Enbloc Sale of Property

It's final: Horizon Towers sale is off
By Joyce Teo, Property Correspondent
Straits Times, Singapore, 5th April 2009

THE Court of Appeal halted the contentious Horizon Towers collective sale once and for all yesterday with a hard-hitting ruling that singled out the estate's sales committee for scathing criticism.

The dramatic judgment caught many by surprise and vindicated the four sets of minority owners who opposed the sale from day one - about 3-1/2 years ago, when the idea was first mooted - and spent nearly $1.5 million in legal costs.

One of those owners, Mr Hendra Gunawan, told The Straits Times yesterday: 'I am very happy that at last we can protect our homes.'

'We can't do anything about it if 80 per cent agree to sell but they have to do it properly so that everyone's home will be sold at a proper price.'

Industry experts are also hailing the decision as a landmark judgment that will set clear parameters for en bloc deals.

Yesterday's ruling was clear in its condemnation of the way the en bloc process was conducted and was particularly critical of the estate's sales committee.

Among a litany of criticism, it pointed to the committee's failure to follow up on a higher offer for the estate, its undue haste in agreeing to a sale price in a rising market and its sloppy procedures in appointing a marketing agent and keeping owners up to speed on the transaction.

But perhaps the most serious censure was directed at its failure to take heed of a possible conflict of interest that arose when two owners bought additional units in the estate just before they were appointed to the sales committee.

'The sale committee's duty is to achieve the best price under the circumstances, and not just a fair price,' said Mr Karamjit Singh, managing director of Credo Real Estate, which has handled many collective sales but not that of Horizon Towers.

The Strata Titles Board, which backed the sale, was also criticised for the way it took too much at face value - whether opinions on price or legal points - when it should have been more questioning. It was also rapped for not being more vigilant on the possible conflict of interest issue regarding sales committee members.

One immediate effect of the ruling is that one of Singapore's most drawn-out en bloc deals is finally over.

The sale of the Leonie Hill estate was first mooted in October 2005. The owners agreed to a reserve price of $500 million the following year, just before the dramatic run-up in the property market.

A deal was signed in January 2007 when the majority owners accepted a price of just below $850 per sq ft of gross floor area from Hotel Properties and its two partners.

The 199 owners of the 99-year leasehold estate would each have pocketed about $2.3 million while the 11 penthouse owners would each have received around $4 million to more than $6 million.

A series of court challenges followed. Even some majority owners turned against the deal when they saw how the soaring market had made their sale price look like a giveaway.

The property market has since slumped and the en bloc market has dried up.

'On paper today, the owners would have lost out, but probably by just 10 per cent,' said a property expert who declined to be named.

Only a handful of the minority owners who objected to the sale fought on until the end, spending millions along the way.

Mr Ng Eng Ghee, Mr Gunawan and his wife Sulistiowati Kusumo and Madam Ong Sioe Hong were represented by Harry Elias while Mr Rudy Darmawan represented himself, his wife and aunt at the hearing.

Madam Ong said her group incurred expenses of more than $1.5 million. Another group of objectors - who fought against the sale earlier - has spent around $1 million. Property industry experts said yesterday's landmark ruling has struck a decisive blow for transparency.

'This is the first time the court of appeal has held in favour of the minority owners,' said Mr Phillip Fong, a partner of Harry Elias Partnership, which represented four minority owners.

'There's now substantial clarity on the extent of the duties of the sale committee.'

Credo's Mr Singh said: 'The judgment is undoubtedly significant. It clarifies what constitutes, for example, good faith and conflicts of interest.'

Leasehold Covenants

Were the defects in the law relating to the enforceability of leasehold covenants so serious as to justify the scheme introduced by the Landlord and Tenant (Covenants) Act 1995 for leases granted after 31 December 1995? - Justin Santiago

The Landlord and Tenant Covenants Act (LTCA) 1995 provided a new set of rules governing the enforceability of leasehold covenants under the broad category of the law governing the conduct of landlords and tenants. Leasehold covenants are those terms agreed in a lease that relate to the parties obligations in their capacities as landlords and tenants. The law related to leasehold covenants before 1995 were mostly derived from common law and the LPA 1925. This has changed with the Landlord and Tenant (Covenants) Act 1995 and applies to leases granted after 1996.

