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Land Law

Land law impacts upon many facets of our day-to-day living, it determines: the difference
between what is property and what is land; who owns property in the land; who may have access
to land; your rights to land as a tenant, and; what you can do with your land. Land law is unusual
in that you can own it outright but still be limited in how you can use it. There are many reasons
for this such as agreements reached by a previous owner or because you failed to notice how the
land was used when you purchased it. As such, land law is heavily governed by how your
neighbours interact with land and what you could have been expected to know.

Ultimately, land law is looking to determine what interests there are in the land and therefore
what a person can do with the land. These interests can be impacted depending on whether the
land is registered or not registered. Beyond owning an interest in the land, less obvious interests
can also come in the following forms:

 Minor and Overriding interests

 Equitable interests
 Covenants
 Leases & Licenses

This module is also looking to establish how these different interests interact.

Table of Contents

2. Land Law Basics Lectures

3. Unregistered Land Lectures
4. Registered Land Lectures
5. Trusts of Land Lectures
6. Co-Ownership Lectures
7. Easements & Profits Lectures
8. Covenants Lectures
9. Leases & Licences Lectures
10. Mortgages Lectures

Fixtures and Chattels Lecture

Exam questions in this area almost invariably are about one issue: is the object a fixture or a
chattel? The reason this is the issue is because the answer to that question will lead you to
discover whether the item is part of the land, and thus passes with it.

Throughout this guide, you will see questions (highlighted in red text for convenience). These
questions are ones you may well ask as you go through the guide, and they are intended to help
develop and broaden your understanding of different categories within the case law.
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The guide is split into four parts. The first part is an outline on the subject. The second part
introduces the (very important!) two-stage test and introduces surrounding matters that are
relevant to the question of annexation. The third part addresses the issue of the physical degree
of annexation. A recap will follow part three. The fourth part discusses purposes of annexation,
and shows how the second stage of the two-stage test can be more decisive than the first stage. A
second recap concludes the fourth part. A case glossary follows the fourth part, which you can
use to quickly revise which case represents which principle. Because this area of law is very fact-
specific, it is very helpful to remember which cases are, for example, about light bulbs or kitchen
appliances. Finally, you will find a (very brief!) statute glossary.

Introduction

Outline

As aforementioned, it is important to establish what on land, constitutes a fixture and a chattel.

Fixtures are those goods which belong as part of the land. Chattels are the personal effects of
their owner. A chattel can be removed at any time by their owners, whereas fixtures might or
might not be removed from the land depending on who it is that wishes to remove them.

Apart from s.62 of the Law of Property Act 1925, all guidance comes from case law. So it is
important to know which cases represent which principles. The two most important cases are
Elitestone Ltd v Morris [1997] and Hellawell v Eastwood(1851)155 E.R. 554 as these both
discuss the two-stage test.

What are fixtures and chattels?

A fixture is any item that is included as part of a conveyance of land (that is, where land is given
from one party to another, and such an exchange includes all of the rights and obligations over
that land) according to s.62 of the Law of Property Act 1925. This means that when a portion of
land is sold and there is something defined as a fixture within the confines of that land, then that
fixture will be owned by the person who takes ownership of the land as a whole.

By contrast, a chattel is a physical object which is separate from the land, and thus its ownership
is independent of who owns the land. It does not change hands upon a conveyance of land.

“Can you give me an example?”

Example: if a painting is hanging in the property known as Blacklodge, and the painting is
regarded as a chattel, then when Blacklodge is sold, the person who owns the painting does not
change: it still belongs to the person who owned it before the conveyance of land.

Conversely, if an ornate chandelier is hanging in Blacklodge, and that chandelier is regarded as a

fixture, then when Blacklodge is sold, the party to whom it is sold now owns the chandelier. It is
no longer owned by the person who, prior to the sale, owned the land and therefore owned the
chandelier.
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NOTE: these examples are assuming that the painting is a chattel, and the chandelier is a
fixture. This example does not explain why they are a chattel and fixture respectively. Instead,
this example is designed to show who owns those objects.

Examination Consideration

You should always think about who owns the rights to the object, because exam questions will
drive at this point: who has the right to decide what happens to the physical object? Your answer
will be determined by whether it is a fixture or a chattel.

The Test and Miscellaneous Issues

Two-Stage Test

The central question comes down to a two-fold test, as devised in Hellawell v Eastwood
(1851)155 E.R. 554. In this test, the court must consider:

1. the degree of annexation: the extent to which the item has been attached or annexed to the
property, and
2. the purpose of annexation: the purpose for which the item was attached to the property.

The same test was reiterated and put forward in Elitestone Ltd v Morris [1997] 1 W.L.R. 687 by
Lord Lloyd of Berwick.

In looking at stage 1), we can say that the greater the degree of attachment or annexing is to the
property, the more likely the item is considered to be a fixture. Another way of expressing this
point, as was made clear in Elitestone Ltd v Morris [1997], is that the physical object is a fixture
if it merges with the land.

“How does it merge with the land?”

This merging is determined by either:

the physical bond of the object with the existing land or

(more rarely) its juxtaposition with the land, such that it is so close to the land that it was
intended to be part of the land.

Case in Focus: Elitestone Ltd v Morris [1997] 1 W.L.R. 687

In the case of Elitestone Ltd v Morris [1997] the predecessor of Morris had constructed a wooden
bungalow. It rested on concrete pillars, and the pillars were attached to Elitestone’s land. The
structure could only be used when on the land; removing the bungalow would have required
demolition and reconstruction of the structure. The House of Lords held, unanimously, that the
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structure was not a fixture per se, however it must be intended to form part of the land, to have
become ‘part and parcel’ of the land, because of the difficulty of its removal and the magnitude
of its affixing to the land. The main judgment came from Lord Lloyd.

Key points from Elitestone v Morris:

How is the structure affixed to the land? Is it, for example, placed on top of the land, is there
something (pillars, for example) between them?

Is the structure difficult to remove? Would its removal involve damaging the item or the
surrounding land?

If the structure is affixed to the land in such a way that removing the item would damage it or the
land means it is a fixture.

The result of an item being a fixture is that the person who owns it is whomever owns the land.
Thus, a fixture can have a former owner; that is, someone who used to own the land (and thus the
fixture), but now does not own the land, and therefore does not own the fixture. This is such an
abiding principle of fixtures that former owners are prevented from retaining ownership even if
they take active steps to do so: for example, in Aircool Installations v British
Telecommunications [1995] C.L.Y. 821, if the former owner inserts a retention of title clause
into the conveyance of a fixture, such a clause is null and void.

“Can the owner of the land decide to no longer own the fixture?”

Yes, this is possible. But again, only the owner of the land can sever the fixture from the land
(for example, taking down the chandelier at Blacklodge: see the Example at ‘What are fixtures
and chattels?’ above). Further, if the owner does not take that step of removing, then upon a
conveyance, that physical object will be conveyed, as part and parcel of the land, to the new
owner, and the former owner loses the right to separate the fixture from the land (Law of
Property Act 1925, s.62(1)).

If you want to impress the examiner, you can invoke the Latin phrase quicquid plantatur solo,
solo cedit. It means “whatever is attached to the ground becomes a part of it.” This in essence is
how a physical object comes to be defined as a fixture: it is attached to the land, rather than
simply resting on it.

Academic Commentary:

Michael Haley, ‘The law of fixtures: an unprincipled metamorphosis?’ (1998) Conv.

Mar/Apr 137.

In reference to that phrase quicquid plantatur solo, solo cedit, Haley argues that actually the
phrase carries little meaning nowadays. Because the court has had to adapt the case law (such as
the case of Hellawell v Eastwood from the 19th century) to modern circumstances rather than
apply a modern statute, Haley says the case law is a ‘mixed bag of tests and evidentiary
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presumptions.’ There is, argues Haley, a lack of coherence and certainty. Haley says ‘the
interaction between the degree and purpose rules… is unsatisfactory, unclear and unduly
cumbersome.’

Haley therefore recommends that the ‘ancient principles’ ought to be abandoned, and a new
statutory regime be introduced, just as there is for agricultural tenancies. Because otherwise, as
in the case of Botham v TSB Bank plc(1997) 73 P. & C.R. D1, ‘it is… a sad commentary of the
present law that it requires the Court of Appeal to decide whether mundane, household items,
such as a sink or cooker, are fixtures and chattels.’

“Is the owner of the land entitled to the chattel(s) on it?”

As a matter of law, no. The person who owned the chattel which was placed in (close proximity
to) Blacklodge would own that chattel before and after they convey the land to another party.
Chattels may therefore be removed at any time by the owner.

Examination Consideration

In this section we have examined the two-stage test. As a quick refresher, what are the two stages
of the test? Keep going back to the test whenever you are faced with a chattels/fixtures question.
In this instance we have looked briefly at the idea of merging with the land as something which
defines fixtures, and the idea that an object is a fixture if it is difficult to remove without
damaging the object.

For bonus points, which Lord in the case of Elitestone recited the two-stage test?

Buyers

It used to be that the distinction between fixtures and chattels had to be settled by means of
express agreement. Expressed differently, unless an object was defined as a chattel explicitly in
the contract for the sale of Blacklodge, all physical objects in and around Blacklodge would
belong to the party purchasing the property at the point of sale. The buyer may even have been
entitled to ownership of those physical objects at the moment the offer of purchase is made and
the land is inspected by potential buyers (Taylor v Hamer [2002] EWCA Civ 1130 per Sedley
LJ). However, in modern conveyancing, ‘tick lists’ of items, described as fixtures or chattels, are
retained by the seller of Blacklodge. This tends, in most cases, to clarify the position.

