AcademicYear 2017/2018Candidatenumber: 861472ModuleTitle: BL2604 Land Law in a Business ContextCourseworkTitle: Individual Land Law Assignment A. INTRODUCTIONLord and Lady MacDonald’s names wouldhave been listed as the legal owners in the land register, thus indicating thatin equity they held the land in trust for themselves. Following on from that,Sir Adrian has purchased the title from these two trustees, thereforeoverreaching seems to apply.
Overreaching originates from the Law of PropertyAct 1925, Schedule 2(1), which states that ‘Aconveyance to a purchaser of a legal estate in land shall overreach anyequitable interest or power affecting that estate, whether or not he has notice’1. Once overreaching operates, it transfers theirproprietary interest on the land to the proceeds of sale and the title thenchanges from the trust of land changes to trust of money. The MacDonald’s trust of land is no more and now theyhold the proceeds of sale on a new trust in favour of themselves.2Overreaching precedes over specific overriding equitable third partycommercial rights3,this principle was applied in City ofLondon Building Society v Flegg, whereby Lord Oliver stated ‘If it be the case, as the Court of Appeal held, thatthe payment by the appellants in the instant case to two properly constitutedtrustees for sale, holding upon the statutory trusts, provides no sensibledistinction from the ratio of the decision of this House in Boland’s case, thelegislative policy of the 1925 legislation of keeping the interests ofbeneficiaries behind the curtain and confining the investigation of title tothe devolution of the legal estate will have been substantially reversed byjudicial decision and financial institutions advancing money on the security ofland will face hitherto unsuspected hazards, whether they are dealing withregistered or unregistered land.’4In advising Ben, Mary, Derek, Joan,and Tony whether their rights may be enforceable against Sir Adrian Pollock, the categories of these overridinginterests must be looked at, as set out in S.3 of the Land RegistrationAct 2002 which replaced the overriding interests which existed under S.70of the Land Registration Act 1925.
5 B. BENRegarding the £10,000 Ben paid tothe MacDonald’s, this was in consideration for the conveyance of the property. Thiswas neither a gift nor a contribution to the purchase price of the farm, consequentlygranting Ben an equitable interest to install, operate and maintain a sewerpipe under the barn on the farm. According to s.52 (1) of the Law of PropertyAct 1925, for Ben’s equitable easement to be transferred into a legal easement,it should be contained in a deed6.
Therefore, this agreement was reduced to a signed Deed dated 2.5.98. Moving on from that, a deed is a documentcompliant with s.
1 of the Law of Property Miscellaneous Provisions Act1989 and it is required to create a legal estate or proprietary interest inland.7 Concerning whether Ben’s rights will be binding, it should be noted that thisis an old legal easement which predates the LRA 2002, therefore it willcontinue to override and bind the purchaser of the registered title, presentlybeing Sir Adrian.8C. MARYWith respect to Mary’s interests,it can be held that her written agreement with the MacDonald’s was purely anequitable interest as this agreement was neither stored in a deed nor a lease. Moreover, this equitable lease cannotbe overreached as it does not fall under the certain equitable rights that canbe overreached under section 2 of the LPA 19259,and will thus bind Sir Adrian. If this written agreement was created after theLRA 2002 Act10, Mary’sequitable interests would have been overreached as she is neither in actualoccupation nor was her interest registered11.
D. DEREKConcerning Derek, it appears that he has an easement of access, as hehad the right to park, load and unload up to 2 vehicles on the forecourtof the farm house for 30 years. Inthis case, the easement has been createdby deed according with s.1 of LP (MP) Act 1989 but in order to have takeneffect legally, expressly created easements should be registered under s.27 LRA2002. Furthermore, Derek should have registered the deed under the chargesregister to become a legal easement and additionally because the deeds durationis 30 years. Part 1 of Schedule 2 of the LRA 2002 directs that land which isleased for a period over 21 years should be registered.
12 As thisdeed was created after LRA 2002, it requires protection by entry onregister. Such express easements that are not registered are only equitable andwould therefore neither override nor bind Adrian.E. JOANIn Joan’s case, it can be assumed she doesnot have a lease or deed under true construction, therefore it is a third partyequitable right. Theconsideration provided was of gross undervalue and not of market value. The £1 could be argued to be nominal consideration in relation to the farm which isworth about £6 million, also signifying that this interest cannot bind SirAdrian, unless a registered notice has protected her interest.
Following onfrom that, Lord Macdonald gave her the option to purchase, which otherwise is knownas a conditional treatment. Joan must have given an actual notice when she wantedto purchase the land. As an option holder, she has an equitable interest in theland. Until registration of this notice takes place, Joan’s proprietaryinterest will not take effect in law, but merely in equity. If she registered this notice as a Class C (iv)Land Charge as directed by the s2 of the Land Charges Act 1972 against the MacDonald’s,then Sir Adrian would have been bound, as land charges offer a system ofprotection for third party proprietary equitable rights13.It can also be assumed that Joan did not register this charge and thus didn’tprotect her third party equitable rights to purchase, therefore as s.
