Resolving Ownership Disputes in Property Sales

Introduction

In a contract for sale of property, the sale may be silent on the ownership of the goods in the property. Such scenario presents conflicting interests of parties involved in the transfer of ownership of the property. The current essay will discuss the principles differentiating chattels and fixtures to resolve the conflict between Steven and Cathy with both claiming ownership of the missing things, arising out of the ownership of the house. The issue to determine is whether the missing items are chattels not forming part of the land and therefore removable from the house, or they are fixtures forming a part of the house and therefore not removable from the house.

Status of and the resultant rights in the property to determine Fixtures and Chattels

The definition of Land according to the Law of Property Act 1925, section 205 (1) (ix), includes things that are attached to the land or are a part of the land. This includes actual fixtures on the property. This presents conflicting interests of parties involved in the transfer of ownership of the property. For instance, Party One may sell a property to Party B. Party A may remove certain items from the property thinking they do not form part of the transfer. On the other hand, Party B may believe that such transfer of the property includes items attached to the property (McFarlane et al., 2015).

The definition of Land according to the Law of Property Act 1925, section 205 (1) (ix), includes physical, tangible things. It is as follows:

“Land includes land of tenure, mines and minerals…buildings or parts of buildings and other corporeal hereditaments; also a manor, an advowson, and a rent and other incorporeal hereditaments, and an easement, right, privilege, or benefit in, over, and derived from the land.”

In case of conflicting interests, the courts have to determine the status of and the resultant rights in the property. For instance, the tests for deciding whether fixtures are a part of the land are subject to the degree of annexation and also the general purpose of annexation (Bray, 2013). The test was seen in Holland v Hodgson (1872) LR 7 CP 328, regarding the spinning looms attached to the floor where it was held that the looms were attached to the land by their own weight and there were no intention to be attached to the land, therefore the looms do not form part of the land. However, alternative argument could be presented by citing the case of Hamp v Bygrave (1983) 266 EG 720 where statues standing on their own weight were not considered chattels as they were easily removable and were not meant to enhance the land. Here and in some other cases, courts have determined the status of and the resultant rights in the property. The application of this test could be seen in cases with similar issue but ruling were different. In D’Eyncourt v Gregory (1866) LR 3 Eq 382, statues on the property were held fixtures as their installation was a part of the architectural design and it enhanced the land. In a similar case Hamp v Bygrave (1866) LR 3 Eq 382, the ruling was different as the court held that the many stone urns and statues standing on the property were chattels as they were standing on their own weight.

At the time of transfer of property, conflicting interests between the parties arise to the issue of who is entitle to the things attached on the property or who can take or retain the goods. The answer lies on the nature and extent of the attachment. As seen in the cases above, if the attachment is substantial and adds to the property, it is fixtures, but where the attachment is not substantial or not intended to be permanent, then the thing is a chattel. Here are few cases that will bring clarity on what things would be considered fixtures or chattels. In TBS Bank Plc v Botham [1996] EGCS 149, bathroom fittings, kitchen workspaces and kitchen units were held to have a high degree of annexation and add to the usability to the flat and were, therefore, held as fixtures. In Elitestone Ltd v Morris [1997] 1 WLR 687, HL, similarly wooden bungalow (Clarke & Greer, 2012). In Mancettor Developments Ltd v Garmonson Ltd. [1986] QB 1212, an extractor fan was held as fixture as removal it would cause damage to the property. In Spyer v Phillipson [1931] 2 Ch 183, antique panelling on the property was held to be ornamental, and its removal was not causing damage to the property and was therefore held chattels. In Young v Dalgety Plc [1987] 1 EGLR 116, carpets and light fittings were easily removal and were held chattels. Similarly, cooker, freezer or other white goods such as fridge were held chattels. Curtains, blinds and carpets were held insubstantial attachment and were chattels (Bray, 2013).

Application of the rules in the current case

Bath, lavatory and sink: They are fixtures due to their substantial attachment to the property and their removal would cause damage to the property.

A wooden shed in the garden: It adds value to the property and is substantially attached and is therefore a fixture.

The large bronze statue: The large bronze statue on a plinth is an ornament and is a chattel not substantially attached to the property and easily removal by not causing damage to property.