The arguments below will show the defects of common law regime and the inadequacy of the LPA in three broad areas :-

1. The principle of continuing liability with its over emphasis on the doctrine of the privity of contract
2. The different abilities of the original tenant and the original landlord to sue on personal covenants and on legal and equitable leases and the difference in treatment of legal leases and
3. The vagueness of terms such as touch and concern land which required extensive judicial interpretation

There will also be a discussion on how effective the LTCA has been in resolving these deficiencies.

The original landlord (L) and tenant (T) had continuing liability for and can be sued on all covenants for the entire term of the lease, even after the assignment of the reversion by L or the assignment of the lease by T, due to the privity of contract. However it was unjust unjust that both L and T should be held liable for breach of any covenant for the whole duration of the lease, even if the breach was performed by a subsequent landlord (AL) or subsequent tenant (AT). Such covenants vulnerable to breaches include, inter alia, paying rent, performing repair obligations and to use the leased land only for the stipulated purpose. Compelling the original T to rectify the breach could prove to be costly, more so if he is going to liable for all other subsequent assignees’ breaches.

Also, by comparing the scope of both AL and AT’s liabilities and abilities to sue, it can be seen that AT has a more limited scope to sue. AT’s ability to sue depends on the rule in the Spencer’s Case, one of the criteris is, (1) there must be a legal lease, (2) there is an assignment of the lease by deed; (3) there is privity of estate between L and T; and (4) the covenant must touch and concern the leased land. Where there is privity of estate, the benefit and burden of covenants relating to L’s land run with any assignment, such that the assignees will be bound by them, pursuant to S78 and S79 LPA 1925.
Therefore, AT may only enforce covenants in a legal lease.

AL, on the other hand, has the ability to sue pursuant to S141 LPA 1925, on covenants in all leases which have reference to the subject matter of the lease pursuant to S142 LPA, which includes legal leases, equitable leases and oral leases, which are leases for a term not exceeding 3 years at the best rent reasonably obtained under S54(2) LPA 1925. This shows that L has a wider scope to sue while T has a limited scope to sue.

There were also question on which covenants touch and concern the land and which have reference to the subject matter of the lease. If these could not be determined, they could be deemed to be personal and thus could not bind any assignee of the reversion or the lease.

LTCA 1995 was enacted to reform some of these rules. It, however, applies to tenancies created after LTCA 1995 takes effect on 1 January 1996. Tenancies created before that continue to be governed by the previous common law rules. It balances the rights of L and T and is now more certain compared to the pre-1996 rules.

LTCA 1995 abolishes the rule that the original parties continue to be liable for all covenants, whether personal or otherwise, and added the onus of release from the covenant on L. LTCA 1995 also releases T from all obligations, save for a few exceptions, and included a special provision for recourse against any occupier other than T himself. His burden for breaches of covenant are reduced S17 T needs to be notified by L/L1 of the breach of the covenant by T1 and is liable up to a maximum of six months. Previously there was no time limit in which he had to be notified of the breaches committed by subsequent assignees.

S3 provides that the benefit and burden of all L and T covenants shall pass on an assignment, except for those that are expressed to be personal, per S3(6)(a). LTCA 1995 does not require the differentiation between covenants that touch or concern the land, or covenants having reference to the subject matter of the lease. Instead, it distinguishes covenants that are expressed to be personal, as these are the covenants that continue to bind the original parties to them for the whole term, due to the doctrine of privity of contract. One must note that the lease must stipulate that such covenants are intended to be personal, or else they will pass upon assignment and bind the assignees.

After the assignment of the reversion, the original L would not be liable for or entitled to the burden or benefit of the covenants only if he has applied to be released under S6 in accordance with the procedure set out in S8. Thus, L has the onus of applying to be released from the covenants after an assignment, otherwise he continues to bear the danger of being sued.

After the assignment of the lease, the original T would be released automatically from all the landlord and tenant covenants, per S5. S16 provides that upon an assignment, T may be required by L to enter into an authorized guarantee agreement (AGA) to guarantee the AT’s performance of the covenants. S11 provides that neither L nor T shall be released if the assignment is one in breach of a covenant or by operation of law. Thus, although T is automatically released per S5, he may continue to be liable if he is a guarantor under S16, or if the assignment is an excluded assignment, or if the covenant is expressed to be personal.

LTCA 1995 has no application to sub-leases, but in cases where a sub-lease is granted, L now has a recourse against the sub-tenant, pursuant to S3(5), in respect of a restrictive covenant, whereby it can be enforced against any occupier of that premises. Alternatively, he may rely on Contract (Rights of Third Parties) Act 1999 if the covenant was intended to benefit and bind successors and assignees.