Mortgagees

It is more often the case that the distinction between fixtures and chattels is not a dispute around
the sale of a property. Instead, it is more likely to form part of a dispute between lenders
(mortgagees) and borrowers (mortgagors) after the borrower has missed payments on their
mortgage. Here, the lender is considering whether they can sell the property along with certain
items in the property, such as household appliances. These sorts of items are certainly open to
question, though there is no single rule for today’s appliances. Instead, these disputes will be
decided on a case-by-case basis by reference to the two-stage test (Botham v TSB Bank plc).
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Examination Consideration

If you are faced with a question about a lender (mortgagee) attempting to take possession of a
property in the event of default (missed mortgage payments) by the mortgagor (the borrower), it
is entirely possible that as part of that question you will be asked if the mortgagee can sell the
property along with certain items in order to increase the sale value, or if those certain items still
belong to the borrower.

What is the ‘land’?

Though this question holds only a limited scope for dispute, the precise definition of land can be
nevertheless an issue for the purposes of taxation (Melluish (Inspector of Taxes) v BMI (No 3)
Ltd [1996] AC 454, HL) or for environmental and conservation purposes (R v Secretary of State
for Wales, ex parte Kennedy [1996] 1 PLR 97).

Physical Annexation

Physical Degree of Annexation

Given there is almost no statute in this area, and in each case the status of physical objects have
been determined on the facts of those particular cases, there is no single means of assessing
whether the physical object has been annexed to the land.

There is a kind of gravity test (though to be clear, you won’t find that term used in the case law!)
which suggests that an object is a chattel if it rests upon the land merely by the force of its own
weight. Applying this rule of thumb to an example, a chair that is not fixed to the floor would be
a chattel.

So between two cases, where the objects are the same or of a similar type, yet they are set down
in different methods, there will be a different result. In Hulme v Brigham [1943] K.B. 152, heavy
printing machinery that were unattached to the floor were held to be chattels, whereas in Holland
v Hodgson (1871-72) L.R. 7 C.P. 328 the spinning looms were bolted to the floor of a mill and
so were held to be fixtures.

For other examples, in Aircool Installations v British Telecommunications [1995] air

conditioning equipment was bolted on to, and cut in to, the walls of a building, and they were
held to be fixtures. By contrast, in Botham v TSB Bank plc kitchen appliances that rested on the
floor of the kitchen merely by their own weight and without any means of bolting to the floor
were held to be chattels, even though they were connected electronically and were integrated into
the kitchen.

“What about light fittings?”

Again it is case-specific. In Young v Dalgety [1987] 1 E.G.L.R. 116 the fluorescent light fittings
were held to be fixtures, but in British Economical Lamp Co. v Empire Mile End [1913] 29 TLR
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386 light bulbs were held to be chattels. In both instances, the determining factor was the degree
and manner of attachment of the objects.

“You mentioned a bungalow earlier. What about other similar-sized structures?”

In Dean v Andrews (1985) 135 N.L.J. 728 a greenhouse that had its own concrete plinth, and was
resting on a concrete base that sat on the land, was a chattel. In Buckland v Butterfield129 E.R.
878 a conservatory on a brick foundation attached to a dwelling separated by windows was
deemed to be a fixture and have to become part of the freehold.

Examination Consideration

As you can see, the question of physical annexation is a case-specific one. So when you are
answering a problem question about chattels and fixtures, ask yourself: is the object attached to
the wall or floor in any way? Or does the object simply rest against the surface by its own
weight? Look closely at the words used to describe the placement of the object.

RECAP

We have so far learned the following:

 Exam problem questions are concerned with whether an object (or objects) in question is (are) a
fixture or a chattel (or fixtures vs chattels).

 This question is important because if we know if an object is a fixture or a chattel, we know to

whom the object belongs. Fixtures = freeholder; chattel = purchaser of the object.

 Whenever we attempt to resolve this question, we always make reference to the two-stage test
of Hellaway v Eastwood and Elitestone Ltd v Morris.

 The first stage of the test asks about the extent to which the property has been affixed or
annexed to the land. The fact that this is posed as an ‘extent’ question is deliberate: the greater
the degree to which the object has been affixed to the land, the more likely it is that the court
would deem the object to be a fixture. Another way of expressing this is that the object has
“merged with the land.”

 Ordinarily, there is a kind of gravity test to assess the degree of annexation of a given object. If
an object simply sits on a surface by gravity alone, meaning it is not bolted down, nailed down,
or attached to the land with any other object, then the object in question is likely to be a chattel.
Conversely, if an item is affixed to the land, then it is more likely to be a fixture according to this
part of the two-stage test.

 There is more likely to be a great degree of annexation to the property if removal of the object
would cause damage to either the object itself and/or to the surrounding land.

 Other relevant matters include whether the party seeking to have the item declared as a fixture
is a mortgagee or a buyer of the property. In either case, they would have an interest in having a
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particular object (such as air conditioning equipment, per Aircool Installations v British
Telecommunications).

 Finally, though it is unlikely to be of primary consideration in a question surrounding fixtures or

chattels, the status of the land itself may be disputed.

Purpose

Deemed purpose of Annexation

Despite everything that is said above, it is not necessarily the case that an item which is bolted
down is intended to be a fixture, and depending on the intention, it may be that the item was not
intended to be a fixture, and such a lack of intention would mean the item was not a fixture
(Potton Developments Ltd v Thompson [1998] NPC 49, ChD). Intention will usually be gauged
by inference, and communication between the parties.

What is clear is that this intention must be made known between the parties. Lord Cockburn
observed in Dixon v Fisher(1843) 5 D 775 that no person ‘can make his property real [ie
belonging to the land] or personal [belonging to himself] by merely thinking it so.’ The question
is whether the installation of the object would in ordinary circumstances have been intended to
be a permanent accretion to, or improvement of, the land or if it is only a temporary addition to
the building or landscape (Botham v TSB Bank plc).

“What about gnomes?”

Indeed: a single freestanding garden gnome in a garden ordinarily constitute a chattel, but a
substantial collection of deliberately and carefully-placed garden gnomes may constitute a group
of fixtures (Hamp v Bygrave(1983) 266 E.G. 720). Likewise, a Portakabin is a chattel as it is
intended to be a temporary structure (Wessex Reserve Forest and Cadets Assn v White [2005]
EWCA Civ 1774) whereas a filtration plant for a swimming pool is almost inevitably a fixture as
it is required to benefit that swimming pool (Melluish (Inspector of Taxes) v BMI (No 3) Ltd).

Case in Focus: D’Eyncourt v Gregory(1866) LR 3 Eq 382

This case concerned heavy ornamental marble statues of lions resting merely by gravity (so
without any installed aids such as bolts) in strategic locations were held to have been an intended
to merge with the land as an integral component of an intention to improve the land.

Key points from D’Eyncourt v Gregory:

The gravity test (see above) is a relevant consideration when deciding if an object is a fixture or
chattel, but

If there is sufficient contrary intention to make them a fixture, then the objects are deemed to be
fixtures, notwithstanding that they can be removed without damaging the land.
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Academic Commentary:

Peter Luther, ‘Fixtures and chattels: A question of more or less’ (2004) O.J.L.S. 4 597.

Luther has criticised the decision in D’Eyncourt v Gregory. In Gregory, the court referred to
millstones as objects which are ‘a thing for the benefit of the common-wealth.’ This means that
the object in question, if conferring an aesthetic benefit to the general public (for example,
passers-by), then there is a case for what Luther calls a ‘constructive annexation’, because by
being connected to the land, the object both acquires a benefit by its location and likewise
confers an aesthetic benefit on its location.

Luther criticised the decision in D’Eyncourt because the objects in question were ornaments, and
Luther’s argument is that ornaments are not comparable to a millstone. Further, the property was
a private property, therefore the land could not be said to be accessible to the general public.

Examination Consideration

Applying this point to your own thinking, note the term that Luther has coined - ‘constructive
annexation’ - and see if it fits the case you are considering in an exam. Further, if you are writing
an essay question on fixtures and chattels, you can point to Luther’s objections.

Marta Iljadica, ‘Is a sculpture “land”?’ (2016) Conv. 3 242:

Iljadica examines the case of Tower Hamlets LBC v Bromley LBC [2015] EWHC 1954 (Ch), in
which the court was asked to consider the classification of an ornamental object that was resting
by its own weight. [Note that this was one statue, as opposed to a collection of statues as we saw
in D’Eyncourt v Gregory.] The court declared the statute to be a chattel, because ‘it is an entire
object in itself. It rested on its own weight upon the ground and could be (and was) removed
without damage and without damaging its inherent beauty.’

Iljadica notes the court regarded how the statute could be enjoyed. The court declared that the
statue would not lose its ‘aesthetic power’ if it were removed from the land. Iljadica therefore
notes there is something relevant about the relationship between the location and the object:
namely, the object may depend to an extent on its location for its aesthetic, in which case it is
more likely a fixture, or its aesthetic may be independent of and unconnected from its location,
which would make it a chattel.

