Complex Issues under Property Law - Essay Example

?The factual scenario raises complex issues under property law, which I shall deal with in turn Whether Barry was en d to remove the sign Whether or not Barry was entitled to remove the sign is dependent on whether the sign falls within the legal definition of land1. Section 205(1) (ix) of the Law of Property Act 1925 (LPA2) defines “land” as: “any tenure and mines and minerals, whether or not held apart from the surface buildings of parts of buildings....and other corporeal hereditaments, also a manor, an advoswson, and an easement, right, privilege, or benefit in, or over, or, derived from land”3. Moreover, in any contract for the sale of freehold land, there is a presumption that the contract will automatically include everything which legally constitutes “land”4. Accordingly, whether or not Barry was entitled to remove the sign depends on whether the sign can validly constitute land or whether it constituted a chattel, which doesn’t fall within the scope of “land”5. The classic definition of a fixture is anything which is physically (but not necessarily legally) removable and makes a permanent improvement to the land6. Conversely, a chattel is an item brought onto the land, which doesn’t become part of the land7. The general rule regarding fixtures is that whatever is attached to the soil becomes part of the soil8. In determining whether the sign is fixture or a chattel, it will be necessary to apply the two factual tests as extrapolated by Blackburn J in the case of Holland v Hodgson9, namely the degree of annexation test and the purpose of annexation test. The degree of annexation test requires that the object be fastened to or connected with the land in some way for there to be a presumption that it is a fixture10. For example, in the case of Hamp v Bygrave11 it was held that patio lights that were attached to the wall of the house were fixtures. Moreover, if an object is not fixed, but merely rests on its own weight, there will be a presumption that it is a chattel12. If we apply this by analogy to the current scenario, the sign had hung from a post, which if resting on its own weight will lead to a presumption of it being a chattel. However, the presumption can be rebutted on the basis of the purpose of the annexation test. In the case of Elitestone Limited v Morris13 Lord Clyde asserted that this test involved a consideration of “the purpose which the object is serving and not the purpose of the person who put it there14”. As such, the test is objective and is concerned with the intention of the person who put the object on the land. It further requires the overriding purpose of the object being the enhancement and enjoyment of the land to make a permanent improvement to the land, in order for it to be a fixture15. If we apply this by analogy to the current scenario, we are not aware of the terms of the contract of sale between Barry, Rachel, Monica, Joey and Phoebe. If the contract expressly provided that the sign would remain as part of the land as a condition of sale, then removal by Barry will be in breach of contract. Alternatively, if the sign is part of the land, Barry did not have a right to remove it and Rachel, Monica, Phoebe and Joey would be able to request a return of the sign16. However, if the sign rests on its own weight, then the parties will have to rebut the presumption by demonstrating that the sign was intended to enhance the enjoyment of the land. If this can be established, the sign will form part of the land and the parties will be able to recover the sign from Barry. 2) Whether Alan is entitled to remain in Unit 2. The extent to which Alan’s rights are enforceable will depend on the nature of his rights and the enforceability of interests under the Land Registration Act 2002. If we firstly consider the factual scenario, Alan argues that he has been using Unit 2 since 2007 and pays a yearly “occupation fee”. This creates a degree of ambiguity as to whether his alleged right to use the property constitutes a licence or a lease. If the living arrangements point to rights under a lease, it will then be necessary to consider whether the interest takes effect as a legal or beneficial interest. With regard to whether or not the occupation arrangements constitute a lease or a licence, the general principle of law is that unless an individual occupying another’s land has exclusive possession, they will be a licensee and not a tenant17. In the current scenario, it appears that Alan has had exclusive occupation of Unit 2, however the other key-defining factor of a tenancy is the offer and acceptance of exclusive possession for a term at “rent18” and we are not aware of the exact terms of his alleged agreement with Barry since 2007. The fact that he has been using Unit 2 since 2007, will point in favour of there being a lease. The distinction between a lease and a licence was formulated in the leading case of Street v Mountford19, where Lord Templeman asserted that the general test for determining a tenancy was to firstly consider the question of “exclusive