Academic
Year 2017/2018

Candidate
number: 861472

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Module
Title: BL2604 Land Law in a Business Context

Coursework
Title: Individual Land Law Assignment

 

 

 

A.      INTRODUCTION

Lord and Lady MacDonald’s names would
have been listed as the legal owners in the land register, thus indicating that
in equity they held the land in trust for themselves. Following on from that,
Sir Adrian has purchased the title from these two trustees, therefore
overreaching seems to apply. Overreaching originates from the Law of Property
Act 1925, Schedule 2(1), which states that ‘A
conveyance to a purchaser of a legal estate in land shall overreach any
equitable interest or power affecting that estate, whether or not he has notice’1. Once overreaching operates, it transfers their
proprietary interest on the land to the proceeds of sale and the title then
changes from the trust of land changes to trust of money. The MacDonald’s trust of land is no more and now they
hold the proceeds of sale on a new trust in favour of themselves.2
Overreaching precedes over specific overriding equitable third party
commercial rights3,
this principle was applied in City of
London Building Society v Flegg, whereby Lord Oliver stated ‘If it be the case, as the Court of Appeal held, that
the payment by the appellants in the instant case to two properly constituted
trustees for sale, holding upon the statutory trusts, provides no sensible
distinction from the ratio of the decision of this House in Boland’s case, the
legislative policy of the 1925 legislation of keeping the interests of
beneficiaries behind the curtain and confining the investigation of title to
the devolution of the legal estate will have been substantially reversed by
judicial decision and financial institutions advancing money on the security of
land will face hitherto unsuspected hazards, whether they are dealing with
registered or unregistered land.’4

In advising Ben, Mary, Derek, Joan,
and Tony whether their rights may be enforceable against Sir Adrian Pollock, the categories of these overriding
interests must be looked at, as set out in S.3 of the Land Registration
Act 2002 which replaced the overriding interests which existed under S.70
of the Land Registration Act 1925.5

 

 

 

 

B.     
BEN

Regarding the £10,000 Ben paid to
the MacDonald’s, this was in consideration for the conveyance of the property. This
was neither a gift nor a contribution to the purchase price of the farm, consequently
granting Ben an equitable interest to install, operate and maintain a sewer
pipe under the barn on the farm. According to s.52 (1) of the Law of Property
Act 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 document
compliant with s.1 of the Law of Property Miscellaneous Provisions Act
1989 and it is required to create a legal estate or proprietary interest in
land.7 
Concerning whether Ben’s rights will be binding, it should be noted that this
is an old legal easement which predates the LRA 2002, therefore it will
continue to override and bind the purchaser of the registered title, presently
being Sir Adrian.8

C.      MARY

With respect to Mary’s interests,
it can be held that her written agreement with the MacDonald’s was purely an
equitable interest as this agreement was neither stored in a deed nor a lease. Moreover, this equitable lease cannot
be overreached as it does not fall under the certain equitable rights that can
be overreached under section 2 of the LPA 19259,
and will thus bind Sir Adrian. If this written agreement was created after the
LRA 2002 Act10, Mary’s
equitable interests would have been overreached as she is neither in actual
occupation nor was her interest registered11.

 

D.      DEREK

Concerning Derek, it appears that he has an easement of access, as he
had the right to park, load and unload up to 2 vehicles on the forecourt
of the farm house for 30 years. In
this case, the easement has been created
by deed according with s.1 of LP (MP) Act 1989 but in order to have taken
effect legally, expressly created easements should be registered under s.27 LRA
2002. Furthermore, Derek should have registered the deed under the charges
register to become a legal easement and additionally because the deeds duration
is 30 years. Part 1 of Schedule 2 of the LRA 2002 directs that land which is
leased for a period over 21 years should be registered.12  As this
deed was created after LRA 2002, it requires protection by entry on
register. Such express easements that are not registered are only equitable and
would therefore neither override nor bind Adrian.

E.       JOAN

In Joan’s case, it can be assumed she does
not have a lease or deed under true construction, therefore it is a third party
equitable right. The
consideration 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 is
worth about £6 million, also signifying that this interest cannot bind Sir
Adrian, unless a registered notice has protected her interest. Following on
from that, Lord Macdonald gave her the option to purchase, which otherwise is known
as a conditional treatment. Joan must have given an actual notice when she wanted
to purchase the land. As an option holder, she has an equitable interest in the
land. Until registration of this notice takes place, Joan’s proprietary
interest 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 of
protection for third party proprietary equitable rights13.
It can also be assumed that Joan did not register this charge and thus didn’t
protect her third party equitable rights to purchase, therefore as s.29 (1) of
the 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 the
unregistered actual notice will be defeated by the bona fide purchaser, Sir Adrian.

