#4637 - Freehold - GDL Land Law

Freehold – Fee Simple Absolute in Possession

3 stages to buying freehold:

1. Exchange of Contracts

2. Completion by Deed: conveyance in unregistered land and transfer in registered land

3. Registration

1. Contract

• Contracts made before 26 Sept 1989 - governed by s40 LPA 1925

• No formal requirements for validity – possible to have valid oral contracts

• But one of the following conditions must be met for the contract to be enforceable:

1. The contract is in writing and signed by party against whom contract is being enforced; or

2. There is an existing written record of an oral contract (memorandum or note) signed by the party against whom the contract is being enforced: Davies v Sweet; or

3. The contract is oral but the person seeking to enforce has done some act of ‘part performance’ demonstrating existence of contract – e.g. buyer taking possession of land with the consent of the seller (Bowers v Cator) and making improvements on the land (Broughton v Snook)

• Contracts made on or after 26 Sept 1989– governed by s2 Law of Property (Miscellaneous Provisions) Act (LP(MP)A) 1989

1. Must be written

2. Contain all the terms

3. Signed by both parties

• S2(3): Either in one document signed by both parties, or in in two identical documents for exchange

• S2(2): can incorporate the terms by reference to other documents

In Writing

Must contain all the expressly agreed terms

Omissions: If terms which form part of the agreement are not incorporated then the contract can be invalidated

• Side Letters:

  • Record v Bell

    • Collateral contract designed to induce a party into the main contract does not need to comply with the LP(MP)A 1989 s 2 unless it is itself a contract of land

  • Tootal Clothing Ltd v Guinea Properties Management Ltd : Agreement to do works was a separate document (and contract): does not invalidate the original contract

Rectification:

• Wright v Robert Leonard (Develoments)

  • Court can rectify when a term, previously agreed by parties and intended to be included in the contract is omitted and it would be unjust not to amend contract

• Oun v Ahmad (2008)EWHC 545: Unless the parties deliberately left something out

Variations: Any variations must comply with s2 LP(MP)A

• McCausaland v Duncan Lawrie Ltd

  • Change in completion date was a material term and so should have complied with s2: but judges didn’t define ‘material term’ so little guidance: but where a term is essential to the nature of the contract then it will be deemed material

Correspondences exchanged

• Commission for the New Towns v Cooper

  • Written correspondences amounted to the process of offer and acceptance leading to an agreement rather than to an exchange of contracts compliant with s2 LP(MP)A 1989

Signed by both parties

• Firstpost Homes Ltd v Johnson: Purchaser signed plan but not the letter which set out the terms of agreement– invalid

• Typing/printing of a name does not constitute a signature: although electronic signature valid pursuant to the Electronics Communications Act 2000 (but this not usual practice)

Contracts exempt from section 2

• Under s2(5) LP(MP)A certain contracts are exempt from the formality requirements of s2:

1. Contract to grant a lease for a term which doesn’t exceed 3 years, which takes effect ‘in possession’ (immediately) and which is at the best rent reasonably obtainable

2. Contracts made at public auctions

3. Certain contracts regulated by the Financial Services & Markets Act 2000 which include an interest of some kind in land

4. The creation of resulting, implied or constructive trusts

• In these circumstances courts will uphold agreements that don’t comply under the principle of constructive trust or proprietary estoppel

  • Yaxley v Gotts: oral agreement enforceable on the basis of proprietary estoppel

Remedies for Breach of contract

1. Damages (Common law available as of right)

• Measure is the loss which the claimant has suffered as a result of the breach, including the loss of the bargain: Speciality Shops v Yorkshire & Metropolitan Estates Ltd

2. Specific Performance (Equitable: discretionary)

3. Injunction (Equitable: discretionary)

Proprietary effect of the Contract:

• Effect of the contract is to pass the equitable interest to the buyer: as soon as the parties have signed a valid enforceable contract, the buyer has an ‘estate contract’ while the seller retains the legal estate and holds it on trust for the buyer: “Equity looks on that as done which ought to be done”

Completion: Transfer of the Legal Estate (conveyance in unregistered land)

Formalities for transfer of legal estate:

• Must be conveyed by deed: s 52(1)LPA 1925

• Requirements for a valid deed: s1 LP{MP)A 1989

  • Signed, attested, delivered

• Exemptions from requirements for a deed:s52(2) LPA 1925

  • Most important: assents by personal representatives and conveyances by ‘operation of law’

Registration:

• Registered land: ownership proved by appearance of name on the register: legal title does not transfer until registration has taken place: s27(2)(a)LRA 2002

• National Land Register : meant to be a complete record: compulsory registration since Dec 1990

  • But loopholes: not all rights have to be recorded – ‘overriding interests’ e.g. ancient rights of way

1. Property Register: describes the land and estate comprised in the title

2. Proprietorship register: specifies the class of title and identifies the owner – contains any entries that affect the right of disposal

3. Contains any charges and other matters that affect the land

Compulsory Registration:

• Transactions triggering first registration under s4 LRA 2002:

1. Transfer of the freehold by sale, gift or court order

2. Grant of a lease of more than 7 years

3. Assignment (transfer) of a lease of unregistered land with more than seven years to run

4. An assent, vesting assent or vesting deed

5. Grant of a lease to take effect in possession more than 3 months ahead of the date of the grant (future leases)

6. First legal mortgage of the freehold/leasehold with more than 7 years to run

Voluntary Registration:

• S3 LRA 2002: voluntary registration of unregistered land so that owner can obtain advantages of the land registration system

Failure to register:

• S.6 LRA 2002: imposes duty to register on the occurrence of one of one of the triggering events in s4

• S.7: if registration is not made in 2 months then any transfer becomes void and legal ownership reverts to the transferor who will hold it...