However the 1995 Act did not affect covenants expressed to be personal : BHP Petroleum v Chesterfield – personal covenants are not affected by the statutory scheme of release however the Court of Appeal decided that landlord covenants are not released by the statutory mechanism and the original covenantor remains liable despite having parted with all interest in the property. The problem here is with regard to the term expressed to be personal.

Also London Diocesan Fund and others v Avonridge Property Company Ltd House of Lords has ruled that landlords can draft their way out of the statutory release provisions of the Landlord and Tenant (Covenants) Act 1995.

Leases and Licenses

It is now becoming increasingly difficult to distinguish between a lease and a license. - Justin Santiago

It used to be that defining a lease or license was simply based on defining a lease according to a criteria based approach. A lease grants exclusive possession of the land for a certain fixed or periodic term, in consideration of premium or periodical payments. The importance in defining a a lease was because a lease was an interest in the land and had the ability to bind subsequent purchasers of the land unlike a license which was merely a personal right. A lease can be associated with covenants that are capable of running with the land, and binding successive owners. This is impossible with a licence.

It is important that leases and licenses are distinguishable as they define different obligations for the parties. Landlords would naturally want to grant only a license in order to avoid the various implied obligations by the landlord to keep the property fit for habitation S8 of the Landlord and Tenant Act 1985 and keep in repair and proper working order structure, exterior and installations S11-16 of Landlord and Tenant Act 1985 and the ability to deny exclusive occupation to occupiers and the ability to exclude them from the property at any time. Tenants on the other would prefer that they had a lease which could be sold, given away or left by will putting much power in the hands of the tenant. Additionally they bind third party purchasers of the landlord’s reversion.

The difficulty in distinguishing leases from licenses stems from the difficulty in putting them into separate compartments. There are different shades of leases and licenses and not all are the same. There exist a continuum rather than separate categories. The reality is that leases and licenses do not exist as labels but as to the effect that it seeks to achieve. This is more akin to the intention based approach.

What is more important than the classification is to try and answer the important question of what did the parties seek to achieve when they entered into the agreement. Did they intend to give an interest in the estate? Was the interest intended to bind third parties? Was there intention for successive owners to be bound by covenants?

The difficulty in distinguishing a lease from a license stems from the inadequacies of the criteria based approach as it has been found in several cases that the criteria are not always certain. -

Exclusive Possession

Street v Mountford hinged on whether the grant conferred exclusive possession. This reasoning was followed in Bruton v London Housing Quadrant where a transaction carefully described as a license was interpreted as a lease because the agreement gave exclusive possession hence creating a lease.

However this criteria based approach if applied strictly could lead to injustice and the courts have intervened to give effect to intention of the parties :-

Agreements containing sham devices purported to deny the occupier exclusive possession as exemplified in Antoniades v Villiers where it was held that an agreement provided for the separate occupancy of an unmarried couple in what was to be their home was held to be a tenancy because the separate agreements was clearly a sham device and the doctrine of pretence would be invoked whereby the courts would strike down the sham devices purporting to deny the occupier exclusive possession since it was clearly evident that the unmarried couple intended to have exclusive possession of the property.

Clear Channel UK Ltd v Manchester City Council in which there was no intention to grant exclusive possession and hence no lease.

Mehta v Royal Bank of Scotland – despite apparent exclusive possession, the occupier of a hotel room was said to have a licence, presumably because it is never intended to create a leaseof such a property.

Where there is no power to create a lease - Gray v Taylor where occupation of an almshouse did not indicate the existence of a lease since the charitable trustees who were landlords did not have the power to create a tenancy,

Exclusive possession does not necessarily connote a tenancy if there are other factors of greater significance to be considered such as absence of the four unities necessary – interest, title, possession and time to support a joint tenancy for the whole premises : AG Securities v Vaughn.

Norris v Checksfield where the right to occupy was given to an employee for the better performance of his duties and therefor not held to be a lease

Bostock v Bryant – act of generosity

Heslop v Burns – where there is no intention to create legal relations at all in a family situation

Fixed term

Leases must have a fixed beginning and a fixed end and be determined at the outset – this would define the term of years absolute laid down by S205(1)(xxvii) LPA 1925 and distinguish a leasehold estate from a fee simple absolution in possession, one of two legal estates according to S1(1) LPA 1925.