Furthermore, as Joan has
only stayed on the farm for half a week since 2009 and the present year is presumably
past 2015, it can be supposed she had no intention to return to the property
and it may be said that there is no actual occupation.16 For
the equitable interest to be binding on Sir Adrian, actual occupation of the
farm 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 of
permanence and continuity which
would rule out mere fleeting presence’, therefore as Joan had only
occupied the premises for a short period of time, there was neither permanence
nor continuity. For these reasons, it can be advised that Joan’s proprietary
interests would not bind Sir Adrian.

F.       TONY

Regarding Tony’s clearance of the
MacDonald’s mortgage and the refurbishment of the farm kitchen it could be deemed on evidence to be
constructive trust19, as this
money 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% stake
in the farm’ therefore quantifying the
beneficial equitable interest. This principle was also applied in Grant v Edwards20.
Moreover, there can be an inferred common interest, as himself and the
MacDonald’s wanted to all use the farm.21 In this
regard ‘any acts of detrimental reliance’ would suffice for a constructive
trust, such as paying direct mortgage contributions to the purchase price22. Additionally,
as the MacDonald’s are the trustees holding the land in trust for themselves
and for Tony, it consequently makes Tony a co-owner in equity and he should
therefore be awarded his 20% stake in the farm.

 

Concerning Tony taking up permanent residence, it must be considered
whether he was in actual occupation which would give an overriding interest
according to Schedule 3, paragraph 2 of the LRA. Thomas v Clydesdale Bank established that the person claiming the
interest 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 found
on reasonable inspection23. There was no requirement that his occupation needed be
apparent 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. If
Sir Adrian or his surveyors had asked the MacDonald’s if anyone was living on
the farm, and they admitted Tony was, then the principle of Caveat Emptor
applies. However, if the MacDonald’s didn’t inform Sir Adrian truthfully after
he enquired, and he followed on to find and then ask Tony about his actual
occupation and yet Tony still failed to disclose it, then Tony’s equitable
rights will not override and bind Sir Adrian. Though, it is also the job of the
trial judge to look at the facts of the case and the context to decide to
whether the third party was in actual occupation or not.

 

G.      CONCLUSION

With regards to Tony, as Adrian has paid two trustees, he rid the
MacDonald’s of their equitable proprietary interest and ultimately overreached Tony’s
equitable interest. Tony is then advised to get his 20% of the property from the
purchasing title from the MacDonald’s. To finalise, Ben and Mary’s legal and
equitable interests respectively, will override and be enforceable against Sir
Adrian Pollack.

1
Law of Property Act 1925, s 2(1)

2
ibid, s 2 and s 27

3
Law of Property Act 1925, s 2(3)

4
1988 AC 54 (Oliver L); This principle was also applied in Kingsnorth Finance
v Tizard 1986 1 WLR 783; this can be distinguished from Williams &
Glyn’s Bank v Boland 1981 AC 487 whereby overriding interests took
precedent.

5
Land Registration Act 2002, s 3; Land Registration Act 1925, s 70

6
Law of Property Act 1925, s 52(1)

7
Law of Property Miscellaneous Provisions Act 1989, s 1

8
Land Registration Act 2002, schedule 12 (9)

9
ibid 1

10
ibid 5

11
Land Registration Act 2002, schedule 3 (2)

12
ibid 11, schedule 2, part 1

13
Land Charges Act 1972, s 2(4)(iv)

14
ibid 11, s 29 (1)

15
1981 AC 513; this principle was also applied
in Lloyds Bank v Carrick 1996 4 All
ER 630 (CA); compare with Peffer v
Rigg 1977 1 WLR 285 which
followed the principle of old equitable thinking.

16
Compare with Chhokar v Chhokar 1984
FLR 313 (Court of Appeal)

17
1995 NPC 162

18
1991 AC 56 (HL); ibid
4

19 Eves v Eves 1975
1 WLR 1338 

20 1986 3 WLR 114;
Similar to Burns v Burns

21  Lloyds
Bank v Rosset 1991 1 AC 107 

22 See Ungurian v
Lesnoff 1990 Ch.206; Similar to Maharaj
v Chand 1986 AC 898; Also look at the decision in Chun v Ho 2002 EWCA Civ.

23 Ibid 8

24  1971 2 WLR 1263 (CA)

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