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Published: Fri, 02 Feb 2018
Freeholder of all five properties
Land Law Coursework
Given the information we have it looks like Miss Stanfield is the freeholder of all five properties. A freehold property is where you have an enjoyment of land forever while a leasehold estate is the same as freehold but only for a particular period. We have limited information but wording suggests that it has the Fee Simple Absolute in Possession in accordance with s.1(1)(a) Law of Property Act (LPA) 1925 so there is no need to discuss this further meaning that she has the authority to grant leases.
The best starting point is the definition of a lease which is situated in the LPA 1925 s.205. This definition must be read with Lord Templeman’s definition of a lease in Street v Mountford which he said a lease involved a grant of exclusive possession for a term. All five properties in this scenario have met the essential characteristics of a lease so we will not be discussing this further.
There are two types of leases that can be created and each property will be assessed in turn to establish which type of lease they have; a legal lease or an equitable lease. A legal lease creates an estate in land for a term of years absolute and with certain formalities while an equitable lease is a lease that grants an interest in land on terms of years absolute but without the legal formalities.
This is a lease interest as under s.1(1)(b) LPA this interest is capable of being a leasehold estate, (a term of years absolute) within the definition so statute states that it is capable of being legal. For it to be a legal lease it needs to comply with s.52(1) of LPA 1925 and the deed must comply with s.1 Law of Property (Miscellaneous Provisions) Act (LP(MA)A) 1989. The s.1 requirements are that the document states that it is a deed and must be signed witnessed and delivered. No deed has been executed as there has only been an agreement in contract that Miss Stanfield will grant a lease to Mr A therefore it does not meet the requirements of s.52(1). s.54(2) does not apply here.
It is however possible to imply a legal lease as Mr A has been allowed into possession by Miss Stanfield this type of lease is known as a tenancy at will but as Mr A has paid the rent monthly and the landlord has accepted, the tenancy at will is converted by implication of law into a periodic tenancy.
As an implied tenancy has arisen it will be measured based on the period for which the rent is to be paid as determined by the agreement. Thus the agreement stipulates the rent is to be paid at a rate of £650 per month and so a monthly legal periodic tenancy is created.
However it can be said Mr A has an equitable lease as s.52(1) has not been complied with, s.2(1) LP(MP)A 1989 states for an equitable lease to arise there must be a contract in writing, signed by parties and contains the main terms of the agreement. In this scenario it does show that there has been a contract in writing and we suggest it has been signed this will suffice for it to be an equitable lease.
If Mr A is willing to go to court before property is sold then equity might well step in to help him here and under the doctrine in Parker v Taswell a court of equity would perfect the imperfect lease by granting specific performance of the contract. Grant for specific performance will only be allowed if pre-conditions of the doctrine of Walsh v Lonsdale have been met. This would compel Miss Stanfield to grant Mr A a deed, which will give Mr A a legal lease for four years.
It shows that Mr A has both a legal yearly periodic tenancy and an equitable lease for four years. He cannot have both at the same time since they cannot co-exist. s.49 Supreme Court Act 1981 states equity will always prevail where there is a conflict between the rules of common law and the rules of equity. Thus Mr A will be regarded as having an equitable lease for four years.
In order for Mr A to protect his equitable lease and bind any potential purchasers of the property, we need to look to see whether Mr A has done a number of things and if he meets certain criteria. An equitable lease is not capable of substantive registration under s.3(1) Land Registration Act (LRA) 2002.
Now we need to deicide whether the interest is capable of being an overriding interest; the LRA 2002 provides two sets of classifications of those interests which will override a purchase of a legal estate even without registration; unregistered interests which will override first registration and unregistered interests which will override transfers of a registered estate.
Since this property is already registered, in order to be an overriding interest, the equitable lease must be found to fall into a category defined under Sch3 LRA. As the lease is equitable, it will not fall into this category as it only deals with legal leases.
Under Sch3(2) LRA, if Mr A can show that he has an ‘interest’ in the land of which he is in ‘actual occupation’, this may become an overriding interest at the time the property is disposed of to the buyer and therefore bind the buyer as the new purchaser.
An equitable lease has been well established by case law to give rise to a proprietary right thus Mr A can show he has an interest in the land. The date of actual occupation does matter as confirmed in Sch3(2) therefore Mr A will have to prove that he was in actual occupation of the property at the time Miss Stanfield signs the deed to transfer the freehold over to the buyer.
Under Sch3(2) LRA not all proprietary interests are capable of overriding even where the interest holder is in occupation of the legal estate affected. Paragraphs 2(a) to (d) set out the exceptions. The potential purchaser will be required to undertake such inquiries and make such inspections of the property that would satisfy a reasonably prudent man of business. Failure to do so will mean that s/he will have constructive notice of Mr A’s equitable lease and he will be bound by it. If he does not have notice either actual, constructive or imputed, the potential purchaser will take free of Mr A’s interest.
It is likely however that Mr A’s occupation of the premises as a tenant is obvious and therefore Mr A would probably be able to claim the protection of Sch3(2) as a person with an proprietary interest in the legal estate of which he actually occupied and whose interest was not excepted by virtue of Sch3(2)(c).
Mr A is also allowed to register his interest as a notice. The types of interest that are protected by entry of notice are equitable interests as it is not excluded under s.33. Thus once entered the interest ceases to be an overriding interest s.29(3). Therefore it is possible for Mr A to register his lease under this provision.