This was decided in Lace v Chantler where a lease for the duration of the second world war was held void as being of uncertain maximum duration.

Parliament has pushed for certainty of duration in leases – Validation of War Time Leases Act 1944 was enacted to that converted all war time leases to a term of 10 years with a proviso that either landlord or tenant could terminate the lease once the war ended by giving a month’s notice.

Similarly lease for life and lease until marriage are void but both are saved by S149(6) LPA 1925 which says that these leases are for 90 years and come to an end when the tenant dies.

Perpetually renewable leases are converted into terms of 2000 years : S 145 LPA 1925.

There has been some uncertainty with regard to periodic tenancies i.e. those which repeat indefinitely until ended by notice to quit being given by either party. This sits uneasily against the requirement of certainty of term since the maximum term cannot be predicted at the beginning of the periodic tenancy. There are three different types of reasoning :-

Ashburn Anstalt v Arnold was an attempt to break away from Lace v Chantler as it was stated that a periodic tenancy amounted to a lease on the basis that the term could be rendered certain by action of one of the parties.It was thought that there are good and sound commercial reasons for this. However this line of cases has been overruled by the House of Lords in Prudential Assurance v London Residuary Body (1992) 3WLR 279 that a leasehold term must be certain from the outset. The term relating to the ability of either party to determine a yearly tenancy on six months’ notice to terminate if there was road widening works to be undertaken was not enough. and as a result the tenancy had been lawfully determined. This brings the law back to Lace v Chantler and supports the argument that tit is becoming increasingly difficult to distinguish a lease from a license.

Premium/Periodical Payments

Under S205 of the LPA, rent is not an essential requirement of a lease. Although not a requirement, the courts have decided if a certain sum is paid regularly then it goes towards showing there was a periodic tenancy. In Bostock v Bryant the obligation to pay fluctuating utility bills could not be regarded as rent, being an uncertain sum. Therefor the issue of whether payment of rent determines a lease remains uncertain.

Coownership of Property

Coownership of property requires an understanding of concepts of joint tenancy and tenancy in common as this would determine how property would be passed under the right of survivorship.

Legally co-owned property would mean that the owners hold the legal title on trust for themselves as beneficial joint tenants : Goodman v Gallant. They would also hold the property as joint tenants in equity.

Williams v Hensman set out the three ways in which equitable joint tenancy can be severed into an equitable tenancy in common under the old rules of equity (preserved by LPA 1925 S36(2). They are in effect :-

a. alienation of her interest inter vivos by a joint tenant
b. mutual agreement
c. any course of dealing which shows that the interests of all were mutually treated as constituting a tenancy in common. This point would be especially relevant if one party orally agrees to sell the other party his or her shares.

Additionally severance will be effected if a joint tenant serves a notice of severance in writing satisfying S36(2) of the LPA - no requirement to sign. The written notice must contain an unambiguous declaration of an intention to sever with immediate effect; not at some time in the future; or an intention to ask the court to sever : Harris v Goddard and the notice must be given to the other party. LPA 1925 S196(3) equates service with giving and will be effective if left at the intended recipient’s last known place of abode : Re 88 Berkeley Road. In Lord Newborough v Jones the notice would have to be left in a way which could reasonably be expected to bring it to the attention of the recipient.

This follows the requirement of LPA S53(1)(c) a disposition of a beneficial interest would need to be in writing and therefor evidential requirement in writing would have to be produced to show that there was disposition of the interest to prevent fraud on the part of other parties.

Under a joint tenancy interests cannot be passed. However under a tenancy in common interests can be passed under the right of survivorship. Therefor where one party wants to pass on the property after death it is important to determine the act of severance. To claim an interest it will therefor be for the person claiming the interest from the dead person to show on a balance of probabilities that the joint tenancy was severed before death. If not the interest would rest with the other joint tenants.

The second line of argument would be where equity would recognize a severance by mutual agreement even where the agreement which causes the severance is unenforceable in its own right due to lack of formality : Burgess v Rawnsley. As per Lord Denning’s obiter, “It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common…”

If it can be established that there was severance and there existed a tenancy in common then the aggrieved party is sad to hold a beneficial interest in the property. As a beneficiary she will have a right to occupy the land under Trust of Land and Appointment of Trustees Act 1996 (TOLATA 1996) S12. An application of sale of the property could be made under TOLATA 1996 S14 but subject to S15 which sets out the matters to be considered by the court in hearing such an application :-

1. Intentions of the creator of the trust
2. Purposes of the trust
3. Welfare of any minor whose home is in the property
4. Interests of any secured creditor

Under the Trusts of Land and Appointment of Trustees Act 1996 S15(2) asking the court to use its discretion to have regard to the circumstances and wishes. There is wider discretion in favour of families under S15 The Mortgage Corporation v Shaire. However the situation might have been different if the interest in the land had been insignificant : Bank of Ireland Home Mortgages v Bell.

