The Principle of Overriding Interests, Leases and Rentcharges - Coursework Example

This essay will consider the principle of overriding interests, leases and rentcharges. Having discussed the application of each it should then be possible to advise the parties with regards to any rights they might have over the property. Overriding interests Overriding interests are interests that need not be on the register but have the ability to bind the new owner. In general terms all interests in land should be entered on the register in order to protect those interests. Where such interests are not recorded the court can that the new purchaser will not be bound by unregistered interests. The principle of overriding interests was introduced to assist those whose interests would not reasonably expect to be registered. This includes things such as short term leases, legal easements1, as well as squatter’s rights and the rights of persons in actual occupation2. Overriding interests are covered under s70 of the Land Registration Act 1925, which has now been replaced by the Land Registration Act 2002. Overriding interests are now dealt with under sch 1 and 2 of the 2002 Act. The case of Williams & Glyn Bank v Boland was one of the first cases to adopt this principle. In this case a wife was able to claim an overriding interest in the property on the basis that she had made a substantial contribution to the purchase and was in actual occupation. This shows that in some cases the courts have regarded the actual occupation of the applicant to be treated as an overriding interest3. In situations where a person is in actual occupation and can demonstrate an interest in that property the court are unlikely to interfere with their right to remain in the property. Any attempt to do so would entitle that person to apply for proprietary estoppel on the basis of their contribution to the property4. Proprietary estoppel was established in the cases of Willmott v Barber (1880) 16 Ch D and Ramsden v Dyson (1866) LR 1 HL 129 where five essential elements were highlighted that had to be satisfied before a legal owner would be prevented from asserting his legal rights. These five elements consisted of the plaintiff having expended some money or having done some act on the faith of their mistaken belief that they would acquire an interest in the land5; they must have made some mistake as to their legal rights; the defendant must know of the existence of his own right which is inconsistent with the plaintiffs rights; the defendant must be aware of the plaintiffs mistaken belief of his rights; and lastly the defendant must have encouraged the plaintiff to spend money in the way they have or have encouraged them to act in the way they did6. Leases To be able to advise the parties in this matter it is necessary to examine the law on leases and tenancies. Leases that are to be for less than three years are not required to be registered against the property thereby not triggering a registration of title7. For the courts to infer that a lease has been informally created the lease cannot be for more than three years8, the rent payable must be the market rent for such property and the tenant has to take possession immediately9. Where a lease is in excess of seven years this would need to be registered on the deeds10. Leases of between 3 years and 7 years do not need to be registered; however, such leases would only be protected if the lessor had entered these on the register11. In law a lease is deemed to have been granted where the leaseholder has been given exclusive occupation of the property. In general terms no services will be included with leased properties. Following the creation of a lease the tenant would have full ownership rights of that property until the expiry of the lease12. A lease is distinguished from a licence on the basis of which party has control over the property. This was explored in Shell-Mex & B P Ltd v Manchester Garages Ltd [1971]13 where the court held that the agreement would be regarded as a licence if the landlord remained in control. The Land Registration Act 2002 s3 allows for the voluntary registration of unregistered land whilst s4 of the Act lays down the regulations with regard to when registration is compulsory. Land Registration on transfers became compulsory from 1990 onwards. At present the law requires registration when the qualifying estate is transferred, where the unregistered legal estate is transferred under s171A of the Housing Act 1985 or where a grant of land is given to another for a term of year’s absolute of more than 7 years and there has been consideration given for this transfer. Such registration is also required when a lease is granted or a mortgage is secured against the estate. S5 gives the courts extra powers to require registration in respect of such things as rentcharges or profit a prendre. Where a duty to register is required it is the duty