Land Registraion Act, Breach of Covenant

Question 1 The impact of the Land Registration Act 1925

House Number 1

Henry inherited this house along with the others in 1993, inheriting unregistered land would lead to a compulsory first registration under the Land Registration Act 1997 which inserted a new s123A into the LRA1925, however as Henry inherited the house prior to this act he was not obliged to register the house.

In 1995 he mortgaged the house to the Greedy Mortgage Company (GCM), by way of a first legal charge. Again this would following s123A this would lead to a compulsory first registration, but as the mortgage was created prior to 1998 Henry would not have been required to follow its provisions. According to s87 of the Law of Property Act 1925 the mortgagee (the GCM who have lent Henry money) are entitled to the same rights as if they had the grant of a term of years absolute, however a legal mortgage is not a legal estate but can be a legal interest under s1(2)c LPA 1925. For the mortgage to be binding as a legal interest the GCM will have to register it. Once this is done s4 of the Land Charges Act 1972 says that the mortgage will be binding on all subsequent mortgagees or purchasers provided that it is registered before the completion of those transactions. Similarly the mortgage will override all legal interests created after the date of registration, and all land charges capable of registration that do not pre date the mortgages creation. Finally the mortgage will also take priority over any interests governed by the doctrine of notice that did not exist before its creation. The LRA 1925 has little impact on this transaction.

In 2001 when H re-mortgages GCM's interest in the property has ended as their loan has been repaid, which means that the new legal charge in favour of the Friendly Finance Company (FFC) is in fact the first legal charge on the property, as in this context first means first in order of priority and not literally the first legal charge to have been placed on the property. As such S123A applies and Henry should have registered the title to house number1 within 2 months of the mortgage being taken out. If he did so the LRA1925 begins to affect the transaction, as from now on any subsequent mortgages will be prioritised by date of registration 1, and in order to be binding on the mortgagee all registerable interests under s1 LPA 1925 and all minor interests must exists prior to the date of registration 2, a LRA1925 70(1)g overriding interest must exist prior to the date of registration , and all other overriding interests must exist at the date of registration.3 If the mortgage did not lead to registration then the transaction will have taken place only in equity making it possible for another interest to supersede the mortgage.

Kenneth inherited house number 1, without encumbrance as the legal charge had been paid by Henry's insurance, he should then have registered himself as the new proprietor as otherwise his interest in the property will exist only equity and the executors of Henry's estate will hold it on trust for him. Again if the title to the land has not yet been registered then s123A LPA 1925 requires that he register it.

A 25 year lease of a property is a lease term of years absolute and is therefore a legal estate under the LPA 1925. In order for the estate to be valid Victoria must register with a separate title to protect her interest, this is another example of compulsory registration, however a lease of over 21 years was trigger event for registration even prior to the LRA1997.

House Number 2

The sale of house number 2 in 1996 should have triggered compulsory first registration of the freehold, if this was not done within 2 months Henry would have continued to hold the title on trust for Susan. Providing that it was done there is no need to register the leasehold title, as only leases of over 21years require registration under the LRA1925.

House Number 3

There are two issues here; firstly in order to give the house to Beryl Henry must have complied with s52(1) LPA 1925 and transferred the title to her by deed, which must itself comply with s1(1)LP(MP)1989. He appears to have done this by executing the deed of gift. As the transfer took place in 2001 under s123ALRA1925 it should have led to first registration. If this registration did not take place Beryl is the owner in equity only and Henry's estate holds Number 3 on trust for her.

2

Walter, Tom and Yvonne

Walter appears to have breached the covenant relating to the use of the land for residential purposes by running a business from his property. To take action against Walter it must be established that he has the burden of the covenant and that Simon has the benefit.

Although W is Bernard's successor in title the burden of freehold covenants cannot pass at common law regardless of whether they are positive or negative and thus W is not bound .4

W may have the burden of the covenant in equity if; the covenant is restrictive, the original covenantee owned land capable of benefiting from the covenant, the burden was intended to pass, either through express assignment or through having reference to the subject matter of the grant 5, and finally if he had notice of the covenant 6. In order to have notice of the covenant it would have to have been registered against the title of the servient land on the charges register. If the covenant is registered W is bound in equity as all of the conditions appear to be fulfilled.

