporality of the occupant's presence within the property, is the limitation of the right of actual occupation amongst minors and third parties.  Court rulings on these issues underline the significance of employing an extensive or a more contextual approach in evaluating issues on actual occupation in making purchase decisions on property.  

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