Referring to Luther’s article, Iljadica argues that the existing case-law is not suited to issues of
fixtures/chattels in public spaces. As she says, ‘The questions of enjoyment and improvement
remain

unstable especially regarding who is enjoying the object and what it means for a property to be
improved when the improvement is ornamental rather than utilitarian.’ In other words, there is a
lack of certainty of how the concepts of ‘improving the property’ and ‘enjoyment’ should apply
in a public space context.
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Examination Consideration

It may well be that in certain questions there is no single right answer from the examiner’s
perspective. What the examiner wants to see is that you acknowledge that physical annexation is
not conclusive, and that what you should do is at least discuss the intention of the parties. You
may come to a differing view with the examiner as to whether something was intended to be a
fixture or not, but if you can make a reasonable argument by referring back to the facts, the
examiner will be satisfied with that.

As to what facts would be relevant, example questions include: was there discussion between the
parties about what the item was intended for? What use did the tenant have for the item?

Overriding Purpose

We have seen that an object can be deemed to be a fixture, despite it not being affixed to a
surface, if there is an intention to have the object function as a permanent improvement to the
land. Equally, intentions can render an object a chattel: if an item is affixed to a surface, yet the
intention of the party who installed it was merely to facilitate enjoyment of the object (rather
than to have the object provide value to the land). If use of the object was unnecessary for the use
of the land, and the use of the object was simply to enjoy using the object, then the item may be
deemed a chattel (Elitestone Ltd v Morris).

Case in focus: Leigh v Taylor [1902] A.C. 157

In this case concerning valuable tapestries that were pinned to a wall, the House of Lords held
these items were chattels and did not form part of the realty (i.e. the land). The mere fact of a
mode of attachment (in this case, pinning to a wall) indicated no necessary intention that the
tapestries were to remain indefinitely on the wall. Thus, they were not intended to improve the
land. The tapestries could only have been enjoyed if they were pinned to the wall.

Key points fromLeigh v Taylor:

Even if an item is attached to a surface, the mere fact of attachment does not necessarily mean it
is a fixture.

When deciding if an item is a fixture or a chattel when it is affixed, the relevant question is
whether the object was attached to the land because it was the only way in which the object
could be enjoyed.

Other cases which have found affixed objects to be chattels include display cases of stuffed birds
(Viscount Hill v Bullock [1897] 2 Ch. 482) and fitted carpets and curtains (Botham v TSB Bank
plc).

Tenant’s Fixtures

Examination Consideration
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When answering a question, consider counterfactuals (that is, asking what would happen if the
facts were different). For example, if you affixed photos of your family to a wall, they are more
likely to be chattels, because the wall is simply being used as a surface for you to enjoy your
family photos. But if instead the pictures are actually commissioned paintings and have
significant value, can the same argument be made that they are intended simply for enjoyment,
or is their value intended to be used to enhance the value of the land?

Generally, the only party which is entitled to remove a fixture is the freeholder, so if anyone is in
occupation or possession of the property, they cannot remove it except with the consent of the
freeholder (Elitestone Ltd v Morris).

However, over time, the court has come to recognise an exception to this rule and to allow a
certain group the right to remove fixtures. This right to remove fixtures is extended to tenants. It
is recognised that tenants will want to install items on their property and would use those items,
but that item is intended to be used by the tenant for, among other reasons, their trade. Therefore,
the court has come to recognise that there is a difference between ordinary fixtures and “tenant’s
fixtures.”

If a tenant installs an object therefore, the question is whether the object was to be used for a
specific purpose. Therefore, the question becomes whether the item annexed to the land is
present on the property for the purposes of the tenant’s trade or is for ornamentation or utility. If
the item can be removed without it losing its usefulness, then it will be defined as a chattel. If
however the property has to be installed on the land in order for it to be used (meaning it is
useless without being installed), then it will be a fixture (Webb v Frank Bevis [1940] 1 All ER
247). Examples of items which would be fixtures are doors, windows, and chimney pieces. This
is so even if the tenant installed them.

Tenants and Right to Remove

Tenants have the right to remove fixtures during the course of their lease. They may even be
required to do so, such as in the case of redundant equipment. Failing to do so may expose the
tenant to a breach of the conditions of their agreement with the freeholder. The terms of the lease
can also modify or exclude this right to remove fixtures.

If a lease is intended to restrict the right of a tenant to remove the tenant’s fixtures, then the lease
must make that intention clear: the court must be confident that the language of the lease is
unambiguous and express about that intention, otherwise the court will not uphold a term which
excludes the right to remove fixtures (Peel Land and Property (Ports No 3) Ltd v TS Sheemess
Steel Ltd [2014] EWCA Civ 100).

Examination Consideration

As a reminder, what right does a tenant have over fixtures while they are in possession of the
land? And what is needed to uphold a condition which modifies or excludes that right?

Agricultural Fixtures
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Unlike in other case law, in agricultural fixtures comprehensive guidance is found in the
Agricultural Holdings Act 1986 and the Agricultural Tenancies Act 1995. These statutes are
primarily concerned with the rights of tenants of agricultural lands to remove fixtures and
buildings. These statutes recognise that fixtures of farm land can be of immense value to the
owner

Examination Consideration

Which statutes govern agricultural fixtures? Make sure you locate these statutes in your statute
book.

FINAL RECAP

Good job, we’re almost there! Let’s recap this final part of the guide on chattels and fixtures:

 Although we have seen that the degree of physical annexation of an object to land is a relevant
concern, it is not decisive. If an object is affixed to land, such affixing may mean it is a fixture, but
not necessarily. Equally, if an object is not fixed to the land, it is likely but not necessarily a
chattel.

 A party can intend an item to be a fixture, and this will be inferred from the surrounding
circumstances of a case. A court will look to see how items are ordinarily used, and this idea of
ordinary use can to an extent displaces the idea of physical annexation.

 An item can be unfixed and a chattel if single and isolated; but if it is part of a wider grouping of
objects, such that the method of placing the individual objects enhances the value of the
property, then those items are taken by the court to be intended as fixtures even if they are not
affixed to the land in any way and simply sit on it.

 Conversely, an item or selection of items are taken to be chattels if they are affixed to the land
simply because such affixing is the only way that such items can be enjoyed.

 There is usually a presumption that only the freeholder has the right to remove fixtures,
however there are exceptions for tenants when they can show the item is for ornamentation
and decoration or for use in their own trade. There are additional statutory exceptions for
agricultural fixtures.

The Doctrine of Notice Lecture

OVERVIEW

In this guide on unregistered land, you will notice several elements. First, there is relatively very
little case law. Much of what is discussed here forms part of the common knowledge of
unregistered land, meaning that you would not be necessarily expected to provide exact sources
for your main points when discussing unregistered land.
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Those main points are given here in brief and are discussed in detail further below:

1. To take ownership of land, the purchaser needs to show “good root of title.”
2. This process contrasts with showing title for registered land.
3. There are different types of rights in relation to unregistered land: in particular, the rights
of the persons that occupy the land without their rights having been registered.
4. The doctrine of notice applies to unregistered land, not to registered land.
5. The advantages of unregistered land tend to focus on its protection of overriding interests.
6. The disadvantages of unregistered land are about the onus and uncertainty it imposes on
purchasers.

This guide is split into four parts. The first part is an introduction to unregistered land: what
unregistered land is, how it is proven, and - briefly - how those people in possession of
unregistered land may protect their rights. The second part discusses the different types of rights
that a person with unregistered interests can have, and how those different types of rights can be
protected. The third part discusses the concept of notice within the context of unregistered land.
The fourth part discusses the advantages of unregistered land, and the disadvantages of
unregistered land. The fifth part discusses unregistered land in the context of adverse possession.

PART ONE: INTRODUCTION TO UNREGISTERED LAND

Unregistered land is any land which does not have a record of title in the Land Registry.
Unregistered land forms an ever-decreasing minority of the land in England and Wales. It is
decreasing because there has been a long, if gradual, effort to register all portions of land in the
jurisdiction. Although registration is not always compulsory, certain “trigger events” can make it
compulsory, such as the sale of the land. Indeed, any transfer of land that fails to register the land
is automatically void (Land Registration Act 2002, ss. 6(4), 7(1)). That said, it was originally
anticipated that all land would be registered by 1955, and that has not happened.

For unregistered land, title is proved by title deeds. The documents which prove the history of
title over property are described as the ‘essential indicia of title’ (Sen v Headley [1991] Ch. 425
per Nourse LJ). These documents, so-called “deeds bundles”, should identify the person who
currently holds the best “title” to the land. When a party looks to purchase that land, they are
required to look at least at the previous 15 years in order to show a “good root of title.”

In other words, the purchaser must be able to demonstrate a clear chain of conveyancing relating
to the property, up to and including the present person in possession of the property. The rights
these persons in possession have over the land may or may not bind a purchaser depending on
two factors: the nature of the right, and whether it has been protected.

Examination consideration: if unregistered land comes up in a problem question, you should be

immediately reminded of this central aspect of unregistered land: that instead of simply
producing a document showing title, there has to be a “deeds bundle” which shows, going back
at least 15 years, that the person claiming to possess the property actually has “good root of
title.” If they cannot, this should be a clue to you as to how the parties in the problem question
can proceed.
 14

It should be stressed that the distinction between registered land and unregistered land is
substantial. In the case of Lloyds Bank plc v Carrick(1996) 28 H.L.R. 707 the court reached a
conclusion based on the land having been unregistered, namely that an unregistered contract did
not grant the legal estate in the property in question despite the seller saying the title was valid.
Notably, Morritt LJ said that if the land were registered, the outcome of the case would have
been entirely opposite. The mere act of registration can therefore alter the rights of parties
immensely.

