#15574 - Freehold Leasehold Estates - GDL Land Law

Land Law : Proprietary Rights, Freehold & Leasehold Estates

Proprietary rights

• Closed ‘list’ of proprietary rights, s1 LPA 1925:

• Only two estates in land

  • S1(1)(a): Freehold (fee simple absolute in possession)

  • S1(1)(b): Leasehold (term of years absolute)

Freehold estates

• Fee simple absolute in possession: absolute right to possession indefinitely

• Formalities for transfer of freehold, 3-stage process:

  • (1) contract

    • Point at which equitable title transfers to buyer (seller retains legal title); gives equitable interest in land to buyer.

  • (2) Completion/Deed

    • Point at which legal title transfers to buyer if unregistered land

  • (3) registration

    • Point at which legal title transfers if registered land

(1) Contract (s2 LPMPA):

• [[need general 2 contract conditions: offer & acceptance; consideration; ICLR]].

• And specific for land:

• [contracts made before 27 Sep 1989: LPA 1925 s40

• s40, must satisfy (a) (b) or (c).

• [contracts made on/after 27/9/1989:] s2 LPMPA: (1) in writing; (2) contain all terms; (3) signed by both parties.

• NB: s2(1): contracts may be exchanged (2 identical contracts, seller and buyer sign one each, exchanged)

• NB: may have incorporation of terms by reference to another document (s2(2), incorporating that document into the contract).

• [[same formalities for sale of any estate/interest in land (leasehold, agreement to grant mortgage, easement, lease etc)]].

• Equitable estate held by buyer from date of contract (‘estate contract’, not full legal estate).

• Re options, Spiro v Glencrown: for options, requirements of s2 LPMPA apply to the initial grant of the option; but to exercise the option, is a unilateral act of the buyer, doesn’t need seller’s consent.

• NB, Cannot have s2 contract formed by correspondence: Commission for New Towns v Cooper: written offers & acceptances by correspondence can no longer give rise to a written contract, under s2 LPMPA. For correspondence to result in a binding contract, must culminate in a single doc, referring to every other doc, signed by both parties.

• Re ‘contain all terms’, 3 ways to save a contract: collateral contract, Record v Bell; separate contract, Tootal v Guinea; rectification, s2(4), Wright v Robert Leonard):

  • Collateral contract to induce, Record v Bell: a collateral contract (where the consideration = entry into another contract), designed to induce a buyer into purchase, need not comply with s2 LPMPA, is separate from contract of land. [[re additional agreement for seller to present proof of ownership paperwork; this additional agreement not contained within sale of land contract; buyer argued this meant sale of land contract not compliant with s2 LPMPA as didn’t contain all terms; held: additional contract not part of land contract, was collateral, so s2 irrelevant].]

  • Separate contract, not directly concerned with sale of land need not be contained in same document as land sale agreement, can be ‘hived off’, Tootal Clothing v Guinea Properties: contract re seller reimbursing leaseholder for shop fittings he would have to carry out; this contract was ‘hived off’ into another contract---the existence of second contract didn’t contravene s2 LPMPA.

  • Cannot be ‘hived off’ if the main land contract is conditional on terms of separate contract (North Eastern v Coleman).

• Equitable remedy of Rectification (s2(4) LPMPA)

  • An omission of ‘all terms’ can be rectified by courts if left out by mistake, but clearly agreed to by both parties, if just’ Wright v Robert Leonard

  • Agreement to sell leasehold included an oral agreement that all fixtures and fittings would be included; wasn’t included in written contract, so not s2 compliant; couldn’t treat as collateral contract (Record) or as separated, ‘hived off’ (Tootal)

  • Court granted equitable remedy of rectification—including the missing terms about interior fittings.

  • S2(4) LPMPA, rectification

  • No rectification if the terms were expressly excluded (must have been a mistake):

  • Oun v Ahmad: unlike Wright v Robert, was not excluded by mistake; here, was expressly excluded. No rectification.

  • Ruddick v Ormston

• [[NB: note how courts don’t like people trying to wiggle out of binding agreements, so have used various methods to uphold the contract, getting round non-compliance with s2: treat as ‘collateral’ (Record v Bell); treat as ‘separate’/hived off (Tootal Clothing v Guinea); or rectify if mistake (Wright v Robert Leonard).]]

Variations to contract

• Where correctly created contract; subsequent variation.

• McCausland v Duncan Lawrie:

  • Tried to vary completion date.

  • A variation of a ‘material term’ (eg completion date) must comply with s2 LPMPA (so can’t be oral).

Exceptions for s2 LPMPA formalities

• (1) contracts to grant a lease of term not exceeding 3 years (S54(2) LPA 1925)—which takes effect ‘in possession’, if at best rent obtainable.