For S to have the benefit in equity he must prove that either, the benefit was expressly assigned to him, and that notice was given to the covenantor7 , or that the covenant has reference to the subject matter of the grant, and the benefit was annexed to him, either expressly in the deed, or by statute8 which annexes the benefit of any covenant which relates to the land of the covenantee 9. The benefit does not appear to have been expressly assigned to him, and it is difficult to see how a promise to keep the house in the use of a single family relates to the land of covenantee, so it is unlikely that S would succeed. However, if all the owners derive their title from a common source, prior to the sale the land was laid out in plots, the restrictions were intended to benefit all the plots, the plots were bought on that understanding, and the restrictions are confined to a defined area, then there may be a scheme of development10 meaning S has the benefit in equity. Not all these conditions need to be met and generally a deed of mutual covenant or some evidence of a purchaser's knowledge of local rules will suffice to establish a scheme. Here the land was part of a prestige development of business homes making it likely that the purchasers knew about the local restrictions. As such S may have the benefit in equity and be able to take action against W. If successful S any remedy will be discretionary, and the court could award an injunction effectively closing the nursery, or damages.

Tom does not appear to have breached any covenants, as the people living in his house are his daughter and grandchild and thus part of one family. However, if he has effectively created two families by dividing the house he will be liable in the same manner as W, although it is difficult to see a judge awarding any remedy in this case.

Yvonne has breached covenant to paint the fences and keep them in repair. However she cannot be bound at common law, nor is she bound in equity, as the covenant she has breached is positive and thus does not come under Tulk v Moxhay.

S might claim that the doctrine of benefit and burden applies to T, W, and Y if none of the above is successful. This principle states that if you take the benefit of a covenant you must take the burden of any related covenants 11. If T, W and Y have benefited through any of the covenants and those covenants are related to the ones that are breached then S may have a claim.

Original Covenantors

Simon may be able to claim against Bernard, Colin, and Doris. They all have the burden of the original covenants at common law under the doctrine of privity of contract for breaches of express and real covenants 12.

For the benefit to have run at common law it will have to have been expressly assigned to Simon, unless there was an automatic assignment. Automatic assignment occurs when: the covenant touches and concerns the land, at the time of the covenant the covenantee held a legal estate in the land, the person claiming the benefit of the covenant derives the title from under the original covenantee, and the original parties intended the benefit to run 13. Intention is established in the same manner as in equity (see above). Here these conditions appear to be met and Simon may be able to sue for damages (the only remedy at common law). B,C, and D may have put indemnities in their conveyances stipulating that the new owners would be liable for any breach of covenant, effectively shifting the burden to W,T, and Y.

3

David has offered Anita a £10,000 if she repays him by £100 a month. This offer appears to have both certainty of terms and willingness to be bound14 and is thus valid. Anita appears to have accepted the offer and meaning that there is agreement. There is consideration for David's offer in Anita's promise to repay the loan at £100 a month, and as the boutique is a business venture it seems likely that there is intention to create legal relations 15. Therefore the 3 essential elements of a contract are present. Anita is bound by the contracts terms and liable to pay David the money due from April even though he agreed to accept less, as for a contractual renegotiation to be enforceable the promisee has to provide fresh consideration16 . However, she may not be liable for all the money David is claiming due to the doctrine of promissory estoppel. Anita will have to show that there has been a clear and unambiguous promise, that promise was intended to create legal relations, she has altered her position in reliance on that promise, it would be inequitable for David not to be bound, and that David has not given reasonable notice of his intention to reassert his original rights17 . If she succeeds the promissory estoppel will operate to suspend David's rights for as long as it equitable to do so, but not indefinitely and David's demand for full amount from now on, will amount to reasonable notice of his intention to reassert his rights .18