Most rights have to be protected by the use of the Land Charges Act 1972. Using the 1972 Act,
the rights are registered as charges. The Land Charges Act 1972 was the successor to the Land
Charges Act 1925, and the 1925 Act had been intended to gradually introduce a system of
registration to land. It was envisaged that the registration of land in England and Wales would be
a slow process, therefore a temporary system was introduced to protect third party rights in
unprotected land.

“Can a person still claim to have a right to the land without obtaining protection by documentary
evidence?”

In some instances, yes. A person can claim ownership of the land by relying on the fact of their
having occupied and possessed the property. In this instance, they are not relying on a paper title,
but instead are expected to testify, by means of a ‘statement of truth’ or some other statutory
declaration that they have sustained possession over the land. They would do so under the
Statutory Declarations Act 1835, and this approach is sanctioned by the Land Registration Act
2002, s.9(5).

Examination consideration: The central idea is that rights can and ought to be protected. It is
easy to anticipate, in a problem question, that an occupant of land has much physical evidence of
their having lived on the land, but do not have the relevant documentation. You would be asked:
to what extent does the fact of their occupation and possession of the land outweigh their lack of
paper title?

PART TWO: TYPES OF RIGHTS

This discussion on unregistered land must also consider the interests of the parties that occupy
land from time to time. Certain proprietary entitlements are allowed to exist ‘off the register’,
meaning they are not recorded in the Land Registry. This is a concept known as “the crack in the
mirror.” The so-called “mirror” is the reflection of the paper record (the entry in the register) to
the corresponding right over the given estate in land. These rights are classified as ‘unregistered
interests’ and are deemed to be ‘overriding interests’, meaning they can bind subsequent
purchasers of the land.

The Land Charges Act 1925 was intended to protect the rights of those with unregistered
interests in one of three ways:

 Legal rights - these rights bind the whole world and do not require any further protection.
 15

 Equitable rights - these form two of the three ways in which the 1925 Act protected third
party rights. Equitable rights no longer protected by the doctrine of notice. These are
registrable either (1) as land charges if they are “commercial interests”, or (2) should be
“overreached” if they are “family interests.” These rights do not bind a purchaser,
however the interests are to be reflected in the purchase price, i.e. the satisfaction of these
rights will impose a higher financial cost on the purchaser.

There are exceptions however to these categories of legal and equitable rights, and it is here
where the ancient doctrine of notice still applies. They are:

 Estoppel rights (ER Ives Investment Ltd v High [1967] 2 Q.B. 379)
 Equitable rights of re-entry (Shiloh Spinners Ltd v Harding [1973] A.C. 691)
 Non-overreached trusts interests (Kingsnorth Finance Ltd v Tizard [1986] 1 W.L.R. 783).

The Land Charges Register, which comes from the Land Charges Acts, provides different
“classes” of third party interests, from Class A (charges created by a person applying under a
statute) to Class F (Matrimonial rights). If an interest ought to have been registered as a land
charge and was not, then the interest will be void against nearly all potential purchasers of the
land (Hollington v Rhodes [1951] 2 All E.R. 578.

Class F is the type of class which you are most likely to encounter in a problem question. Class F
is a spouse’s statutory rights to occupy the matrimonial home. As with any other of the classes, if
a spouse had a right to occupy the land, but the Class F land charge was not registered, then such
a right will be void. And this remains the case even if the purchaser knew about the unprotected
interest (Midland Bank Trust Co Ltd v Green (No. 1) [1981] A.C. 513). Statutory authority for
this is found in s.199 of the Law of Property Act 1925.

Case in focus: ER Ives Investment Ltd v High

H and X were neighbouring freehold owners of unregistered land. X began to construct on his
property a block of flats, the foundation of which encroached to a degree on H’s land. H waived
his right to complain of trespass when he was granted, in writing - but not by deed - a right of
way for his car across X’s yard. H never registered his equitable easement against X as a Class
D(iii) land charge, but subsequently built a garage on his own land which was accessible only
across X’s yard. H also contributed part of the cost of resurfacing the yard. X later sold and
conveyed the land in which the yard was found to Y. Y had full knowledge of the above facts. Y
in turn conveyed the land to ER, expressly subject to H’s right of way over the yard. The Court
of Appeal held H’s rights, despite their non-registration, as enforceable against ER. The majority
agreed that H’s equitable easement was statutorily void for non-registration, but ruled that ER
was estopped from pleading non-registration as a basis for their case against H, because of the
known history of acquiescence to H’s right of way over the land. Even though H’s rights derived
from an informal grant and was ineffective by reason of their non-registration, his rights as a
result of subsequent circumstances were not registrable in any event under the Land Charges
Act, so they comprised an ‘equity’ binding all subsequent purchasers who took the land with
actual notice.
 16

Key points from ER Ives Investment Ltd v High

 Non-registration of a right over land, such as a right of way, is usually grounds for
refusing to enforce the underlying right.
 However, there is reason to consider that the right may be enforceable if the right could
not be registered, and if the subsequent circumstances indicated that the parties were
aware of the right so claimed.
 What the subsequent circumstances are will always be case-sensitive. In this instance, the
circumstances of the right of way were communicated to every subsequent purchaser, and
indeed X had even assisted in the maintenance of the land for the benefit of H’s
easement.

Note that all the various classes are only void in certain circumstances; in the case of Class F, if
the spouse’s right to occupy is unregistered at the time the property is purchased, that right to
occupy is void against anyone who gives value in exchange for the interest in the land. This
couples up with what is said above about equitable rights, in that the value of the interest is
reflected in the purchase price.

Conversely, a notice that is registered binds everyone, according to s.198 of the Law of Property
Act 1925. Therefore, even if a purchaser does not find the notice in their search, they are still
bound by it.

Examination consideration: Remember to look over the exceptional categories for how rights
may be protected. Remember the important proviso that a purchaser of title can take ownership
of the land, even though there are overriding interests, if the value of those interests are
adequately compensated in the purchase price. How do you think this may appear in an exam?
Might this issue of who takes ownership appear in a problem question, for example?

PART THREE: NOTICE

It is important to note that some rights are still governed by the old doctrine of notice, which is
not without its problems. This doctrine is employed as a kind of stopgap, because there are some
rights which are not registrable as land charges yet would have been recognised prior to the 1925
and 1972 Acts as equitable rights that ought to bind purchasers.

Prior to 1926, it was presumed that all equitable rights in and over land were enforceable against
all other parties except for bona fide purchasers of a legal estate for valuable consideration
without notice. This is known as the bona fide purchaser rule, and this was an ‘absolute,
unqualified, unanswerable defence’ in equity (Pilcher v Rawlins(1871-72) L.R. 7 Ch. App. 259
per James LJ). It does not, however, apply in the case of registered land.

Therefore, the doctrine of notice has been confirmed to apply to unregistered land, and not
registered land, according to Holaw (470) Ltd v Stockton Estates Ltd(2001) 81 P. & C.R. 29.
That said, the bona fide purchaser rule can still mean overriding interests do not take precedence
over the rights of bona fide purchasers. This is so, provided that certain conditions are met:
 17

1. The purchaser must show that his absence of notice was ‘genuine and honest’ (Midland
Bank Trust Co Ltd v Green (No.1) [1981] A.C. 513).

2. The purchaser must take a legal estate in the land concerned, however a lender who takes
a charge “by way of legal mortgage” is regarded as having “the same protection” as if a
legal estate had been created in his favour (Law of Property Act 1925, s.87(1)). A
purchaser who takes only an equitable interest in the land is, in principle, subject to all
pre-existing equitable interests regardless of notice. This emphasises the idea of the first
equity in time prevailing over a latter equity.

3. A person is a purchaser if they take property by reason of the act of another person,
which means they cannot take property as a purchaser if they seek to take possession of
the property based solely on an operation of law. Therefore, a person is a purchaser if
they are a donee (meaning they received the property from another person as a gift) but
cannot be a purchaser if they are a squatter, because title derives simply form the passage
of time.

4. Finally, a bona fide purchaser must take the property without notice. There are different
categories of notice:

1. Actual notice is where the purchaser is consciously aware of relevant matters at the date
of purchase, such as the fact of occupation; these are matters which are said to be ‘within
his [the purchaser’s] own knowledge’ (Law of Property Act 1925 s.199(1)(ii)Ia)). This is
effectively a subjective test.

2. Constructive notice relates to matters of which the purchaser would have been
consciously aware if he had taken reasonable care to inspect both land and title (Law of
Property Act 1925 s.199(1)(ii)(a)). This, unlike actual notice, is an objective test. The
courts tend to be reluctant to apply the doctrine of constructive notice broadly (Hunt v
Luck [1902] 1 Ch. 428). An example of matters giving rise to constructive notice would
be an inspection of the land that discloses the physical presence of persons other than the
vendor (the seller).

3. Imputed notice is attributed to a purchaser where the knowledge is held, actually or

constructively, by an agent of the purchaser, such as a solicitor (Law of Property Act
1925 s.199(1)(ii)(b)).

Examination consideration: You would have to be clear on the bona fide purchaser rule, and
especially all of the different kinds of notice. In a problem question which raises bona fide
purchaser issues, is the notice actual, constructive or imputed? Depending on the type of notice,
what is the consequence? Make sure you highlight the relevant sections in the Law of Property
Act 1925 in your statute exam book.