• (2) contracts made at public auctions

• (3) the creation of resulting, implied or constructive trusts (s53(2) LPA 1925).

• (4) certain contracts regulated by Financial Services & Markets Act 2000.

• (5) Proprietary estoppel: courts may uphold non-s2 compliant agreements under doctrine of PE (Yaxley v Gotts).

Proprietary effect of a binding contract (an estate contract)

• Effect of estate contract the equitable interest in the land passes to buyer [[seller retains legal title]].

• So estate contract = equitable interest in the land, held from date of contract. This is a proprietary right.

• Why: ‘equity regards that as done that which ought to be done’.

• Can be protected against 3^rd parties.

• So if seller doesn’t go through with sale, not handing over legal title, buyer can enforce his equitable interest under estate contract, with equitable remedies: SP, injunction etc.

Remedies if either party breach estate contract

• (1) Damages, available as of right for breach of contract. Usual measure = the loss C has suffered as result of the breach (Speciality Shops v Yorkshire).

• (2) discretionary equitable remedies (awarded if ‘fair & equitable’:

  • SP

  • Injunction

  • Rectification (eg Wright v Robert Leonard), rectifies the contract

(2) completion

• Known as ‘conveyance’ if unregistered land; ‘transfer’ if registered land.

• [[NB, unregistered land, legal title passes at this point; registered land, legal title doesn’t pass until registration]].

• S52(1) LPA 1925-requires deed.

• Formalities: s1 LPMPA 1989: (1) clear on face is deed; (2) signed by transferor & witnessed; (3) delivered/dated.

• Effect of invalid deeds: ineffective; but, if compliant with s2 LPMPA, creates a valid estate contract, giving equitable interest to buyer, could seek remedy of SP/injunction etc.

• Exceptions to requirement of deed, in LPA s52(2);

  • eg assents made by a personal representative.

  • Eg surrenders by ‘operation of law’ = where property vests in another automatically, eg bankruptcy.

(3) Registration

• Buyer’s responsibility

• If unregistered land

  • Legal title transfers on execution of deed; New owner must then register, or legal title will revert to seller

  • Transfer of freehold by sale/gift/court order = Triggers First registration, s4 LRA 2002;

  • If not registered within 2 months of completion, legal title will revert to seller, ss6-7 LRA.

• If registered land, legal title doesn’t transfer until registration

  • s27(2)(a) LRA 2002.

• Other triggering events for unregistered land (s4 and s27 LRA 2002):

  • Transfer of freehold by sale/gift/court order

  • Grant of lease more than 7 years.

  • Assignment of lease with more than 7 years left to run

  • Inheritance

  • Future leases

  • Mortgages: a first legal mortgage of freehold/leasehold with more than 7 years

• Crown Land: is direct owner of its land (demesne land)—does not hold an estate; not registrable. Though Crown, under LRA 2002, can grant itself a freehold estate; voluntarily register it.

• Voluntary registration, s3 LRA 2002

Effect of non-registration

• Unregistered land:

  • If not made within 2 months (s6 LRA); legal title revers to seller/transferor (s7 LRA), who will hold it on bare trust for the buyer/transferee.

  • So then buyer will only hold equitable interest.

• Registered land

  • Legal title will remain with seller until registration: s27(1) LRA 2002.

• So, failure of registration = only equitable title for buyer (if more than 2 months for unregistered land)—will have estate contract, equitable title.

Consequences, failure to use deed or non-registration

• (1) Equitable estate contract if documents comply with s2 LPMPA.

• (2) Courts will enforce this by equitable remedy of specific performance.

Acquisition by adverse possession (squatting)

• Unregistered land:

  • Squatter must show have been in adverse possession for 12 years (must show: (a) physical control + (b) requisite intention to possess, for 12 years).

• Registered land:

  • Same rules as above if in adverse possession of registered for 12 years prior to 13/10/2003 (when LRA 2002 came into force).

  • Now, new system, Part 9 and Sch 6 LRA 2002:

  • Re for periods in which 12 years had not been achieved before 13/10/2003.

  • Can be registered as proprietor after 10 years of adverse possession

  • Notice of that application is given to true owner (who can easily defeat the application, and has 2 years to evict the squatter)

  • So new system: harder to obtain adverse possession.

• From 1/9/2012, squatting in residential buildings = criminal offence, under Legal Aid, Sentencing & Punishment of Offenders Act s144.

  • But, a potential criminal act is not a bar to acquiring title via adverse possession (Best v Chief Land Registrar)

Leasehold estates

• One of 2 legal estates in land: s1(1)(b) LPA 1925, if ‘term of years absolute...