Introduction

Land registration aims to provide easier, safer and efficient transfer and protection of land (Dixon, 2018). Theodore Ruoff, the Chief Land Registrar identified three principles that could be said to advance this aim. They are mirror principle, the curtain principle, and the insurance principle (Davys, 2017). Mirror principle requires the Register reflects reality of the property title. Curtain principle does not require the buyer to find issues behind the property. Insurance principle requires the state to guarantee registry accuracy and to compensate lose arising from any errors (King, 2015). The current essay will determine whether the Land Registration Act 2002 and the three principles properly balance the need for certainty, transparency and security against the requirement for justice.

Is the Act 2002 substantial as to its principles and applicability vis-a-vis effectiveness?

The 2018 report by the Law Commission on updated the Land registration Act 2002 presented to the Parliament recognises the three principles and it states that the principles have expanded the core purpose of the registry by not only emphasising on its certainty and reliability, but also on other purposes not directly related to improving conveyancing, such as making the register open to public to provide transparency in land ownership. However, this seems to be not sufficient as the report itself threw light on the loopholes in the Act 2002, for instance the lack of visibility of mines and minerals titles through concerns presented by the Law Society and the Conveyancing Association (Law Commission, 2018). Another example is a few practices of the registry that attract opposition. One such practice is preferring closure of the landlord’s title. It raises a primary concern of whether the intention of Section 153 of the Law of Property Act 1925 is to create two freehold titles relating to the same land. However, the Commission found this practice to be sensible thought it acknowledges there is an underlying uncertain attached to Section 153 (Law Commission, 2018).

A loophole that goes against the principle aim to bring justice is Schedule 4 to the Act 2002, which does not regard much of the finality. No time limit is set for A Party to application for rectification of error in the registry. As a result, the title of B Party is not secured and is always vulnerable to being indefinitely subject to rectification application. There must be certain virtues of finality, such as with the passage of time, such vulnerability should be removed as well as its associated interests of justice. This operation of longstop provision or of indefinite permissibility of rectification application will likely force either the registrar or the court to make decisions unjust to B Party (Law Commission, 2018). However, referring to the case of MacLeod v Gold Harp Properties Limited [2014] EWCA Civ 1084, [2015] 1 WLR 1249, Lord Justice Underhill observed that Schedule 4 to the Act 2002 provides for power to rectify mistakes in the register and such power “extends to correcting the consequences of such mistakes”. There is arguably no system of land registration that could be considered practically effective in achieving in totality these three principles. As such applying these principles would lead to favouring certainty over justice in some instances (Davys, 2017). This was seen with issues regarding finality and there will always be unjust consequences in some instances, which will not bring absolute justice. When the three principles are strictly applied, registered title in land is indefeasible, and it becomes immune to claims other than those in the Register (Davys, 2017).

Mirror principle requires the register to reflect totality of ownership and interests in a land and the title should accurately reflect the position ‘on the ground’. It calls for revealing the identity of owner and the nature of his ownership and any limitations on the interests and rights associated with the land so that a prospective buyer will know the complete character of the land by reducing possibility of fraud because (Bray, 2016). An alternative argument is that this principle is not complete as it allows overriding interests as it has potential of overriding reality with title that may be acquired through manipulation. What the prospective buyer will see may not be the real character of the land as the title registration is not real (Zevenbergen, 2017). This drawback is unfortunately validated by the second principle, the curtain principle. This principle allows a curtain of trust of a special kind to hide certain equitable interests in the property (Davys, 2017). Buyer is not impacted by existence of any equitable interests in the property when complying with purchase formalities provided under Sections 2 and 27 of the Act 1925. Buyer does not need to go behind the title to see events occurred outside the register. But, the problem here as explained above is, the buyer will always be at perpetual vulnerability to rectification application. However, this vulnerability has legal protection provided under the insurance principle and the state is imposed with the responsibility to enforce such protection of the buyer. State shall protect registered title to a land (Davys, 2017).