Case in focus: Kingsnorth Finance Ltd v Tizard

 18

The husband, H, held an unregistered legal title on an implied trust for himself and his estranged
wife, W. H and two children of the family lived in the house and W visited the home twice a day
in order to cook meals for the children. H secretly charged the legal title to Kingsnorth Finance
(KF), a finance company, and then left for the United States with one of the children. H arranged
for the usual mortgagee’s inspection and valuation at a time when W would not have been in
occupation, as W only occupied intermittently. KF, having not paid the mortgage moneys to at
least two trustees, could not claim to have overreached W’s beneficial interest, nor did W’s
interest constitute a registrable land charge per the Land Charges Act 1972. The doctrine of
notice was deemed to apply to W’s beneficial entitlement. KF’s claim for possession was
rejected, as it ought to have been apparent to KF, as mortgagee, that upon inspection children
occupied the property. KF ought to have made further inquiries regarding the possible rights of a
wife. Given KF had failed to take these steps, it was fixed with constructive notice of W’s
equitable interest.

Key points from Kingsnorth Finance Ltd v Tizard

 H had attempted to prevent the KF from having notice of the W’s presence.
 That being said, the inspection, according to the court, ought to have resulted in KF
undertaking further inspections and inquiries regarding the possibility of a wife being in
occupation.
 As with ER Investments Ltd v High above, it was not possible for the wife to register her
interest in the land. This indicates that where an interest is registrable, then the lack of
registration should mean that the bona fide purchaser is entitled to the property.

Examination consideration: We have seen how Kingsnorth Finance represents an instance of

notice having been given, and it was constructive notice. Looking above at the case of ER
Investments Ltd v High, what type of notice do you think applies in that case? You can use these
two cases in an exam to distinguish between actual notice and constructive notice.

Note that in cases of bona fide purchasers without notice purchasing property, the unregistered
rights are not only void against that purchaser; in fact, the unregistered right upon being held
void against that purchaser are forever extinguished. Therefore, if A, a bona fide purchaser
without notice, validly purchases Blackacre and voids the unregistered rights of C, the
unregistered rights are extinguished forever and cannot even bind a subsequent purchaser, D,
who does have notice of those unregistered rights (Wilkes v Spooner [1911] 2 K.B. 473).

PART FOUR: ADVANTAGES AND DISADVANTAGES OF UNREGISTERED LAND

ADVANTAGES OF UNREGISTERED LAND

In the case of unregistered land, rights over land tend to lie with the long-standing occupant(s) of
the property, rather than the nascent purchaser. That means that, in the event another party
purports to sell the occupant’s property to an innocent purchaser without the occupant’s consent,
the occupant retains the right to the property; it does not pass to the innocent purchaser.
 19

Here’s how it can best be understood: A is the owner of the property (we’ll call it Blackacre). B
sells the title of Blackacre to C, without A’s consent. C is unaware that the sale takes place
without the consent of A. In this instance, A retains the title.

There are several reasons for this approach:

1. Allowing the innocent purchaser to win in a dispute over ownership would be

objectionable to the original occupant, given they did not authorise the disposition of the
property. This has been described as ‘anathema to democratic ideals of private
ownership.’ (Amy Goymour, ‘Mistaken registrations of land: exploding the myth of “title
by registration” (2013) C.L.J. 72(3) 617.) This view is consistent with the European
Convention on Human Rights in that any non-consensual interference with the
occupant’s property (in this case by purported sale of the property) is unjustified unless it
is shown to be in the public interest and is proportionate.

2. The concept of security of title (meaning, if you have title to property, you have a
reasonable expectation it cannot be interfered with without your consent) is arguably
strengthened if the original occupant is favoured over a later innocent purchaser.
Otherwise, if a buyer could easily take ownership of land, it would give support to the
idea that title is actually ‘easy come, easy go.’ (Thomas Mapp, Torrens’ Elusive Title
(Alberta) (1976)).

3. The layperson’s view, according to the Scottish Law Commission, is that such
dispositions as described above ought to be declared void. As Amy Goymour has said,
‘the popular conception of a just outcome should not be dismissed lightly.’

4. Following what was said above about the layperson’s perspective, the layperson may not
realise that they ought to protect their interest by way of a charge. It has been pointed out
that many parties with overriding interests (such as the original occupant ‘A’ in our
scenario) are simply ignorant of registration requirements. Purchasers will employ
solicitors and conveyancers, but those with the overriding interest tend not to. It is
therefore, as Roger Smith has said, ‘unrealistic and unfair’ to expect such people to
protect their interests by way of registration, and the layperson’s view is that their
possession of the land ought to protect them absolutely (Roger Smith, ‘Land registration
reform - the Law Commission’s proposals’ (1987) Conv. Sept-Oct. 334).

Examination consideration: Whilst you are unlikely to have the space to discuss advantages of
unregistered land, in an essay question it is very different. When you are asked how unregistered
land pertains to priorities of ownership between competing parties, you should be able to list off
these advantages. Can you remember the sources listed above?

ARGUMENTS AGAINST UNREGISTERED LAND

Given the discussion above, it is perhaps unsurprising that the arguments given against
unregistered land tend to be about how they affect the rights of purchasers. This is part of a view
about what the Land Registration Act 2002 was intended to do: namely, according to the
 20

supporters of this view, preferring the purchaser to the original occupant is a ‘self-contained,
considered and appropriate resolution of problems which arise’, those problems being the issue
of ownership. (Elizabeth Cooke and Roger Smith, Ruoff and Roper’s Law and Practice of
Registered Conveyancing (London) (2013)).

Conversely to the points made above, there are several reasons why favouring the purchaser,
which means opting for registered land rather than unregistered land, is preferable:

1. The choice simplifies and makes cheaper the conveyancing process for the purchaser. If
the land is registered, they can take the Register at face value and would not need to go
through the cumbersome process of establishing the “good root of title” going back at
least 15 years.
2. This preference for the purchaser, if made generally, could help to bring about a more
confident and dynamic property market.
3. The purchaser may also have a human rights claim to the property, given that they had
exchanged the required purchase money for the property and may seek to make the land
their home.
4. There are other arguments against unregistered land. The intersection for example
between cases which require notice and those which do not is not always clear, and as a
result a purchase of unregistered land can be complicated. This complexity is a chief
complaint: Lord Scarman, in Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487,
bemoaned the need to show “good root of title” as a ‘wearisome and intricate task of
examining title.’

“Why is it so complex?”

Titles have to be investigated afresh on every successive purchase; every purchaser is obliged to
look over the long history of ownership of the land, and come to a judgement about the quality of
the relevant title, and would have to weigh the risks that a defect of the title would have on the
market value of the land (Kevin Gray and Susan Francis Gray, Land Law (6th ed.) (2009)
(Oxford)). Purchasers can therefore have serious evidential hurdles to surmount when
establishing the “good root of title”, and it is clearly not desirable.

Compare the process of tracing title of unregistered land to the process of determining title over
registered land. In that instance, when a purchaser comes to inspect the title of the land, it has
already been approved by the Chief Land Registrar, both graded and guaranteed by the Registrar.
There is therefore no issue about the validity of title. Compared to the practice of establishing
“good root of title” in unregistered land, establishing title for registered land is inexpensive,
straightforward, and certain.

Examination consideration: In an exam, will you be able to recall the main points that argue
against the continued existence of unregistered land? How much weight would you put on the
ease of registration when set against the protections for overriding interests?

PART FIVE: ADVERSE POSSESSION

 21

As you will know from your reading elsewhere, adverse possession grants, so-called “squatters’
rights” to those who are in possession of property without paper title to the property. A key
element of adverse possession is limitation. And in the case of unregistered land, there is a
defined limitation period, after which objections to adverse possession cannot be enforced. The
Limitation Act 1980 s.15(1) stipulates that ‘no action shall be brought by any person to recover
any land after the expiration of twelve years from the date on which the right of action accrued to
him.’ As you will recall from your reading on adverse possession generally, the right of action
accrues to the person with paper title at the time when they become aware of the person without
paper title being in possession of the property.

What should be made clear is that the expiry of the twelve-year period does not bring about a
conveyance of land from the person with paper title to the person without paper title. Instead, the
right is extinguished (Limitation Act 1980, s.17) which makes the squatter’s independent
possessory title ‘impregnable, giving him a title superior to all others’ (Buckinghamshire County
Council v Moran [1990] Ch. 623 per Nourse LJ).

Finally, the squatter, upon taking possession of unregistered freehold land, must be bound by all
prior encumbrances, charges etc. And because they have taken possession by operation of law,
they cannot rely on the defence of being a bona fide purchaser without notice, and therefore is
subject to restrictive covenants and unregistered rights as per the pre-1926 convention (Re Nisbet
and Potts Contract [1906] 1 Ch. 386).

Examination consideration: Although it is probably unlikely that a question about unregistered

land will feature, as an aside, discussion of adverse possession, it is quite possible that the
reverse would occur. In other words, if you are answering a question about adverse possession,
you may seek to mention any relevant points about the land if it is shown to be unregistered.

Registration of Title: Minor Interests and Overriding Interests lecture

OVERRIDING INTERESTS

All registered dispositions of a registered estate must take effect subject to those unregistered
interests which are said by the Land Registration Act (LRA) 2002 to “override” such dispositions
(LRA 2002, s.29(1) and (2)(a)(ii)). The disponee of the registered title takes the title subject to
those rights even though, by definition, they do not appear on any register of title (LRA 2002,
ss.29(3) and 30(3)). Schedule 3 of the LRA 2002 sets out the list of those categories of interest
which qualify as overriding interests (see below, the section ‘Sub-categories of overriding
interest’).