29 (1) ofthe LRA 2002 directed ‘interest will not be binding upon the purchaser’14.The rule is register or be damned and this reasoning is applied in Midland Bank Trust Co v Green (No,1)15. Furthermore, it can be advised that theunregistered actual notice will be defeated by the bona fide purchaser, Sir Adrian.Furthermore, as Joan hasonly stayed on the farm for half a week since 2009 and the present year is presumablypast 2015, it can be supposed she had no intention to return to the propertyand it may be said that there is no actual occupation.16 Forthe equitable interest to be binding on Sir Adrian, actual occupation of thefarm by Joan must be shown, this principle was further applied in Stockholm Finance v Garden Holdings17.
In Abbey National Building Society v Cann18,Lord Oliver held that, ‘actual occupation did involve some degree ofpermanence and continuity whichwould rule out mere fleeting presence’, therefore as Joan had onlyoccupied the premises for a short period of time, there was neither permanencenor continuity. For these reasons, it can be advised that Joan’s proprietaryinterests would not bind Sir Adrian.F. TONYRegarding Tony’s clearance of theMacDonald’s mortgage and the refurbishment of the farm kitchen it could be deemed on evidence to beconstructive trust19, as thismoney was neither a gift nor was it included in the acquisition costs initially,therefore there is no resulting trust. In the clearance and home improvements,there was an express statement asserting that he ‘could have a 20% stakein the farm’ therefore quantifying thebeneficial equitable interest.
This principle was also applied in Grant v Edwards20.Moreover, there can be an inferred common interest, as himself and theMacDonald’s wanted to all use the farm.21 In thisregard ‘any acts of detrimental reliance’ would suffice for a constructivetrust, such as paying direct mortgage contributions to the purchase price22. Additionally,as the MacDonald’s are the trustees holding the land in trust for themselvesand for Tony, it consequently makes Tony a co-owner in equity and he shouldtherefore be awarded his 20% stake in the farm.
Concerning Tony taking up permanent residence, it must be consideredwhether he was in actual occupation which would give an overriding interestaccording to Schedule 3, paragraph 2 of the LRA. Thomas v Clydesdale Bank established that the person claiming theinterest is in actual occupation and would be obvious on reasonable inspection.As he immediately took up permanence, it can be assumed that he could be foundon reasonable inspection23.
There was no requirement that his occupation needed beapparent as applied in Hodgson v Marks24.Furthermore, it is the duty of the buyer to carry out all enquires,investigation and inspections in relation to the land he wishes to purchase. IfSir Adrian or his surveyors had asked the MacDonald’s if anyone was living onthe farm, and they admitted Tony was, then the principle of Caveat Emptorapplies. However, if the MacDonald’s didn’t inform Sir Adrian truthfully afterhe enquired, and he followed on to find and then ask Tony about his actualoccupation and yet Tony still failed to disclose it, then Tony’s equitablerights will not override and bind Sir Adrian. Though, it is also the job of thetrial judge to look at the facts of the case and the context to decide towhether the third party was in actual occupation or not.
G. CONCLUSIONWith regards to Tony, as Adrian has paid two trustees, he rid theMacDonald’s of their equitable proprietary interest and ultimately overreached Tony’sequitable interest. Tony is then advised to get his 20% of the property from thepurchasing title from the MacDonald’s. To finalise, Ben and Mary’s legal andequitable interests respectively, will override and be enforceable against SirAdrian Pollack.1Law of Property Act 1925, s 2(1)2ibid, s 2 and s 273Law of Property Act 1925, s 2(3)41988 AC 54 (Oliver L); This principle was also applied in Kingsnorth Financev Tizard 1986 1 WLR 783; this can be distinguished from Williams &Glyn’s Bank v Boland 1981 AC 487 whereby overriding interests tookprecedent.5Land Registration Act 2002, s 3; Land Registration Act 1925, s 706Law of Property Act 1925, s 52(1)7Law of Property Miscellaneous Provisions Act 1989, s 18Land Registration Act 2002, schedule 12 (9)9ibid 110ibid 511Land Registration Act 2002, schedule 3 (2)12ibid 11, schedule 2, part 113Land Charges Act 1972, s 2(4)(iv)14ibid 11, s 29 (1)151981 AC 513; this principle was also appliedin Lloyds Bank v Carrick 1996 4 AllER 630 (CA); compare with Peffer vRigg 1977 1 WLR 285 whichfollowed the principle of old equitable thinking.16Compare with Chhokar v Chhokar 1984FLR 313 (Court of Appeal)171995 NPC 162181991 AC 56 (HL); ibid419 Eves v Eves 19751 WLR 1338 20 1986 3 WLR 114;Similar to Burns v Burns21 LloydsBank v Rosset 1991 1 AC 107 22 See Ungurian vLesnoff 1990 Ch.206; Similar to Maharajv Chand 1986 AC 898; Also look at the decision in Chun v Ho 2002 EWCA Civ.23 Ibid 824 1971 2 WLR 1263 (CA)