Formalities in Land Law Exceptions

The examples of formalities with regard to land law are contained in provisions that mandate that agreements for sale of land be in writing and signed by both parties. There are other kinds of formalities that are attached to different kinds of transactions in land law. as to registration of the agreement for sale of land. For instance, a creation of trust in land can only be done by writing. Such formalities mandate that transactions involving transfer of interests in land are done in a due and prescribed manner and that transactions that do not comply with such formalities are not effective in creating legal interests. However, as pointed out, land law also gives importance to exceptions to formalities in the same way that it gives importance to the formalities. This essay explores how constructive trusts and proprietary estoppel provide important exceptions to the formalities that exist in land law.

The Law of Property Act 1925 (LPA 1925), Section 53(2)(c), exempts constructive trusts from the formality of being prescribed in writing. This is an important provision and it shows how the land law serves to protect interests created without the compliance with formalities in a way that leads to the creation of important exceptions to formalities themselves. Constructive trusts therefore, arise through an operation of law and do not need to comply with the provisions regarding formalities in LPA 1925, Section 53 (1). Constructive trusts are not required to be in writing, nor do these have to be registered. Therefore, these are created informally. In each of these three respects, constructive trusts are similar to interests created by way of proprietary estoppel, which is discussed later in the essay. However, at this point it may be noted that both constructive trusts as well as interests created by way of proprietary estoppel are similar in being informal, unwritten and unregistered, therefore, exceptions to formalities in land law.

Coming back to constructive trust, the interest under constructive trust is created when a person is acted upon unconscionably by the legal owner of the land, with the result that the person is deprived of an opportunity to assert a beneficial interest, or act in a way detrimental to their interest. There is no specific definition of constructive trust, which allows courts to use the concept of constructive trust in different contexts, and also maintain a flexibility of application. There are different ways in which constructive trust can arise, such as, unconscionable dealing with property, or an unlawful act with regard to property. In context of land law, a constructive trust can arise when the behaviour or conduct of the legal proprietor leads another person to act in his own detriment on the understanding that the legal proprietor will transfer some interest in the property to another.

An example of creation of constructive trust can be seen in the case of Eves v Eves, in which case the legal proprietor informed his partner that she being too young to hold a legal title over the property, he was not putting her name in the title and was instead taking the property in his sole name. The claimant did not contribute to the purchase of the property, but she expended substantial physical labour in the development of the property. The court held that the excuse of age taken by the sole proprietor to avoid putting her name in the title was enough to show that there was an intention to share the beneficial interest in the property. Based on the fact that the claimant had expended considerable effort to develop the property on the basis that she had beneficial interest in the property, the court held that it would be inequitable for the defendant to deny the claimant any share in the property and therefore, one quarter of the share went to the claimant. In this case, a trust was created without there being any formalities of the trust. The important point in the creation of such constructive trust, as seen in the Eves case as well as in Lloyds Bank v Rosset, is that there should be some expressed common intention to share the beneficial interest and the claimant must have acted to their detriment based on the reliance on such expression.

In Grant v Edwards, the defendant told the claimant of constructive trust that due to possible negative effects on his divorce proceedings, he was not sharing legal title with her. The defendant held the legal title to the property in his own name, and also took out a mortgage in the property. However, the claimant paid the expenses of the house so that the defendant continued paying the mortgage payments. Thus, based on the expression of the defendant that the only reason why he could not share the legal title of the property with her was his divorce, the claimant suffered a detriment by paying all household expenses. The court held this to be sufficient for holding that there was a constructive trust created in the case due to common intention to share beneficial interest and detriment suffered due to reliance on this intention. Similar decision was given by the court in Le Foe v Le Foe, where the wife paid for the domestic expenditures, while the husband paid the mortgage payments and the legal title was held in the name of the husband. The court applied constructive trust to hold that the wife held beneficial interest in the property. In Rosset, it has been held that common intention can be inferred from conduct of the parties, which includes inferred intention and detrimental conduct. Continue your exploration of Gareth's Blackacre Property Issues with our related content.

Thus, a common intention to share beneficial interest, reliance on the common intention, and detriment due to such reliance, can go on to create a constructive trust in the favour of a person despite being informal. Similarly, the doctrine of proprietary estoppel also leads to an informal method of acquiring interest in land. As mentioned before, both constructive trust and proprietary estoppel, lead to the creation of interests in land through informal routes.

Like constructive trust, proprietary estoppel is also an equitable remedy. There are three elements that lead to the establishment of a proprietary estoppel, which are, representation of assurance, reliance in that assurance and detriment caused due to reliance on the assurance. Two cases establish the way in which a proprietary estoppel can be created. A fourth element of unconscionability is also sometimes added to establish proprietary estoppel. In Pascoe v Turner there was an express active assurance given by the proprietor to the claimant wherein the proprietor said that the claimant can continue living in the property as the title to the property will also be transferred to the claimant’s name. The claimant redecorated the property and spent substantial amount of money in improving the property. This led to the establishment of proprietary estoppel. Similarly, in another case the claimant was allowed to continue living in the property due to proprietary estoppel as after based on the assurance, the claimant spent money on redecorating the property. However, in Thorner v Major, proprietary estoppel was not created because the assurance given to the claimant was not clear and unequivocal.

Despite the similarities between constructive trusts and proprietary estoppel, there are also important differences. First, unlike constructive trust, which is based on an expressed common intention, proprietary estoppel does not require any such meeting of minds. Second, claimants under constructive trust get a beneficial interest in the land, with the courts only having to decide the share of interest; whereas in proprietary estoppel, the claimant does not necessarily get a beneficial interest, as other remedies may also be prescribed by the court. These are important differences between constructive trust and proprietary estoppel.

Continue your exploration of Formalities in Land Law Exceptions with our related content.

To conclude this essay, formalities are important in land law, but as this essay shows sometimes exceptions to such formalities are as important as the formalities themselves. As this essay has discussed, two such exceptions can be found in constructive trust and proprietary estoppel. Both create interest in land without there having been any formalities involved in the creation of interests. Despite the lack of formalities, the courts have come to protect the interests created through these means.

Table of Cases

Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch. 276

Eves v Eves [1975] 1 W.L.R 1338

Grant v Edwards [1986] Ch. 638

Hammad v Mitchell (1992) 1 WLR 1127.

Holman v. Howes [2008] 1 FLR 1217

Le Foe v Le Foe [2001] 2 FLR 970.

Lloyds Bank v Rosset [1990] UKHL 1

Pascove v Turner [1979] 1 WLR 431

Ramsden v Dyson [1866] LR 1 HL 129

Thorner v Major [2009] UKHL 18

Willmott v Barber (1880) 15 Ch D 96

Books

Davys M, Land Law (Macmillan 2017).