Overriding interests have a historical record as statutorily binding disponees notwithstanding

their absence from the register of title (Land Registration Act 1925, s.70(1)). These types of
rights would not require registration to become apparent, because they ought to be apparent to
any taking the registered title of land upon a physical inspection of the land (and/or inquiring
with persons residing on the land) or by reference to other evidential aids, such as the registers of
local land charges maintained by local authority bodies.
 22

Typically, those interests that qualify as overriding are those which have no other means of
protection within the system of registration of land. In their unregistered status, they bind the
whole world, and the registered land scheme is designed simply to replicate this principle of
binding the whole world.

The “guiding principle” that underlies this aspect of the LRA 2002 (of certain unregistered
interests being overriding) is that interests should be overriding interests only where ‘protection
against buyers is needed, but where it is neither reasonable to expect nor sensible to require any
entry on the register’ (Law Commission, Land Registration for the Twenty-First Century: A
Conveyancing Revolution No. 271 (July 2001) para 2.25). This is reflected in the LRA 2002
which restricts the role of overriding interests, such as:

1. Abolition or phasing out of certain sub-categories of overriding entitlement, including

equitable easements and profits à prendre; rights of persons in adverse possession; rights
of non-resident landlords.

2. Incorporation of unregistered interests in the register- The LRA 2002 provides means of
ensuring that pre-existing overriding interestsare brought on to the register, following
which they cease to have overriding status (LRA 2002, ss.29(3) and 30(3)). The right
thereafter becomes binding not due to its (now-abolished) overriding status, but by virtue
of its place on the register. This can be done by the registrar entering a potentially
overriding interest on the register by means of a notice (LRA 2002, s.37(1); Land
Registration Rules 2003, r.89).

3. Curtailment of the circumstances in which new overriding interests can arise.

4. Finally, e-conveyancing will eventually make it impossible for the creation of rights
except by the entry of those rights on the register, eventually making overriding interests
at least a very limited and rare feature, at most will be non-existent.

Sub-categories of overriding interest

As per Schedule 3 of the LRA 2002 there are a variety of unregistered rights which qualify as
overriding interests. These include:

1. Legal leases granted for a term not more than seven years,

2. Proprietary interests of persons in actual occupation of the land,

3. Legal easements and profits à prendre, and

4. Local land charges.

In order for any of these categories to qualify and be recognised as an overriding interest, s.29(1)
of the LRA 2002 requires that no interest can claim a status of overriding interest unless the
interest had existed immediately before and up to the relevant date of disposition, and up to that
 23

date had affected the estate that forms the subject of the disposition. Therefore, any interest
which arises for example between the dates of disposition and registration, the so-called
registration gap, can qualify for overriding status (LRA 2002, s.74).

The disponer when disposing the registered title of an estate has a duty to disclose to the
disponee any subsisting overriding interests. If they fail to do so, the disponee may have
contractual rights of recovery (Ferrishurst v Wallcite Ltd [1999] Ch. 355 per Robert Walker LJ).
When the disponee seeks to register their title with the registrar, they must at that point disclose
any subsisting overriding interests of which they are aware (LRA 2002, s.71).

The sub-categories 1, 3, and 4 are not discussed in detail here, as these would be unlikely to form
part of an exam question. Instead, focus will be given on the proprietary interests of persons in
actual occupation of land.

For any overriding interest, it is a given that, at the date of the registrable disposition, the interest
which is alleged to ‘override’ the interests of the registered proprietor must be fully enforceable;
it will not be enforceable if it was in any way made negative by estoppel or waiver.

Case in focus: Paddington Building Society v Mendelsohn(1985) 50 P. & C.R. 244

The son (S) of the defendant (M) had purchased a registered title in his own name, with a portion
of the purchase money having been provided by M, and partly also through a mortgage loan
from the plaintiff mortgage company (PBS). M argued that her beneficial interest, supported by
an implied trust, as well as her actual occupation of the property, meant her interest overrode the
charge executed by S in favour of PBS. The Court of Appeal disagreed; it observed M had been
aware of a charge in favour of PBS prior to its execution, and indeed intended it to take place.
From this, the court inferred that M had intended her rights to be subject to the rights of PBS
rather than vice versa. Given that M had consented to the arrangement and to the priority of
PBS’s interest, the Court of Appeal found there was no overriding interest on the part of M. The
Court of Appeal determined that M had silently represented her consent to PBS, and this
constituted an estoppel. Additionally, M would have failed if her case was decided subsequent to
the LRA 2002 because she was not in actual occupation in advance of the disposition.

Takeaway Points:

 An overriding interest must be unencumbered by estoppel or waiver.

 An example of an estoppel is where the person hoping to claim an overriding interest
does nothing to communicate it where they are aware of the party hoping to claim an
interest.
 M was estopped because she was aware of the intended charge, and because she did
nothing to challenge it or to raise the issue of her intention of claiming an overriding
interest.

Examination Consideration: Reflect on the guiding principle of overriding interests and how the
LRA 2002 intends to progressively narrow and eliminate the range and number of overriding
interests in England and Wales. Whenever an interest is said to be unregistered in an exam
 24

question for example, you would not be amiss to point out that the person claiming the
overriding interest may need to register their interest subsequent to the conclusion of whatever
legal issue presently confronts them.

Unregistered interests of persons in actual occupation

Briefly on the point of definition, actual occupation is intended to be interpreted as it is written,

so long as they are taken as ‘ordinary words of plain English’ (Williams & Glyn’s Bank Ltd v
Boland [1981] A.C. 487 per Lord Wilberforce). That being said, actual is taken to mean
‘apparent’ or ‘patent’, such that the fact of occupation would ‘put a person inspecting the land on
notice that there was some person in occupation’ (Malory Enterprises Ltd v Cheshire Homes Ltd
[2002] Ch. 216 per Arden LJ).

The LRA 2002 Schedule 3 para 2 confers overriding status to ‘an interest belonging at the time
of the disposition to a person in actual occupation, so far as relating to land of which he is in
actual occupation.’ This is intended to provide protection to vulnerable occupiers whose interests
in the land may have been created informally and without full regard to the usual requirements. It
requires purchasers to be prudent when inspecting property, as upon a reasonable inspection the
purchaser ought to be made aware of potential unrecorded interests and the need for further
inquiry. By this form of protection, an occupier may simply ‘stay there [at the property] and do
nothing’, because nobody can ‘buy the land over his head and thereby take away or diminish his
rights’ (Strand Securities v Caswell [1965] Ch. 958 per Lord Denning MR).

In effect, the onus is on the purchaser, rather than the occupier, to determine whether the
occupation constitutes an overriding interest. The disponee is required to ask any person in actual
occupation of the land ‘what rights he or she has in the land’ (Winkworth v Edward Baron
Development Co Ltd [1986] 1 W.L.R. 1512 per Nourse LJ). The disponee cannot simply
interrogate the disponor; they must direct this questioning to all persons they find in actual
occupation of the land. It has been observed that ‘reliance on the untrue ipse dixit [meaning “he
himself said it”] of the disponor will not suffice’ (Hodgson v Marks [1971] Ch. 892 per Russell
LJ).

Historically, there has been some controversy surrounding overriding interests, not least because
the delineation between registrable interests and those interests deemed to be overriding has ‘no
firm dividing line’ (Williams & Glyn’s Bank Ltd v Boland [1981] per Lord Wilberforce).
Therefore, those interests which may constitute minor interests and ought to have been recorded
in the register were nevertheless preserved as overriding interests, a notion which was
‘disquieting’ to some (Kling v Keston Properties Ltd(1985) P. & C.R. 212 per Vinelott J). So
although there was a system in place for registering interests i.e. the Land Registry, and although
there have been policy reasons mandating occupiers to register their interests, nevertheless
occupiers did not need to concern themselves with the formalities because they could in any
event rely on overriding interests.

This historical concern gives rise therefore to the concession inherent in the quotation referred to
above in the LRA 2002 Sch 3 para 2: ‘an interest belonging at the time of the disposition to a
person in actual occupation, so far as relating to land of which he is in actual occupation’ is
 25

deemed to be overriding. The concession comes from there being exceptions, i.e. those cases
where the interest is not overriding. There are two exceptions. First, the actual occupier has
unreasonably failed, on inquiry, to disclose his own entitlement. The LRA 2002 excludes the
interest of any actual occupier ‘of whom inquiry was made before the disposition and who failed
to disclose the right when he could reasonably have been expected to do so’ (LRA 2002
Schedule 3 para 2(b)). If they fail to reveal their interest upon inquiry from the disponor, the
occupier’s failure to reveal the existence of their rights is fatal for any claim of overriding
interest (Holaw (470) Ltd v Stockton Estates Ltd (2001) 81 P. & C.R. 29). There is therefore an
onus of sorts to be imposed on the occupier, and by that measure the LRA 2002 seeks to balance
the rights and duties of the disponee and the occupier. Second, the relevant occupation was
neither reasonably discoverable nor was it actually known by the disponee. The second
exception is discussed below in the section ‘Curtailment: Actual Occupation’.

Examination Consideration: As you will have noticed, there are corresponding duties on the part
of both the disponor and the person claiming overriding occupation. The disponee is required to
conduct a reasonable inspection of the land, and upon discovering persons who might appear to
be in occupation of the land to ask them if they are indeed in occupation. However, persons in
occupation should make their occupation known if asked by the disponee, and as seen in the case
of Paddington Building Society above, they may be estopped from relying on overriding
interests. What this means for you is, in any problem question, asking whether each side have
discharged their respective duties?