4

Brian may claim actual undue influence, where a person exerts influence over the mind of a party to a contract to such an extent that the consent of that party is called in question 19. In such circumstances there is no need to show that the contract was in anyway disadvantageous or prove there was a special relationship between the parties. Although Anita lied to Brian, he may not be able to rely actual undue influence, and so may have to claim presumed undue influence. This occurs when there is a relationship of trust of confidence between two people, and a transaction that calls for an explanation. The relationship between spouses is often considered to be one of trust and confidence, and a bank should be put on enquiry whenever a spouse stands as surety for their partners debts 20, as this amounts to constructive notice of possible undue influence. When a bank is put on enquiry in this manner it should offer advice extent of liability or check with the spouse if they have got independent legal advice, explain why the bank wants them to use a solicitor, send the solicitor the necessary information, obtain written confirmation that he has fully explained the implications of acting as surety21 . Failure to act in this manner will leave the bank open to claims of undue influence and allow the injured party, in this case Brian, to rescind the contract.

  1. S29 LRA1925[^ Return]
  2. s20 LRA1925[^ Return]
  3. s20 LRA[^ Return]
  4. Austerberry v. Oldham Corporation [1885] 29 Ch. D. 750[^ Return]
  5. s79 LPA 1925[^ Return]
  6. Tulk v. Moxhay (1848)[^ Return]
  7. s136 LPA 1925,[^ Return]
  8. s78 LPA 1925[^ Return]
  9. See Federated Homes Ltd v Mill Lodge Properties Ltd. (1980) CA for a discussion of the principle.[^ Return]
  10. Elliston v. Reacher [1908] Ch. 665, C.A[^ Return]
  11. Halsall v. Brizell [1957] Ch. 169[^ Return]
  12. S79 LPA 1925[^ Return]
  13. See Smith and Snipes Hall Farm v. River Douglas Catchment Board [1949] 2 K.B. 500.[^ Return]
  14. Harvey v Facey [1893] AC 552[^ Return]
  15. Had this been a purely business deal then intention would have been presumed see Jones v. Padavatton,[1969] 1 WLR 328[^ Return]
  16. Stilk v Myrick (1809) 2 Camp 317[^ Return]
  17. Central London Property Trust Ltd v High Trees Ltd [1947] KB 130[^ Return]
  18. Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd 1955[^ Return]
  19. Williams v Bayley (1866) LR 1 HL 200[^ Return]
  20. Royal Bank of Scotland v. Etridge (No. 2) [2002] 2 A.C. 773.[^ Return]
  21. ibid.,[^ Return]

BIBLIOGRAPHY

Books

M. Furmston, Cheshire, Fifoot, and Furmston's Law of Contract, London, Butterworths, 2001

W.B. Howarth, Nutshells: Land Law 5th Edition, London, Sweet & Maxwell, 2000

J. McKenzie and M. Phillips, Textbook on Land Law, London, Sweet & Maxwell, 2002

A. Sydenham, Nutshells: Equity and Trusts 5th edition, London, Sweet & Maxwell, 2000

Websites

http://www.legal500.com/devs/uk/cp/ukcp_027.htm

Cases

Austerberry v. Oldham Corporation [1885] 29 Ch. D. 750

Central London Property Trust Ltd v High Trees Ltd [1947] KB 130

Elliston v. Reacher [1908] Ch. 665, C.A

Federated Homes Ltd v Mill Lodge Properties Ltd. (1980) CA

Halsall v. Brizell [1957] Ch. 169

Harvey v Facey [1893] AC 552

Jones v. Padavatton, [1969] 1 WLR 328

Royal Bank of Scotland v. Etridge (No. 2) [2002] 2 A.C. 773

Smith and Snipes Hall Farm v. River Douglas Catchment Board [1949] 2 K.B. 500.

Stilk v Myrick (1809) 2 Camp 317

Tulk v. Moxhay (1848)

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd 1955

Williams v Bayley (1866) LR 1 HL 200

Legislation

Land Charges Act 1972

Land Registration Act 1925

Land Registration Act 1997

Law of Property Act 1925

Law of Property (Miscellaneous Provisions) Act 1989

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