The rules with regard to the evaluation of the interests of parties were recently considered by the Court of Appeal in Oxley v Hiscock. If the claimant has an interest in the house, the value of that interest is ascertained at the time the property is sold. Accordingly, any increases or decreases in the value of the property are taken into consideration. If a party remains in occupation paying the mortgage, rates and other outgoings, he or she is credited with these expenses. Conversely, the party in occupation is debited with occupation rent for using the premises partly owned by the other. In Oxley the court identified three approaches thus:

1. The approach adopted by Lord Diplock in Gissing v Gissing and Nourse LJ in Stokes v Anderson, the respective shares of the parties are not to be determined at the time of the acquisition of the property but are left to be determined when their relationship comes to an end or the property sold. Thus, a complete picture of the whole course of dealing is available to the court in order to determine what is fair.

2. The approach suggested by Waite LJ in Midland Bank v Cooke - the court undertakes a survey of the whole course of dealing between the parties in order to determine what proportions the parties must be assumed to have intended from the outset for their beneficial ownership. Thus evidence of what the parties intended at the time of the acquisition may be inferred from the conduct of the parties while they were living together.

3. The suggestion put forward by Browne- Wilkinson V.C. in Grant v Edwards and approved by Walker LJ in Yaxley v Gotts - the court in its discretion makes such an order as the circumstances require in order to give effect to the beneficial interest in the property of the one party, the existence of which the party with the legal title is estopped from denying.

In Oxley the Court of Appeal expressed a preference for the third approach. The second approach was capable of leading to an artificial or fictional intention of the parties. Likewise, the same point could be made of the first approach i.e. at the time of the acquisition the parties’ intention was that their shares should be left for later determination.

Equitable Interest in Land

Equitable interests in land - Justin Santiago

An equitable interest in land is pleaded when the aggrieved party has no legal interest in the land and is not the registered proprietor with absolute title. Such equitable interests can be claimed based on different situations and under various mechanisms such as express trust, resulting trust or constructive trust. An implied trust of land does not require it to be manifested and proved by some writing signed by the person able to declare the trust or thus circumventing LPA S53(1)(b) as allowed under LPA S53(2). Alternatively it could be possible to claim a contractual licence or an interest under a right of occupation.

Express Trust

A declaration of trust in respect of land or any interest therein must be manifested and proved by some writing signed by the person able to declare the trust or by his will satisfying the requirement of LPA S53(1)(b). Where there is an express declaration of a trust the parties are to hold as beneficial joint tenants : Goodman v Gallant and the parties would have an equal share in the property. However an express trust can also be inferred from a common intention that the house would be a matrimonial home : Paul v Constance.

Resulting Trust

If there was unequal contributions towards the purchase price of the house and if there is an absence of evidence of a different common intention an interest as a tenant in common with shares in proportion to the contribution under a resulting trust arises : Bull v Bull.

An interest under a resulting trust requires a direct contribution to the purchase price of the land made at the time of its acquisition by the person claiming the beneficial interest : Midland Bank v Cooke, Hammond v Mitchell. In Midland Bank v Cooke the courts held that in the absence of express agreements all conduct would be surveyed to throw light on what shares were intended. In Hammond v Mitchell the conduct surveyed included any promises of the interest to be had, any sharing of money, whether there was any detriment.

Constructive Trust

A beneficial interest may be claimed under a constructive trust which is the formula through which the conscience of equity finds expression : Beatty v Guggenheim Exploration Co. In Westdeutsche Landes-bank Girozentrale v Islington London Borough Council Lord Browne-Wilkinson identifed a constructive trust as a trust ‘which the law imposed on the trustee by reason of his unconscionable conduct’. In Paragon Finance v D B Thakerar & Co Millett LJ stated that a ‘constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his beneficial interest in the property’.