Curtailment

Actual Occupation

Curtailment is the effort of the LRA 2002 to put in place a restrictive understanding of what
being in ‘actual occupation’ means. This is relevant to overriding interests because persons being
in actual occupation can be an overriding interest, but will not qualify for that status if it ‘would
not have been obvious on a reasonably careful inspection of the land at the time of the
disposition’ (LRA 2002, Schedule 3, para 2(c)(i)). There is only one exception to this
requirement of reasonably careful inspection, which is where the disponee of the land had ‘actual
knowledge’ of the occupier’s interest at the time of the disposition (LRA 2002, Schedule 3, para
2(c)(ii)). Therefore, if a disponee neither has actual knowledge of the interest, nor could
reasonably be expected to have discovered the interest, then they will not be bound by that
interest. Conversely, if one of these two applies, protection is accorded to the person with the
interest.

For a period of occupation to be relevant for these purposes of overriding status, the occupation
must subsist both before and at the date of the registrable disposition (LRA 2002, s.29(1)-(2),
and Schedule 3, para 2). This view in the LRA 2002 mirrors an earlier precedent set in case law
(Abbey National Building Society v Cann [1991] 1 A.C. 56). This imposition of the required
duration (i.e. before and on the date of the registrable disposition) is intended to make it easier
for there to be a meaningful or ‘fruitful’ inquiry in advance of the disposition (Abbey National
Building Society v Cann [1991] per Lord Oliver of Aylmerton).
 26

Where a person in occupation of land is seeking to show their interest is overriding, it is not
sufficient that they have occupied the land for only a minimal period before and on the date of
the disposition. In other words, a pattern of substantial and frequent absence from the land will
severely undermine a claim to ‘actual occupation’ (Stockholm Finance Ltd v Garden Holdings
[1995] N.P.C. 162). That being said, a person claiming actual occupation may successfully show
such occupation, even if it is intermittent, so long as they are able to point to some physical
evidence or ‘symbol’ of their continued residence at the property, as well as evidence of their
intention to return to the property (such as in the case of Kling v Keston Properties Ltd (1985) P.
& C.R. 212 in which the presence of the occupier’s car parked at the property showed an
intention to continue residing at the property).

Case in focus: Chhokar v Chhokar [1984] F.L.R. 313

The husband (H) held the registered title to the shared matrimonial home in which he and his
wife (W) resided. H held the property on implied trust for himself and W in equal shares. H had
secretly agreed to transfer that title at a less than market value to an acquaintance, P. H was
intending to extricate himself from the property and the marriage without W knowing until his
cash interest in the property had been taken out. To further the deception, P and H agreed to
carry out the transaction whilst W was in hospital giving birth. Upon the transfer of title, H
absconded with the net proceeds of the sale of the title, and W and her newborn child were
locked out of the property. However, because W’s furniture was still in the property at the date
of the disposition, that constituted evidence of actual occupation. Therefore, W was held to have
an overriding interest over P.

Takeaway Points:

 Continual occupation is not necessary evidence.

 What is required is some evidence of previous occupation and an intent to return to the
property; physical evidence in or around the property would be required to satisfy this
requirement.
 Additionally, one might suggest that an act of deception (as with here, where the W was
left unaware of the sale until after its occurrence) assists in supporting an inference of
actual occupation.

What should also be borne in mind is who occupies the property. In family cases, the idea of
actual occupation, if shown in fact, can successfully give rise to legal rights provided that the
person claiming actual occupation can satisfy the usual conditions of that principle. In Abbey
National v Cann [1990] 2 W.L.R. 833, the second defendant claiming actual occupation was a
family member of the first defendant, and would have been successful but for the fact that she
did not occupy the property at the required dates to satisfy the conditions of actual occupation. In
Strand Securities v Caswell [1965] Ch. 958the sub-tenant allowed their stepdaughter to live rent
free in the relevant property, and the court held that the stepdaughter was therefore in actual
occupation, and that the right of actual occupation did not extend to the sub-tenant merely
because of his stepdaughter being in occupation.But not all family members are equal: a child
does not have a claim to an overriding interest because their occupation of a given property is
only because their parent/carer occupies the property (Hypo-Mortgage Services v Robinson
 27

[1997] 2 F.L.R. 71). Further, the idea of actual occupation extends to businesses, even where
they only occupy a portion of the land. In Ferrishurst v Wallcite [1999] Ch. 355 the claimant
business was able to claim actual occupation within an office space and by that token retain an
overriding interest for the purchase of a neighbouring garage, even though the claimant business
occupied only a portion of the land.

Equitable easements and profits

Curtailment is also the means by which the LRA 2002 sets limits around easements and profits à
prendre. The LRA 2002 provides that overriding interest protection will be confined to legal
rights alone for easements and profits, and will not extend to equitable easements and profits
(LRA 2002, Schedule 3, para 3(1)). Any newly-created easement or profit subsequent to the
enactment of the LRA 2002 must, if it is to ‘operate at law’, be completed by registration (LRA
2002, ss.27(1) and 2(d)). The LRA 2002 is thereby acting to reduce the scope of easements for
two reasons. First, if the easement is completed by registration, then it will appear on the register
and by definition will cease to be an overriding interest. Second, if the interest is not so
registered, the easement will merely arise as an equitable right, and such rights are explicitly
excluded by the LRA 2002 from those types of easements and profits which may “override” later
dispositions of the servient land.

Examination Consideration: The LRA 2002 clearly intends to proscribe and narrow the scope of
overriding status for these two categories. You are more likely to face exam questions on
occupation, particularly problem questions, as they are necessarily more facts-specific, and you
will be expected to parse relevant from irrelevant facts.

MINOR INTERESTS

As will be seen, the term “minor interests” is a loose term used in place of the term “registrable
interests.” Minor interests refer to those rights which can be applied to land, yet are secondary to
the registered estate. The place of minor interests in registration of title has to be considered in
the context of the Land Registration Act 2002.

The Land Registration Act (LRA) 2002, among other things, is intended to simplify the ways in
which minor interests that affect registered land can be protected on the register. The LRA 2002
did away with many of the forms of protection of minor interests that existed by virtue of the
Land Registration Act 1925, such as the so-called “caution against dealings” and the
“inhibition.” In their place the LRA 2002 stipulated that an entry of “notice” on the register was
the only means by which a minor interest can bind a disponee and their title once the disponee
has registered their proprietorship.

A notice is ‘an entry in the register in respect of the burden of an interest affecting a registered
estate or charge’ (LRA 2002, s.32(1)). The concept of a notice is a recognition of the variety and
range of entitlements that can apply to registered land. The entry of a notice into the Land
Registry protects the priority of a given interest against other interests in the land (LRA 2002,
s.29(1) and (2)(a)(i)). These interests are referred to as registrable interests. It is however
 28

acceptable to refer to such interests as minor interests. Ultimately, these minor interests impose a
burden on the registered estate.

Notices can vary in their duration depending on their purpose. Certain notices, such as restrictive
covenants, are potentially indefinite in character and will, unless they are discharged, bind all
subsequent disponees. Other notices that serve a short-term purpose, such as estate contracts,
may be cancelled on an application to the Land Registry.

Means of entry

Any person that claims to be entitled to a protectable minor interest can apply to the Land
Registry for the entry of a “notice” in the charges register of the title so applied for, per the LRA
2002, ss.32(2), 34(1) and the Land Registration Rules 2003 r.84(1). The notice may either be an
“agreed notice” or a “unilateral notice.”

“Agreed notices” require the consent of the registered proprietor or evidence showing the
applicant’s claim is valid, alternatively the registered proprietor can themselves apply for an
agreed notice (LRA 2002, s.34(3)). There are certain rights which may only be protected as
minor interests on the charges register as an agreed notice. Examples of such rights include
“home rights” under the Family Law Act 1996, formerly the Matrimonial Homes Act 1967 and
1983, which confer upon those spouses or civil partners which qualify particular entitlements in
regards to occupation of, or non-exclusion from, a dwelling-house (Family Law Act 1996,
s.30(2)). Other such rights include orders made under the Access to Neighbouring Land Act
1992. The benefit of such a notice is that it provides greater protection to the beneficiary,
because they are not subject to cancellation procedures unlike unilateral notices. But agreed
notices can be brought to an end once the interest it protects comes to an end (Land Registration
Rules 2003, r.87).

“Unilateral notices” are, unlike agreed notices, contentious, and the entry of such notices
therefore commences a process of notification of and possible objection by the registered
proprietor (LRA 2002, s.35, Land Registration Rules 2003, r.83). The entry of a “unilateral
notice” does not require the cooperation or consent of the registered proprietor, but the registered
proprietor is entitled to apply, at any time, for the notice to be cancelled. If the registered
proprietor seeks for the notice to be cancelled, the applicant for the notice may in turn object to
that requested cancellation (LRA 2003, s.36, Land Registration Rules 2003, r.86). As with
agreed notices, the beneficiary of the notice can apply to the registrar for removal of the notice
when the notice is redundant (LRA 2002, s.35(3), Land Registration Rules 2003, r.85).

The Land Registry will not however grant any notice once requested. The LRA 2002 requires
that a person applying for the entry of a notice cannot do so ‘without reasonable cause’ (s.77(1)).
This duty is considered in respect of any person who suffers damage in consequence of a breach
of this statutory requirement (LRA 2002, s.77(2)). As for the status of the right protected by the
notice, it (the right) is not rendered as valid simply because it is protected by a notice. All that
the notice does is protect the priority of the interest against others (LRA 2002, s.32(3)). This
means that a right, if invalid, may be removed from the register.
 29

Aims of registration

The intention of registration and protection of minor rights under the LRA 2002 operates
according to two rules:

1. Minor interests, if registered as a charge in the charges register, acquire ‘protected’

priority, meaning it binds any subsequent disponee of the registered estate, whether or not
the proprietor inspects the register (LRA 2002, s.29(2)(a)(i)).

