Legal Issues in the Case of One Acre House

Introduction

There are three issues that arise in this case scenario. The first issue is whether Sonia has an interest due to actual possession in One Acre House, which will bind Bob after purchase. The second issue is whether Katie has the right to continued possession of the studio and flat after Bob purchases the house. The third issue pertains to the mortgage to the Northwest Building Society. For students struggling with complex legal concepts, seeking a law dissertation help provide the most valuable support in navigating such intricate cases effectively.

Sonia

Sonia is in occupation of the main house and she refuses to move out. She says that she paid £10,000 towards the purchase price six years ago. The issue is whether her interest binds Bob on the purchase of the house.

As Sonia does not have the legal title to the One Acre House, but she has contributed towards the purchase of the house and is in occupation of the property, the question of her equitable interest in the property has to be explored. When buying registered land, the purchaser has to ensure that he is aware of the registered claims against the property. Under Land Registration Act 2002, the purchaser of a registered property is generally not bound by constructive trust. However, the Schedule 3, para 2 of the Act protects the interest of the person who has an interest in the property and is in actual possession even in the event of such a right not being entered onto the register of title. Therefore, with respect to Sonia, her interest may be protected as against Bob if she has an interest in the property and is in actual occupation of the property.

Schedule 3 protects interest belonging at the time of the disposition to a person in actual occupation unless such person failed to disclose the interest in an inquiry made before the disposition. In Williams & Glyn’s Bank v Boland, the court has held that if a person has a proprietary interest whose priority can be protected by an entry on the register but was not entered on the register, such interest would be an overriding interest in case of actual possession. Therefore, the important question is to explore whether Sonia is in actual possession or not. Although there is no single test to determine the actual possession as per Link Lending Ltd v Bustard, in Williams & Glyn’s Bank v Boland, it was observed that a person in actual possession is a simple term in English and must be interpreted as such and therefore, there is a distinction between actual possession and legal possession; the former relates to physical possession of the property. Applying these principles to the present case, it is clear that Sonia is in actual possession of the property because she has physical possession.

The second question is whether Sonia has an interest in the property even if it is not registered. Sonia is not a registered title holder but she can claim tenancy in common. As per the principle laid down in Malayan Credit Ltd v Jack Chia-MPH Ltd, contribution to the purchase of the property in unequal amounts can lead to the presumption of tenancy in common. Parties can be considered to hold beneficial interest aligned with the share in the purchase contribution. Moreover, constructive trust and resulting trust may be involved here. Constructive trust arises when the

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1. Choudhary v Yavuz [2011] EWCA 1314.
2. Williams & Glyn’s Bank v Boland [1981] AC 487.
3. Link Lending Ltd v Bustard [2010] 2 P&CR DG 15.
4. Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549.
5. Laskar v Laskar 1 WLR 2695 [2008].

legal title is vested in one party but the beneficial interest is also vested in another party. This was explained in Lloyds Bank v Rosset, where the court held that in case of an expressed common intention, based on which the party has acted to their detriment, leads to the creation of a constructive trust. Resulting trust may arise where one party contributed to the purchase of the property as per the principle laid down in Curly v Parks, which held that a direct contribution towards the purchase price led to resultant trust. As per Capehorn v Harris, a non-legal owner has an interest in the property based on the conduct of the parties and the quantum of interest based on circumstances in the case. Also applicable here is the Trusts of Land and Appointment of Trustees Act 1996, Section 1 of which provides that where two or more people own land concurrently, creates a trust under which the rights of ownership are divided between legal owners (trustees) and beneficial owners. Those who have contributed to the purchase of the property can be protected under this provision also.

Based on these principles Sonia can claim interest in the property as a tenant in common or under resulting trust doctrine. The principles of TOLATA are also applicable to her case. Her interest would bind the purchaser of the property.

Katie

Jim has signed a document giving Katie the right to exclusive possession of the workshop, the flat and its surrounding land for a term of 10 years at a market rent of £1,000 per month. Katie is in possession of this property. The issue arises whether Bob will be bound by Katie’s interest after purchase of the property.

The first question to consider is whether the agreement between Jim and Katie amounts to a licence or a lease. The law which is applicable here is contained in authorities on lease and licence and in the Law of Property (Miscellaneous Provisions) Act 1989, Sections 2(5)(a) and 54(2).

Section 2 of Law of Property (Miscellaneous Provisions) Act 1989, requires that leases of three years or more should be in writing and under a lease deed [Section 54(2)]. Regardless of the terminology used by the parties to describe the agreement, the agreement will be considered a lease if certain conditions are satisfied; first, the right to exclusive possession for a fixed term; and second consideration in the form of lump sum or periodical payments over an identifiable land. If the agreement is for exclusive possession for a definite period of time and for consideration of a periodic or fixed nature, this would be a lease and not a licence. In this case, Katie’s agreement with Jim is in the nature of a lease because it is for a fixed term and involves the payment of rent for exclusive possession. Exclusive possession relates to the tenant’s control over the property with a right to exclude all the world.