However limitations have been imposed on the constructive trust. Three conditions were laid out in in Grant v Edwards :-

a. Evidence of a common intention that the claimant should have a beneficial interest
b. The claimant has acted to his/her detriment on the basis of the common intention
c. Equitable fraud on the part of the legal interest holders

Further evidence of common intention are found in Lloyds Bank v Rosset :-

1. Evidence of agreement in the form of express discussions between the parties and
2. Evidence of conduct which includes direct contributions to the purchase price and payment of mortgage installments

It was intended by Lord Bridge that the value of the claimant’s share was to be determined by reference to the two categories of evidence. But the courts have adopted a more liberal approach, namely, once an interest has been established under at least one of the categories of evidence, the court has a general discretion to do what it considers just and fair in the circumstances.
The quantum of the beneficial interest is measured by reference to these contributions.

The courts are more likely to take a broad brush approach in determining the shares of the parties : Drake v Whipp. This was affirmed in Oxley and Hiscock where the courts considered that when two persons contributed to the purchase of land conveyed into the name of one of them and where there was no agreement about the quantification of their respective shares, the court was entitled to take into account the whole course of conduct between the parties in determining what would be a fair share. In the case of Le Foe v Le Foe, the courts showed a greater willingness to regard indirect contributions as triggering a share. This shows a return to earlier decisions by the courts in cases like Hussey v Palmer and Gissing v Gissing (pre Rosset) which showed flexibility in giving an interest to the party which made indirect contributions allowing the legal owner to make mortgage payments.

If an interest can be claimed under any of the three mechanisms above the interest would exist behind a trust of land (formerly trust for sale) governed by the Trusts of Land and Appointment of Trustees Act 1996. Under a trust of land a purchaser would have to pay to at least two trustees. If the money is paid to two trustees, the occupiers’ interests will be overreached even if they were in actual occupation : City of London Building Society v Flegg.

The nature of a beneficiary’s interest under a trust of land is such that they are neither registrable nor overriding under the LRA 2002. Such interests behind a trust of land are not capable of protection on the Register. A Restriction may be entered, forcing overreaching; but the Restriction does not protect the equitable interest and no Notice may be entered.

License

If the aggrieved party has no beneficial interest in the property the claimant only has a licensee which is a temporary occupation permit. If the claimant is a bare licensee he can be evicted with reasonable notice. However there is a possibility that he can claim a licence supported by a contract, by constructive trust, by estoppel or by a license coupled with an interest.

If by contract the aggrieved party should be able to prove all the elements of contract law – offer, acceptance, consideration, intention to create legal relations are met. A contractual license would give the claimant a right to stay on the land as a tenant for life and has been argued to amount to an interest in land : Errington v Errington Wood however this was declared per incuriam in Ashburn Anstalt v Arnold where it was stated that a contractual license could never amount to an interest in land following the traditional view of King v David Allen and Sons Billposting Ltd and Clore v Theatrical Properties Ltd where it was decided that a contractual licence cannot be a proprietary right and therefore cannot bind a third party even if he has notice. A contractual licence affects only parties who have entered into the agreement and should not be capable of binding third parties. The most that the agrieved party could claim was a breach of contract and therefore entitled to compensation for the loss of the expectation : Baker v Baker.

The other scenarios sees equity stepping in by way of a constructive trust to protect a licensee from third parties in cases where the purchaser was not bona fide : Binions v Evans. In this case a life tenancy was imposed by a constructive trust that would bind third parties. In this way the licences are becoming more difficult to distinguish from leases in terms of the rights which they confer upon the holder and has been applied equally to both unregistered land : Binions v Evans and registered land : Lyus v Prowsa Developments. The most striking case of a court treating a licence as effectively a property right is probably Bruton v London And Quadrant Housing Trust1977, where the House of Lords held that a lease could be granted out of a licence.

The third option is for the aggrieved party to claim a license arising out of estoppel and this would amount to an interest which would bind third parties and which can be protected by way of notice. Estoppel can be invoked if it can be coupled with a right that A may have which could be a rent free tenancy if there is continuous occupation : Greasley v Cook. He would have to prove that there was a representation made to him, there was reliance/change of position and there was detriment / unconscionable disadvantage. The question would be whether it would be conscionable to allow the sellers to insist on their strict legal rights : Taylor Fashions Ltd v Liverpool Victoria Trustees.