Conclusion

The applicability of the three principles and the Act 2002 and their effectiveness are different matters. The state is imposed on perpetual obligation to protect buyer, which also means the buyer is vulnerable all the time. This presents a conflict between the power of the state to enforce protection of the title and authority of the court, as was seen in the Gold Harp case mentioned above, to rectify errors. On one hand the state guarantees protection to registered title and indemnification to owners/buyers for loss arising out of errors in the register and on the other the court can exercise authority to rectify the error. The question that still remains is the determination of the extent of justice vis-a-vis the indemnification in terms of compensation against the conclusive nature of the register. Certain practical reforms are required to ensure advancement of justice as the need of certainty, transparency and security alone cannot serve the purpose of justice.

Case note of Tulk v Moxhay [1848] EWHC J34 (Ch)

Plaintiff, Charles Augustus Tulk was the owner in fee of the vacant ground, “Leicester Square garden or pleasure ground” in Leicester Square and several houses forming the Square. In 1808, Plaintiff sold the ground with the equestrian statue installed in the centre and the iron railing and stone work around the ground (the “property”), to Elms in fee. The deed states that Elms and his heirs and assigns at their own costs will maintain and undertake necessary repairs of property in an open state. The deed also states that the inhabitants of the Leicester Square, tenants of the Plaintiff, upon a reasonable rent, have keys and privileged to admission into the property. The ground was further conveyed to the Defendant and the purchase deed did not have any similar covenant as such with the vendor, but Defendant admitted having notice of the 1808 deed. The Defendant asserted a right to build on the ground, but the Plaintiff filed for injunction, which was granted by the Master of Rolls. The issue here is to determine whether the 1808 deed covenant run with the land and therefore was enforceable against the Defendant?

Key elements of the decision. The core principle is focussed on enforceability of a covenant in equity. In the current case, the Defendant claim was dismissed. Defendant had notice of the 1808 deed and hence having notice of the equity attached to the property is bound by the covenant in equity irrespective of whether he was bound at law or not. The order of injunction order by the authority against the Defendant is accordingly valid. There are four requirements for a restrictive covenant to be binding on a successor in title: a) it must be negative in substance; b) it must benefit the covenantee’s land; c) there must be an intention for the burden to run with the land; and d) successor must have notice of the restrictive covenant. Lord Cottenham LC focussed his reasoning on the need of the covenant to be restrictive or negation. He stated that the issue to determine is not unenforceability of a covenant that does not run with the land or whether the covenant runs with the land. The actual question is whether the covenant is restrictive in that whether a party is permitted to use the land in a manner that is inconsistent with the terms of contract agreed by the vendor, who also has notice of terms of the contract. Thus, ‘if an equity is attached to the property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased.’ Thus, the restrictive covenant in 1808 that the purchaser and his assigns will use and abstain from using the land in a particular manner is enforceable in equity against all successor buyers with notice irrespective of whether covenant runs with the land in order to bind so subsequent purchasers at law.

Legal and social impact.

The Tulk v Moxhay provides for principles that equity attached to a property overrides the need of privity of contract to enforce a covenant in equity. The principle laid down in this case has been cited in many other cases, such as Patching v Dubbins (1853) Kay 1, [1853] EngR 894, (1853) 69 ER 1; Crest Nicholson Residential (South) Ltd v McAllister CA (Bailii, [2004] EWCA Civ 410; Hemingway Securities Ltd v Dunraven Ltd and another ChD ([1995] 1 EGLR 61, and many more. The four requirements need to make a covenant enforcement has expanded the narrow privity principle that is based on privity of contract, which holds applicable only in positive covenants. To decide whether a covenant is negative or not, one needs to see whether there is some payment to comply with the covenant, as is seen in Haywood v The Brunswick Permanent Benefit Building Society CA 1881. March 18, 2019.

To decide whether the covenant benefits covenantee’s land, one needs to see the distance between the dominant land and the servient land, as is seen in Kelly v. Barrett. [1924] 2 Ch. 379. To decide whether the covenant touches and concerns the land was laid down in P & A Swift Investments v Combined English Stores Group [1989] AC 632. Section 56 of the Law of Property Act 1925 entitles any person to take benefit arising out og a restrictive covenant even if not being a privy to a deed conveyance. To decide whether a successor must have notice of the restrictive covenant, one needs to see whether the covenantee holds a legal estate in the land on the date the covenant was formed. However, there may be certain situations whether the Tulk principle do not apply as in the case of London County Council v Allen [1914] 3 KB 642, where it was held that purchaser was not bound at law or in equity despite having the notice of restrictive covenant on the land if the covenantee does not have possession of or interest in the land that was intended to benefit.