The next question is whether the lease would create a binding interest for Bob. This question arises because for the lease to create a binding interest, it should satisfy the formality requirements under the Law of Property Act 1925 (LPA 1925). Section 52(1), requires fixed term lease to be made under a lease deed. A lease deed under the Law of Property (Miscellaneous Provisions) Act 1989, Section 1, should be

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6. Lloyds Bank v Rosset [1990] UKHL 1
7. Curly v Parks (2004) EWCA Civ 151.
8. Capehorn v Harris [2015] EWCA Civ 955.
9. Street v Mountford (1985) AC 809.
10. National Car Parking v Trinity Development Corporation [2001] EWCA Civ 1686.

signed, attested and headed as a deed. These requirements are not met with in this case as there is a documents signed by the parties, but it is not a deed. In the Land Registration Act 2002, Schedule 3 lists out unregistered interests that override registered dispositions; these include short term legal leases, easements, profits and property rights of a person in actual possession. Short term leases are for a duration of up to 7 years. In this case, the lease is for 10 years so it is not a short term lease. Under Section 27, a lease of more than 7 years is a registrable disposition.

In this case, the lease of Katie’s does not satisfy the formality requirements and is not registered although it is of more than 7 years. Therefore, it will not be an overriding interest for Bob in case he purchases the property.

Northwest Building Society

Jim has a mortgage over the property in favour of the Northwest Building Society. The mortgage was created by deed. The issue is whether this has any implications for Bob when he purchases the property.

A mortgage of a registered land is a registered charge. All dealings in registered land are to be to the Land Registry using the appropriate form and registered in order to be effective. A mortgage that is registered creates a legal charge on the property and binds the future purchasers of the property. In order to be legal, the mortgage should be created through deed (Law of Property Act 1925, Section 52), and registered (Section 27(2)(f)). The mortgage in a registered land would be noted in the Charges Register at the Land Registry.

In this case, as the mortgage is by deed and can be presumed to be registered, it creates interest for the mortgagee. In White v City of London Brewery, the court held that the mortgagee has the right to possession in the event of the mortgage dues not paid to them. The right to possession can be claimed by the lender when the borrower fails to make payments on the mortgage. The lender also has the power to sale in such cases (Law of Property Act 1925, Section 101(1)).

Bob should ensure that the seller pays of the mortgage on completion or the mortgagee shall have the right to sale of the property in case of default of loan.

If title to the land was unregistered

If the title to the land were unregistered, then the position would be a little different. If the title to the land were unregistered, then the position would be a little different. Bob upon purchase would have to apply for the registration of the property as per the provisions of the Land Registration Act 1997 for the First Registration. At this time, all deeds and documents relating to the property are shown at the Land Registry. At this time, a legal lease between the owner and another party would bind the purchaser.

As Katie’s lease is a fixed term lease, it is a legal right that she could enforce against Bob. The same cannot be said of a licence, which cannot bind the purchaser unless they had constructive notice.

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11. Barbara Bogusz, Roger Sexton, Complete Land Law: Text, Cases, and Materials (Oxford University Press, 2015).
12. LRA 2002, s.27.
13. White v City of London Brewery [1889] 42 Ch D 237.
14. Greg v Pollmount [1966] Ch 584.

With respect to the interest of the person in actual possession of the property, constructive notice of the same would bind the purchaser. This is relevant to Sonia’s interest in the property. Bob would therefore be required to do a thorough background check of the property to explore whether there were any people in possession. In Lloyds Bank v Carrick, it was held that the failure to inspect of the property prior to purchase led to constructive notice, which would then bind the purchaser of the property that is unregistered. Same can be said where the purchaser does an inspection of the property, but the inspection is inadequate or the purchaser is not diligent in the inspection. The case of Williams & Glyn’s Bank v Boland is also relevant to this point as actual possession by the wife in a property held in the name of the husband led to the creation of a beneficial interest which bound the purchaser of the property.

With relation to the mortgage in unregistered land, a mortgage would create an interest in the property as per Law of Property Act 1925, Section 1. Therefore, even if the land were unregistered, Bob would be bound by the charge created by mortgage over the property.

Table of cases

Capehorn v Harris [2015] EWCA Civ 955.

Choudhary v Yavuz [2011] EWCA 1314.

Curly v Parks (2004) EWCA Civ 151.

Greg v Pollmount [1966] Ch 584.

Kingsnorth Finance v Tizard [1986] 1 WLR 783.

Laskar v Laskar 1 WLR 2695 [2008].

Link Lending Ltd v Bustard [2010] 2 P&CR DG 15.

Lloyds Bank v Rosset [1990] UKHL 1.

Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549.

National Car Parking v Trinity Development Corporation [2001] EWCA Civ 1686.

Street v Mountford (1985) AC 809.

White v City of London Brewery [1889] 42 Ch D 237.

Williams & Glyn’s Bank v Boland [1981] AC 487.

Books

Bogusz B and Sexton R, Complete Land Law: Text, Cases, and Materials (Oxford University Press, 2015).

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