The purpose of the doctrine is to give rise to a number of remedies both proprietary and non proprietary and there is great flexibility in granting remedies to achieve such results as it thinks fair and reasonable in the circumstances. This could be a license to remain on the land : Inwards v Baker or even an interest in the land : Pascoe v Turner. However the particular interest to be awarded must still be decided by the judge according to all the circumstances of the case. It is difficult to find any consistent principle running through the cases. The modern approach to proprietary estoppel and how to give effect to the equity was considered in depth in the two following cases : Campbell v Griffin – repayment of any detriment incurred and Jennings v Rice – there must be proportionality between the expectation and the detriment.

As with the constructive trust, the inspiration behind proprietary estoppel can be seen in equity’s concern to prevent unconscionable conduct the difference is the central element for proprietary estoppel is detrimental reliance. However there are several differences between the two:-

1. The constructive trust has a long established use to impose a trust in situations unrelated to the principle of detrimental reliance

2. Secondly a constructive trust means by definition that a person has an equitable share in the property held by another. In a sense, the term “constructive trust” is used to describe both the legal mechanism by which a trust property is created but also the trust interest thus created. On the other hand, proprietary estoppel is a mechanism which if established may give rise to proprietary interests other than a trust.

A final option is for the aggrieved party to claim a license coupled with an interest and the licence exists to facilitate the enjoyment of the interest.

If it can be established that Olga has an interest either under enforceability of a contractual license by a constructive trust or an estoppel it would bind the buyer if it had been protected on the register or if it was supported by actual occupation as an interest that overrides under Schedule 3 Para II of the LRA 2002 (formerly S70(1)(g) which will protect Olga’s interest upon sale. If such cases any buyer or mortgagor would take the property subject to the aggreived party's interest unless it was not obvious that the aggrieved party was an occupier with reasonable inspection of the property.

Selling Land - Equitable Title and Legal Title

Selling Land - Justin Santiago

Selling land requires two stages – a contract which transfers the equitable title followed by the transfer of legal title (conveyance).

Law of Property (Miscellaneous Provisions) Act 1989 S2 states that a contract for the sale or other disposition of an interest in land only transfers the equitable title and must fulfill 3 requirements “-

- it must be in writing
- it must incorporate all the terms in one document
- must be signed by or on behalf of each party to the contract

The next requirement is that the conveyances of a legal estate by way of sale must be by deed LPA S52(1) which transfers the legal title. Under the Law of Property (Miscellaneous Provisions) Act 1989 S1 - a deed is defined as a document which :-

- makes it clear on its face that it is a deed requires that the word ‘Deed’ appear on the document
- is signed and witnessed
- is delivered

Registered Land

How has LRA 2002 changed land law. Discuss. - Justin Santiago


The Land Registration Act 2002 was introduced in response to the Law Commission and HM Land Registry report, Land Registration for the Twenty-first Century (2001).The Act simplified and modernised the law of land registration. A key change under the new Act is that it is a move from a system of registration of title to one where the fact of registration itself gives a person title to the land. The act also facilitated the introduction of e-conveyancing and made the register reflect a more accurate picture of a title to land, showing more fully the rights and subsidiary interests that affect it.

The Act made some major changes to the law regulating registered land. Specifically, it:

1. Increased the list of events that force compulsory registration and voluntary registration;
2. Enabled shorter leases to be registered;
3. Changed the system of protection of third party rights; and
4. Provided for electronic conveyancing.

The increased list of events that force compulsory registration and voluntary registration would enable more land to come under registered title and reduce the volume of unregistered land conveyancing.

Compulsory registration - if a sale had been completed after 2003, according to LRA 2002 S4, any transfer of an unregistered freehold estate or a leasehold estate in land with more than seven years to run will be subject to compulsory registration. Transfer is broadly defined to include sale, gift, court order or the creation of a first legal mortgage. Originally under LRA 1925 registration of title was only compulsory on conveyance on sale of a fee simple and a grant of a lease for more than 21 years or assignment of a lease with more than 21 years to run.

Voluntary Registration

Under LRA 2002 S3 voluntary registration is encouraged for five types of legal estate which may be registered with their own title :-

1. Freehold
2. Legal lease with over seven years to run
3. Rent charge
4. Franchise (Right granted by the Crown)
5. Profit a prendre in gross

Protection of third party rights

The LRA 2002 attempted to more clearly reflect the true nature of the rights in the land concerned and to depend less on the doctrine of notice. Under registered land, the doctrine of notice supposedly did not have any application due to the fact that the system of registration is based on the mirror principle which reflects all the interests in the land. However there existed interests called overriding interests. Overriding interest loomed large in the scheme of LRA 1925 and although were not registrable protected rights of third parties representing a crack in the mirror and provided the most common pitfall for a purchaser of registered land and were listed in LRA 1925 section 70(1) and include the following 4 categories :-