The Tulk is often referred as the source of doctrine of covenants “running with the land in equity”. The principle has developed in modern times where a purchase will still be bound even when he does not have a notice of the restrictive covenant, as was seen in In re Nisbel and Potts’ contract [1996] 1 Ch. 386 (Hogg, 1912). However, there is anomaly in this principle, which does not meet the test criteria applied in recognition of equitable property rights. The restrictive covenant entitles the holder a right over the land and not in relation to a right of the party originally bound. As such the initial promissor has a direct duty towards the physical user of the land and does not have a duty towards a specific and free standing right of the promissor. The principle in Tulk, could thus be argued that it has unnecessarily expanded liability of third parties and some courts, as seen above, have rejected the principle (Mitchell & Mitchell, 2012). In Keppel v Bailey ChD 29 Jan 1834., the court had to determine whether the owner of land can burden future owners by creation of novel rights. The court took a different approach than Tulk. The court observed that such a right cannot be annexed or appended either as an incident or by granting it away if it is not connected with the enjoyment or occupation of the land. Novel rights cannot be devised and attached to the land at owner’s will, as it causes inconvenience in terms of law great and create confusion of rights. Tulk principle has left discretion open to determine the type of duty to be considered equitable in respect to third party liability and impact; and to distinction between duties that create personal rights and those creating equitable rights. There is a conceptual approach rather than a practical or more consequential oriented approach being adopted. This is not to deny the role of Tulk that has helped in identifying set of circumstance that would result to the burden of making a burden operative. Dig deeper into Complexities of Joint Tenancy and Beneficial Interests with our selection of articles.

Bibliography

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Bray, J., 2016. Unlocking land law. Routledge.

Clarke, S. & Greer, S., 2012. Land Law Directions. Oxford: Oxford University Press.

Crest Nicholson Residential (South) Ltd v McAllister CA (Bailii, [2004] EWCA Civ 410

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D’Eyncourt v Gregory (1866) LR 3 Eq 382

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Dixon, M., 2018. Land Law. Routledge.

Elitestone Ltd v Morris [1997] 1 WLR 687, HL

Hamp v Bygrave (1983) 266 EG 720

Haywood v The Brunswick Permanent Benefit Building Society CA 1881

Hemingway Securities Ltd v Dunraven Ltd and another ChD ([1995] 1 EGLR 61

Hogg, J.E., 1912. Tulk v. Moxhay and Chattels. LQ Rev., 28 , p.73.

Holland v Hodgson (1872) LR 7 CP 328

In re Nisbel and Potts’ contract [1996] 1 Ch. 386

Kelly v. Barrett. [1924] 2 Ch. 379

Keppell v Bailey ChD 29 Jan 1834

King, S., 2015. Beginning Land Law. Routledge.

Law Commission, 2018. Updating the Land Registration Act 2002. Controller of Her Majesty's.

London County Council v Allen [1914] 3 KB 642

MacLeod v Gold Harp Properties Limited [2014] EWCA Civ 1084, [2015] 1 WLR 1249

Mancettor Developments Ltd v Garmonson Ltd. [1986] QB 1212

McFarlane, B., Hopkins, N. & Nield, S., 2015. Land Law: Text, Cases, and Materials. Oxford University Pres.

Mitchell, C. & Mitchell, P., 2012. Landmark Cases in Equity. Bloomsbury Publishing.

Patching v Dubbins (1853) Kay 1, [1853] EngR 894, (1853) 69 ER 1

P & A Swift Investments v Combined English Stores Group [1989] AC 632

Spyer v Phillipson [1931] 2 Ch 183

TBS Bank Plc v Botham [1996] EGCS 149

Young v Dalgety Plc [1987] 1 EGLR 116

Zevenbergen, J.A., 2017. Overselling the Mirror and Curtain Principles of Land Titling. Responsible Land Governance: Towards Evidence Based Approach.

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