possession” as a starting point. Lord Templeman further stated that the existence of “exclusive possession” was essentially a question of fact and that the intention of the parties was irrelevant20. Accordingly, if Alan can establish that in fact, the occupation arrangement resulted in the grant of exclusive possession, the arrangement will constitute a lease and not a licence. As Smith comments21, with regard to rented accommodation an occupier in residential accommodation is either a lodger or a tenant22. In Street v Mountford23, Lord Templeman asserted that the facts would point to a lodger if the landlord provides attendance or services that required the landlord to exercise unrestricted access to and use of the premises. However, in practice many landlords have not wanted to provide the services required but have used the shield of lodger as a route to indicate a licence as highlighted by the decision in Aslan v Murphy24. There does not appear to be any such requirement here and no such services were provided to Alan from the facts provided. The relevant consideration is whether Alan’s occupation satisfied the requirements of “exclusive possession” as set out in Street v Mountford. Indeed in the Street case itself it was asserted that the relevant consideration was to look at whether the arrangement amounted to a tenancy in practice notwithstanding the label given to the arrangement by the parties25. Accordingly, whilst it is not clear as to whether the agreement constituted a licence or a lease, the length of occupancy and the yearly fee will operate in favour of there being a lease. Alternatively, the lack of exclusive possession of the entire Unit 2 will operate in favour of there being a licence. Ultimately, Alan will have the burden of proof. If the terms of his use of Unit 2 constitute a licence, then Rachel, Phoebe, Monica and Joey will be able to terminate upon giving notice. Alternatively, if his arrangement constitutes a lease, the issue of contention will be whether this is binding on the purchasers. The Land Registration Act 200226 (LRA) prescribes specific requirements regarding registration of third party rights and the extent to which such rights bind a purchaser’s interests, distinguishing between third party rights requiring registration and overriding interests27. As a general principle, a prior estate has priority over the buyer subject to the specific exceptions in the LRA. Under the LRA, if a right is subject to the express requirement of registration in order to qualify for priority (and not an overriding interest under Schedule 3), failure to register will forfeit priority and the right will not bind a purchaser on disposition28. In order for a lease to be valid, the case of Lace v Chantler29 asserts that it must be for a determinable period (in the case of periodic tenancies/recurring tenancies) or a specified period of time. However, with regard to the current scenario, it is important to mention at the outset that the lease if valid may not constitute a legal lease and may take effect in equity30. We are not told whether the property is registered or unregistered. In the case of unregistered land, a legal lease must be created by deed if longer than three years but not more than seven. In the current case the agreement has been in operation since 2007 and therefore can be created without formalities31. There does not appear to be any written agreement and therefore whilst not a valid lease in law, Alan may try and argue that it is valid in equity as a properly construed contract for the creation of a lease as “equity treats as done that which ought to be done”. However, in order to be valid, such a contract would be required itself to be signed in writing32. There does not appear to be any written contract, which would further negate Alan’s claim to an equitable lease. However, if Alan could establish rights under an equitable lease, equitable leases are not overriding per se and in order to be enforceable he would have to establish that he was in actual occupation and that Phoebe, Monica, Rachel and Joey had knowledge of this. Schedule 3, paragraph 2 of the LRA protects overriding interests of those with proprietary rights who are in “actual occupation”33. The definition of “actual occupation” varies according to the facts of each individual case and the nature of the premises. Schedule 3 of the LRA expressly requires a purchaser to have actual knowledge and that occupation must have been “obvious on a reasonable and careful inspection of the land at the time of disposition34”. Furthermore, it has been held that whilst actual occupation must be given its natural meaning, the LRA unequivocally requires it to be reasonable discoverable35. Moreover, in Chhokar v Chhokar36 it was asserted that the actual knowledge requires occupation to be reasonably discoverable and it is relevant to consider symbolic presence of occupation. Furthermore, although uninterrupted presence is not a mandatory requirement, a fleeting presence is not sufficient either, and the relevant consideration is the effect of the temporary absence, the length and purpose of absence, symbolic physical evidence of continued residence and evidence of an intention to return37. If we apply this to the current scenario, it is evident that the parties did not have knowledge of Alan’s rights prior to purchase. Moreover, it doesn’t appear that the terms of his occupancy were reasonably discoverable within the LRA definition. As such, it is highly unlikely that Alan’s purported rights to use Unit 2 will be enforceable. 