- S70(1)(a) easements and profits including equitable easements
- S70(1)(f) rights of an adverse possessor
- S70(1)(g) rights of person in actual occupation – date of transfer of title : Abbey National BS v Cann
- S70(1)(k) leases granted for a term not exceeding 21 years

Under LRA2002, the role of overriding interests had been substantially reduced and was replaced by interests that override for which registration was strongly encouraged. Some interests that have been removed are equitable easement whether expressly or impliedly granted S70(1)(a) and the rights of adverse possessors unless accompanied by actual occupation S70(1)(f). The LRA 2002 also reduced the considerable burden to purchasers of the rights of persons in actual occupation under S70(1)(g) where :-

1. Enquiries have been made of the right-holder and he has failed to disclose the right in circumstances where he was reasonably expected to disclose and
2. The right holder’s actual occupation is not obvious on a reasonable inspection of the land and the person bound did not have actual knowledge of the interest

Under the new regime, there are two new categories of interest :-

Schedule 1- a broad category of interests which override on first registration of title that is will override the estate of the person who first registers when the land ceases to be unregistered land including :-

- leases up of to and including seven years
- the rights of occupiers – Schedule 3 Para 2
- easements and profits
- local land charges

Schedule 3 – a shorter list of interests which override on a later disposition of registered that is a sale of land after it has been registered :-

- leases up to and including seven years
- the rights of occupiers
- legal easements actually known to exist by the purchaser, obvious upon a reasonably careful inspection of the land or exercised within one year prior to the date of the disposition in question – overulling Celsteel v Alton
- profits

Section 71(b) imposes a duty for the person applying for registration of a disposition to disclose information about any rights of which he is aware which might fall within the scope of Schedule 3 and thus override. Protection by a notice on the register actually removes overriding status S29(3). Thus the number of overriding interests should be diminished as more dispositions are made under the new legislation with more interests coming onto the register.

Electronic Conveyancing

Electronic conveyancing is set out in Part 8 of LRA 2002 and provides for the conveyancing procedure to be carried out online. The act of creation will be the act of registration and this will be electronic.

The objective of electronic conveyancing is :-

1. A paperless system
2. No registration gap
3. A notional and viewable version of the register as amended to reflect proposed contractual terms
4. Draft documents verified against the title register and requisitions raised there and then as the transaction progresses
5. Quick identification of encumbrances
6. Possibility of simultaneous exchange of contracts or completion instantaneously

Problems

However problems still exists notably in the following areas :-

1. Interests in registered land may sometimes fall into one class and sometimes into another ex. someone with a interest that is neither registrable nor overriding is in actual occupation may protect his interest by entry on the register or rely on his occupation as entitling him to an overriding interest.

2. Interests that are neither registrable nor override allows the doctrine of notice to continue to apply in the case of registered land. These third type of interest formerly known as minor interests now termed third party rights which need to be protected by entry on the register comprising interests in unregistered land that would be registrable under the LCA and those that comprise interests of beneficiaries under trusts of land and strict settlements that were capable of being overreached under LRA 2002 S28-30. A new form of restriction will perform the functions of the current restriction and inhibition and a new form of notice will combine the functions of the current notice and caution. A restriction may be entered, forcing overreaching but the restriction does not protect the equitable interest and no notice may be entered.

2. Also short leases granted for period not exceeding seven years also bind any disponee of a registered and thereby detract, at least marginally, from the completeness of the mirror image which the Land Register is meant to reflect.

3. A periodic tenancy for less than 3 years is legal without a deed or document and is not registered anywhere.

4. A beneficial interest arising under a trust of land may bind a purchaser as an overriding interest even though it is not protected by entry on the register. A beneficial interest arising under a trust of land may be overreached if the purchaser pays to two trustees or a trust corporation whether they are in actual occupation or not. Thus a trust of land neither protects purchaser or interest holder and the LRA 2002 does not cater this type of situation adequately. Thus a person who has negligently failed to protect his interest is protected while the purchaser is bound to make much more extensive enquiries

5. The triggers for compulsory registration do not include a grant of a lease for exactly seven years and transfer of existing leases with less than 7 years left to run

6. Spouse’s right of occupation must be protected by entry on the register although a spouse may incidently have another interest which is capable of overriding the register such as a constructive trust interest.