of the estate owner or his successor in title to ensure that the registration is done14. Non-compliance with this duty renders the transfer or grant void and the new owner or grantee would lose the right to possess the land15. Under the Law of Property Act 1925 ownership and incumbrances are defined as estates and rights claimed over the land are classed as interests. Ownership is listed as the fee simple absolute in possession16 whilst incumbrances are listed in three categories commercial or family, legal or equitable and non-registrable or registrable17. Incumbrances that have a commercial use are generally classed as legal rights. These legal rights are usually classed as good against the whole world irrespective of notice to the third party that these are in existence or registration. The rights that fall into the category of good against the whole world are easements18 or profits a prendre19, rentcharges20 and legal charges21. Rentcharges Rentcharges are governed by the Rentcharges Act 1977. Rentcharges are defined as an annual or periodic sum that is charged on land or issued from the land. Under s2 of the 1977 Act new rentcharges cannot be created from the start of the 1977 Act, unless the charge has been created for the purpose of contributing towards the cosy of services or maintenance of covenants22. The court will only allow such charges if they benefit the land and the amount charged is deemed to be reasonable. In Orchard Trading Estate Management Ltd v Johnson Security Ltd [2002]23 the rentcharge was allowed on the basis that the charge related to the maintenance and management of the estate. The court found that the amount charged was reasonable and the rentcharge payments benefited the land. Conclusion Having considered all of the above it is now possible to advise the parties with regard to their rights over the property. In the case of Ronaldo he would have to rely on the principle of overriding interests in order to protect his right to remain in the property. as he has made to financial contribution to the property at all he would be reliant on the fact that he is in actual occupation. Unfortunately as he has not paid towards the property he cannot claim a beneficial interest in that property and would have to rely on the comments made by his sister, to prove that she intended him to have a beneficial interest in the property. if he had contributed financially he could have relied on proprietary estoppel to prevent the house from being sold. However, this does not apply in this case and Ronaldo would have to hope that the court would infer a beneficial interest from the letter signed by his sister. When considering the position with Nicolas it is necessary to consider whether the lease can be regarded as protected under the principle of an overriding interest as it has not been entered on the register. As he has had the lease for more than 3 years he would not be entitled to the automatic protection afforded to those with leases that cannot be entered on the register. If the lease had been for more than 7 years it would have had to been entered on the register to protect his rights. Nicolas falls into the middle category of leases, and as such the courts would be free to determine that the lease is not valid as it has not been protected by registration. This would mean that the new owner would take the property free of any rights asserted by Nicolas. Nicolas would only be able to rely on the principle of an overriding interest if the lease had been for less than 3 years. Finally, with Patrice, the charge for the maintenance of the grounds is likely to be regarded as a rentcharge. As the charge benefits the land and is for its upkeep, Patrice is likely to be bound by this agreement, unless he can demonstrate that the amount charged is unreasonable. As the amount is £10,000 per year it may well be that the court would hold that the amount was unreasonable, which might mean that Patrice would not have to pay this. Bibliography Ashburner, W, Principles of Equity, 2nd Ed, 1933, Butterworths Beale, HD, Bishop, WD, Furmston, MP, Contract Cases and Materials, 3rd Ed, 1995, Butterworths Bryn Perrins, Understanding Land Law, 3rd Ed, 200, Cavendish Publishing Ltd Civil Procedure, The White Book, Volumes 1 & 2, 2002, Sweet & Maxwell Cockburn, T & Shirley, M Equity in a Nutshell, 2005, Lawbook Co Dixon, M. Modern Land Law, 5th Ed, 2005, Cavendish  Gravells, N P, Land Law Text and Materials, 2nd Ed, 1999, Sweet and Maxwell Gray, K & Gray, S, Elements of Land Law, 4th Ed, 2005, Oxford University Press Harris, P, An introduction to Law, 4th Ed, 1995, Butterworths Hayton, Commentary and Cases on The Law of Trusts and Equitable Remedies, 11th Ed, 2001, Sweet & Maxwell Jill Poole, Casebook on Contract Law, 6th Ed, 2003, Oxford University Press Pearce & Stevens, The Law of Trusts & Equitable Obligations, 2nd Ed, 1998, Butterworths Rose, FD, Statutes on Contract, Tort & Restitution, 10th Ed, 2000, Blackstone’s Thomas, M, Statutes on Property Law, 8th Ed. 2001, Blackstone’s Transfer of land: The Law of Positive and Restrictive Covenants (1984) Law Commission No 127 Treitel, G H, The Law of Contract, 10th Ed, 1999, Sweet and Maxwell http://www.landregistry.gov.uk http://www.propertylawuk.net www.opsi.gov.uk QUESTION 2 CRIMINAL LAW In April 1998, the Home Secretary asked the Law Commission: “As a part of their programme of work on dishonesty, to examine the law of fraud, and in particular to consider whether it: is readily comprehensible to juries; is adequate for effective prosecution; is fair for potential defendants; meets the needs for developing technology including electronic means of transfer; and to make recommendations to improve the law in these respects with all due expedition. In making these recommendations to consider whether a general offence of fraud would improve the criminal law.” Written answer, Hansard (HC) 7 April 1998, vol 310, cols 176-177. Cited in The Law Commission, Fraud (Law Com no 176, 2002) [1.1] Discuss to what extent, if at all, these objectives are achieved by the Fraud Act 2006. According to the Law Commissioners responsible for compiling the report (Law Com No 176, 2002), from their research they were able to conclude that the introduction of a general fraud offence would assist in criminal law proceedings. Their reasoning behind this was that the system in operation at that time was such that the available charges were too numerous and none of the charges seemed to fully encapsulate the meaning of fraud. It was the belief of the commissioners that a change in the way in which fraud offences could be charged would assist the jury by giving them a straightforward definition of fraud. The commissioners felt that this would help the jury to concentrate more on whether the facts fit the crime as charged, rather than the present system where the definition was so obscure that key time was wasted in trying to define the depth of the charge. The commissioners also felt that in many cases the defendant had been wrongly charged, and that if the definition had been more narrowly confined it would be more likely that the correct charge would be issued in the future. The commissioners believed that changes to the Act would make the law in this area simpler, which could lead to lesser offences of fraud, as the commissioners felt that there might be occasions where the person committing the fraudulent act might not necessarily realised that the act was fraudulent. In an article written by Summers (2008), he comments that the simplification of the offence of fraud has possibly gone too far, making the observation that the ‘section 2 offence seems likely to be capable of the most widespread use when charging, precisely because it is the broadest, but has it gone too far?’ Summers highlights how under s2(5) ‘ a representation can arise before it is released from D’s exclusive control, for example if he typed a false representation into a computer, intending to send it later. He will still have an intention to gain, eventually, and so would be guilty of the full offence.’ Since the 2006 Act has only recently come into force very few cases have actually been heard in court using the new Act. This is partly due to the complexity of fraud cases which generally take longer to compile for the court. Two cases that have been tried under the Act include Kensington International Limited v Republic of Congo and others [2007]24 and Attorney General’s Reference (no 6 of 2008) [2008]25. In the first of these the court accepted that bribery could amount to fraudulent activity despite the fact that previous case law refuses to accept bribery as a crime of dishonesty. This demonstrates how the broadness of the charging element of the Act could lead to many being charged under the Act for offences that would previously not have been regarded as fraudulent. In the second case the judgement refers to s51 of the 2006 Act, which in fact does not exist. The Act only contains 16 sections and so therefore it is uncertain as to which section the judgment should specifically refer to. According to Summers (2008) the CPS have reported an increase of over 40% of cases charged under the 2006 Act. Prosecutors claim that this demonstrates that the changes are working, however, Summers argues that the increase is due to the widening of the categories of fraud under the Act. Given the lack of adequate case law it is impossible to judge whether the Act will achieve its objective, however, initial case law seems to suggest that the Act is likely to create more problems than its solves. Bibliography Law Commission Report No 176 (2002) Summers, B, The Fraud Act 2006: Has It Had Any Impact? 24 November 2008 Amicus Curiae Journal of the Society for Advanced Legal Studies, Issue 75, Autumn 2008, available at http://www.mondaq.com/article.asp?a Read More