Notices may be entered either by the registered proprietor or the person who claims the right to be protected. Applications may be made in two ways. Mr A may register his lease either by way of an “agreed notice” (i.e. in agreement with Miss Stanfield or with documentary evidence of the existence of the right) or by way of a “unilateral notice” (without Miss Stanfield’s agreement or without documentary evidence of the right’s existence).
If the buyer is bound by the Sch3(2) or by the notice, either agreed or unilateral, he would have a right of action against Miss Stanfield.
If Mr A cannot claim the equitable lease for whatever reason then his legal monthly periodic tenancy does not need to be registered as it is an overriding interest.
This is a lease interest as it has fulfilled s.1(1)(b) LPA. For it to be a legal lease a deed has to be executed but this has not been done as stated in the scenario. s.54(2) does not apply here.
It is however possible to imply a legal lease as Miss B has been allowed into possession by Miss Stanfield (tenancy at will) and she has accepted the rent monthly this will now be regarded as a monthly legal periodic tenancy as it fulfils s.52(2)(d) . We need to consider if Miss B has an equitable lease, as the lease has not fulfilled s.52(1) LPA and for it to suffice as an equitable lease it must meet the criteria set out in LP(MP)A 1989 s.2(1). There has only been an offer in a letter to grant a lease this may not suffice under s.2(1) as it needs to be signed by both parties and may not be considered as a contract.
However if the court do allow it to suffice it will show that Miss B has both a legal monthly periodic tenancy and an equitable lease for twelve years but the latter will prevail.
The means of protecting interests does change for unregistered land against potential purchasers. In unregistered land, the protection of equitable interests relies upon either:
(i) Registration as a Land Charge at the Land Charges Registry or, if not registrable,
(ii) The doctrine of notice
It shows that Miss B can register it under Class C(iv) (s.2(4) of Land Charges Act 2002 (LCA) to bind third parties, failure to do so will render the charge void as against a purchaser of the legal estate for money or money’s worth. If Miss B cannot claim the equitable lease for whatever reason then her legal monthly periodic tenancy will be governed by the principle that “legal rights bind the world” and the buyer will be bound by this tenancy. But the new buyer can terminate it by giving one month notice as that is the notice period for monthly periodic tenancies.
This is a lease interest as it has fulfilled s.1(1)(b) LPA. For it to be a legal lease a deed has to be executed, in this scenario it shows a lease has been granted to Mr C so they have complied with s.52(1) of LPA 1925 and it is presumed the deed has complied with s.1 LP(MP)A 1989. Meaning there is a fixed term legal lease as the period is fixed (six years) and certain at the time of creation.
Mr C therefore cannot register his lease by way of registrable dispositions as that only registers legal lease’s over seven years. Therefore we need to look at overriding interests. Mr C has a legal lease, therefore it would be overriding by virtue of Sch3(1) LRA.
Another way he can protect himself is by notice. The types of interest that are protected by entry of notice are Legal leases over three years (but not over seven years) as it is not excluded under s.33. This will allow Mr C to protect his interest under this notice thus meaning he is protected from potential buyers.
This is a lease interest as it has fulfilled s.1(1)(b) LPA. For it to be a legal lease a deed needs to be executed in this case this has not been done as it there has only been an verbal agreement that Miss Stanfield will grant a lease to Mrs D.
However there are exceptions that need to be looked at. For leases for three years or less there is no requirement for a deed to be completed meaning it can be done orally or by conduct and in this case a lease has been granted for two and a half years. This shows there is a fixed term legal lease as the period is fixed (six years) and certain at the time of creation.
To also constitute a legal lease the rent must be at market value meaning a full rent at economic rates. Therefore if Miss Stanfield reduced the rent lower than market value just because Mrs D is her friend then it will not be considered a legal lease, there is nothing stating this is the case meaning it will be presumed it is at economic rate. Also what needs to be proved is that the lease takes affect in possession in this case the lease has started straight away so this has been complied with.
As the land is unregistered Mr C’s legal lease will be governed by the principle that “legal rights bind the world” and any future buyers will be bound by this lease so nothing has to be done by Mr C to protect his lease.
This is a lease interest as it has fulfilled s.1(1)(b) LPA. For it to be a legal lease it needs to comply with s.52(1) of LPA 1925. A deed has been executed between the parties and we presume the deed has complied with section s.1 LP(MP)A 1989. Meaning there is a fixed term legal lease as the period is fixed (fifteen years) and certain at the time of creation
To be binding on third parties leases over seven years have to be registered meaning this needs to be done by Mr and Mrs E for there to be a legal lease if they don’t it will result in the lease being equitable. Therefore the lease has the potential to be legal but only if it is registered by way of registrable disposition s.27 LRA 2002. Registrable dispositions are interests that must be completed by registration. These interests under s.27 include; legal lease exceeding seven years and certain other leases; those which take effect more than three months after the date of grant (reversionary leases). Mr and Mrs E have a lease over seven years and a reversionary lease as the lease commenced three months after it was granted.
However if they do not register it, it will not take affect at common law therefore it will remain equitable. For it to be a equitable lease it must comply with s.2(1) LP(MP)A 1989. Looking at the facts there has been a deed in writing presumably signed this will comply with s.2(1).
The protection include the doctrine of overriding interest however it will not fall into Sch3 LRA as this category only deals with legal leases which are under seven years not equitable interests. Mr and Mrs E would probably be able to claim the protection of Sch3(2) LRA as a person with an proprietary interest in the legal estate of which there have actually occupied and whose interest was not excepted by virtue of Sch3(2)(c). As a double precaution they will be able to enter it on the registered proprietor as a notice as it protects equitable leases.
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