3) Can Monica Insist on allowing Alan to live in farmhouse? With regard to property ownership in law, section 1(6) of the Law of Property Act 1925 (LPA) asserts that “a legal estate is not capable of subsisting or of being created in an undivided share of land”. Accordingly, the sole mechanism for legal co-ownership of land is by joint tenancy. A valid joint tenancy in law must satisfy the ancient requirements of the four unities, namely; unity of possession, unity of interest, unity of title and unity of time38. Unity of possession requires that each co-owner be entitled to possession of the whole and the possession requirement distinguishes legal co-ownership from separate ownership of parts of the land. With regard to unity of interest, all joint tenants must have interests of the same kind and quantum and it is impossible at law for one tenant to have a different size share to the other tenant and consequently, if a joint tenancy is severed the shares as tenants in common will automatically be of the same size39. It has also been propounded that the unity of interest rule explains the requirement that joint tenants must act together in order to bind the land40. The unity of title requirement demands that the proprietary interests derive simultaneously from the same title (usually by deed or will). The fourth requirement of unity of time is arguably the weakest requirement41. The essence of this requirement is that each of the joint tenants must vest at the same time, which can be problematic in practice42. The use of the trust has become more common to circumvent this requirement and it is questionable whether unity of time is now a relevant requirement in the modern co-ownership model43. The joint ownership model of joint tenancy can be rebutted by an equitable presumption of a tenancy in common44. Lord Hatherley LC in Robertson v Fraser45 asserted that an express agreement to create a joint tenancy or indeed anything “which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy46”. In the current scenario, as Monica, Phoebe and Joey state the property to be held on trust for Rachel’s interest, the presumption of joint tenancy is rebutted and the property is held as a tenancy in common. At this point, the Trust of Land and Appointment of Trustees Act 1996 (TLA) imposes a trust of land, which substitutes the previous system of trusts for sale. Under the TLA provisions, all parties will have the legal estate as joint tenants on trust for themselves and tenants in common in equity. As trustees all four parties have absolute power in the Property, which means that they can effectively sell, lease or mortgage the Property and therefore prima facie Monica can allow Alan to continue staying in the farm house. However, under the general law of trusts, any such action must be in the best interests of the trust and have regard to the rights of the beneficiaries47. 4) Can Monica force a sale? As the property is a trust of land, only Monica, Phoebe and Joey can legally overreach Rachel’s interest under section 2(2) of the LPA 1925 or alternatively offer to buy her share. If Rachel’s interest in the Property was overreached or bought out then Monica, Phoebe and Joey would still hold the Property as tenants in common under the trust of land. Additionally, under the TLA provisions section 14 provides that “Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section”. Moreover, section 15(1) of the TLA provides wide discretion to the courts and states that “the matters to which the court is to have regard in determining an application for an order under section 14 include: (a) the intentions of the persons who created the trust, (b) the purposes for which the property subject to the trust is held. (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land…as his home, and (d) the interests of any secured creditor of any beneficiary”. Therefore, Monica could make an application to the court for a sale order as a trustee however whether or not a sale would be ordered would depend on her intention, the other trustee’s interests and Rachel’s interest as beneficiary. However, the inherent flaw of section 15 is that there is no guidance given with regard to the importance to be attached to the various factors set out when the court is exercising its powers. This is further compounded by the inconsistency in judicial decisions. Nevertheless in Bank of Ireland v Bell48 it was commented obiter, that there should be a flexible interpretation of section 15. Peter Gibson asserted that: “The 1996 Act, by requiring the court to have regard to the particular matters specified in section 15 appears to me to have given some scope for change in the court’s practice. Nevertheless a powerful consideration is and ought to be whether the creditor is receiving proper recompense for being kept out of his money, repayment of which is overdue.49” If we apply this to the current scenario, in light of the principles of the TLA and the rights of Monica, Phoebe and Joey and Rachel in the property, it is highly unlikely that she will succeed in an attempt to force a sale of the land. Question 2: In what circumstances can equitable joint tenants result in severance of the joint tenancy? Section 1(6) of the LPA 1925 provides that a legal estate cannot be held in undivided shares and Section 34(2) of the LPA provides that legal title can vest in a maximum of four persons and that if held by more than one person, constitutes a joint tenancy. Furthermore, the important distinction between an equitable joint tenancy and a tenancy in common is the right of survivorship in equitable joint tenancies. Additionally, under section 36(2) of the LPA 1925, only an equitable joint tenancy can be severed not a legal joint tenancy. The classic case of Williams v Hensman50 establishes a starting point for determining severance of a joint tenancy: “A joint tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share……..Secondly a joint tenancy may be severed by mutual agreement. And, in third place, there may be severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.51” An act operating on a joint tenant’s share is the common law form of severance and if any of the four unities cease to exist, then the joint tenancy must terminate52. Therefore, leaving a property will not in itself sufficient to shatter unity of possession as possession is also required for a tenancy in common. Unity of possession is only shattered if the co-owners vest parts of the land in the co-owners by virtue of partition53. A prime example would be if a tenant wrote to the other co-owners claiming that they wanted to be compensated for their share in the property54. On this basis it would be arguable that one of the co-owners severed the joint tenancy through course of dealings. This third limb of severance has created controversy with the interpretation of common intention to sever the tenancy55 however the general principle applicable is Walton J’s approach in Nielson-Jones v Fedden56, where it was held that course of dealing should be considered as a basis for implying a common intention to sever. The case of Gore & Snell v Carpenter 57further asserted that the test was stated to have been satisfied where “over the years the parties have dealt with their interests in the property on the footing that they are interests in common”. In applying these principles in practice, the result is that conduct will most likely satisfy the requirements of acting on a tenant’s share and through course of dealings for the purpose of severing the joint tenancy with the result that the co-owners would hold the property as tenants in common in equity58. Accordingly, the result would be that all four parties would have a defined share of the property under an equitable tenancy in common. As stated above, the presumption on severance of a joint tenancy is that the tenants in common will have equal shares in the property unless any of the parties can rebut this with evidence relating to their contributions to the purchase price59. This was held to be a relevant consideration in the case of Westdeutche Landesbank Girozentrale v Islington LBC60, where Lord Browne-Wilkinson asserted that “where A makes a voluntary payment to B or pays for the purchase price which is vested in…….. the joint names of A and B, there is a presumption that ……….the property is held on trust in the case of a joint purchase by A and B in shares proportionate to their contributions.” Furthermore, the case of Drake v Whipp61 also highlights that consideration is given to post-acquisition contributions to the property and whole course of conduct in determining the measure of each tenant’s share in the property. Moreover, in the absence of any other information to the contrary regarding contributions, it is presumed that the parties will equal shares in the property under the tenancy in common62. BIBLIOGRAPHY K Gray & S. F. Gray (2009) Elements of Land Law, Oxford University Press 4th Edition J MacKenzie & M Phillip (2008) Land Law. 12th Edition Oxford University Press J. E. Martin (2009) Modern Equity 18th Edition, Sweet & Maxwell. Megarry and Wade., (2008) The Law of Real property. 7th Edition Sweet & Maxwell. R J Smith, (2009) Property Law: Cases and Materials .4th Edition Longman. S. Wilson (2009). Todd & Wilson’s Textbook on Trusts 9th Edition, Oxford University Press Legislation Law of Property Act 1925 available at www.opsi.gov.uk accessed March 2011 Law of Property (Miscellaneous Provisions) Act 1989 available at www.opsi.gov.uk accessed March 2011 Trust of Land and Appointment of Trustees Act 1996 available at www.opsi.gov.uk accessed March 2011 Land Registration Act 2002 www.opsi.gov.uk accessed March 2011 Read More