2. Protectable interests, if not registered as a charge in the charges register, are subsequent
in priority to the interest which passes under any registered disposition made for valuable
consideration (LRA 2002, s.29(1)), however they remain enforceable against a disponee
otherwise than for value, such as a donee or a trustee in bankruptcy (LRA 2002, s.28(1)).

Unprotected - but protectable - interests and fraud

An unprotected (though protectable) minor interest, when addressing most registered estates,
will be ineffective against the registered proprietor unless the entitlement in question also
qualifies for protected status as an unregistered interest which statutorily “overrides” registered
dispositions of the estate (LRA 2002, s.29(2)(a)(ii)). There is, according to the Court of Appeal,
‘no general principle which renders it unconscionable for a purchaser of land to rely on a want of
registration of a claim against registered land, even though he took with express notice of it… a
decision to the contrary would defeat the purpose of the legislature in introducing the system of
registration’ (Lloyd v Dugdale [2001] EWCA Civ 1754 per Sir Christopher Slade).

That being said, if a registered proprietor seeks to rely on this principle to defraud a beneficiary,
they would come up against the court’s position that it will not allow ‘a person to keep an
advantage which he has obtained by fraud’ (Lazarus Estates Ltd v Beasley [1956] 1 Q.B. 702 per
Denning LJ). This means that if a disponee for value of a registered estate is found guilty of
fraud, they would find that the court in exercising its equitable jurisdiction will seek to protect
the minor interest that was not otherwise registered as a charge in the register.

The court applied this approach, in particular when looking at the Land Registration Act 1925 in
Peffer v Rigg [1977] 1 W.L.R. 285. Therefore, although registration of title as a process is
intended ‘to provide simplicity and certitude in transfers of land’, equity retains the ability ‘to
exercise its jurisdiction in personam on grounds of conscience (Oh Hiam v Tham Kong [1980] 2
M.L.J. 159 per Lord Russell of Killowen).

The problem for the courts is to determine a definition of fraud, particularly given this is within
the civil (rather than criminal) context. For example, the Court of Appeal in Midland Bank Trust
Co. v Green [1980] Ch. 590 found that fraud was apparent in the circumstances of the case,
whereas the House of Lords in the same case (Midland Bank Trust Co. v Green [1981] A.C. 513)
found there was no fraud whatsoever. This leads to two approaches:

1. A narrow definition of “fraud” will tend to favour the operation of the Land Register as
the authoritative guide to interests and is unlikely to declare that a given act or omission
 30

on the part of the registered proprietor qualifies as “fraud.” The rationale for this
approach is that hopeful beneficiaries ought to be encouraged to register their interest
rather than rely on the courts. According to this view, it is therefore not fraudulent to
simply exploit the incautious or negligent failure of those beneficiaries if they happen to
indicate, but not register, their rights. ‘It is not fraud to take advantage of legal rights, the
existence of which may be taken to be known to both parties’ (Re Monolithic Building
Co. [1915] 1 Ch. 643 per Lord Cozens-Hardy MR). This view has been bluntly expressed
in the following way: ‘nice guys finish last’ (Burnett’s Trustee v Grainger [2004] UKHL
8 per Lord Rodger of Earlsferry).

2. Conversely, an expansive definition of “fraud” will look more to the facts of individual
cases and particularly for exceptions to the above-mentioned principle of regarding
registration as the optimal means of protection. This argument has not yet reached the
appeals courts, but has had some currency in legal academia (for example, Paul Finn,
‘Commerce, the Common Law and Morality’ (1989) 17 Melbourne U L Rev 87; see also
Duncan Kennedy, ‘Form and Substance in Private Law Adjudication’ (1975-76), 89
Harv L Rev 1685).

That being said, it has been suggested (though is not expressly contemplated by the Land
Registry) that the courts will take the view that statutory immunities from unprotected minor
interests will be inapplicable if the disponee acts in bad faith to take advantage of a failure by the
person possessing the interest to enter that interest in the register. An example would be a
disponee is made aware of an unprotected interest and tells the person with the interest that they,
the disponee, will promise to respect and prioritise that interest, but at a later time refuse to
uphold that promise by pointing to a failure of the person with the interest to register the interest.

The disponee, acting in bad faith, is said to have carried out a form of ‘postponing conduct’
which displaces or reverses the special priority rule (LRA 2002, s.29(1)). As a result, the
disponee takes their title subject to the unprotected interest in question by way of constructive
trust (Lloyd v Dugdale).

As mentioned, there is some disagreement over any unified definition of fraud, but equity has
seen fit to intervene in the following circumstances:

1. A deliberate scheme by the disponee to defeat the unprotected right, for example where
the transfer of title was made to the transferor’s limited company in order to defeat a pre-
existing and inconvenient estate contract (Jones v Lipman [1962] 1 W.L.R. 832);

2. An express agreement by the transferee to take title subject to the unprotected interest,
such as where the transferee of an uncompleted housing development reneged on their
agreement to be bound by the contractual rights of a purchaser who had already paid their
deposit (Lyus v Prowsa Developments Ltd [1982] 1 W.L.R. 1044). The registration of
title of system is intended to ‘protect a transferee from defects in the title of the
transferor, not to free him from interests with which he [the transferee] has burdened his
own title’ (Bahr v Nicolay (No. 2)(1988) 164 CLR 604 (HC of Australia) per Brennan J).
 31

Case in focus: Lloyd v Dugdale [2001] EWCA Civ 1754

Dugdale’s (D’s) company, JAD, had moved into occupation of the premises in question, but after
the death of the original owner, the executors transferred the registered title to Lloyd (L),
expressly subject to D’s claim. The Court of Appeal held that this agreement was equity of
estoppel, but was not overriding against L, because at the relevant time the occupier had been
JAD rather than D himself. D attempted to argue there was a constructive trust which bound L to
give effect to D’s rights of occupation. Sir Christopher Slade rejected this argument, and (leading
the Court of Appeal), held that ‘whether or not the conscience of the new estate owner is
affected… the crucially important question is whether he has undertaken a new obligation, not
otherwise existing, to give effect to the relevant encumbrance or prior interest.’ It may have been
possible to find that L owed such an obligation to D if L had paid a reduced purchase price ‘upon
the footing that he would give effect to’ D’s claimed right of occupation. But since there was no
evidence of such a reduced purchase price, D’s claim failed.

Takeaway points:

 An oral agreement to take property ‘subject to’ a pre-existing (unregistered) right can,
though not necessarily will be, grounds for establishing a constructive trust that upholds
the pre-existing right.
 It is important to remember who, in a case such as this, is in occupation at the relevant
time.
 In order to give effect to the oral agreement mentioned above, there has to be a reflection
of that on the facts, such as a reduced purchase price.

Practically speaking, given that land is increasingly subject to electronic conveyancing, it will
eventually be impossible for an unprotected minor interest to exist, because the making of an
entry in the register is what creates the interest.

Examination Consideration: Minor interests, as we have seen, are about interests that are
secondary and to an extent inferior to the registered title yet are capable of binding that title so
long as they are registered. There is an exception to this registration requirement. Can you
remember the exception?

Express and Implied Trusts Lecture

EXPRESS TRUSTS

Express trusts are a device of disposition which, in land, creates a purely nominal (‘legal’) title
that vests in the person named by the testator as the trustee. The title is purely nominal in that the
property vested in them is not for their benefit, but is instead for the benefit of another, namely
the beneficiary. These terms of trusteeship are made explicit in the testamentary disposition of
the land in question, and so the trustee must act according to those terms. A breach of those
terms is regarded as an affront to the conscience of the court of equity, and therefore a trustee
can be required by the court to comply with the express terms of the trust.
 32

Such a trust does not have to be articulated in any particular form, so long as the words plainly
express and evidence an intention. Speaking clearly such that the words give rise to an objective
intention ‘create a trust…without knowing it’ (Re Schebsman, deceased [1944] Ch. 83).
Examples of trusts of land include A granting B the right to live rent-free for life on A’s land
(Bannister v Bannister [1948] 2 All ER 133, CA). In the case of a matrimonial home, for
example, one spouse expressing to the other that the first spouse regards the second spouse as
having equal rights may inadvertently give rise to the existence of such rights (Hammond v
Mitchell [1991] 1 W.L.R. 1127 per Waite J).

Formalities for creating equitable rights

Given that a trust can therefore be (potentially) created so easily, the recognition of equitable
rights in trusts of land is coupled with a requirement for formality. The requirement of formality
stems from the Statute of Frauds 1677 and two related policy considerations. The first is that it
reduces the likelihood of controversy arising from allegations of fraud or mistake; the second is
it is consistent with the English legal system’s preference for formal methods of creations of
interests in land.

With such rights, a central rule is that a declaration of trust relating to land is enforceable only if
it is ‘manifested and proved’ by some writing signed by the declarant (Law of Property Act
1925, s.53(1)(b)). The failure of documentary formality, as a consequence, results in a ‘merely
voluntary declaration of trust… unenforceable for want of writing’ (Gissing v Gissing [1971]
A.C. 886 per Lord Diplock). Without the evidence of a trust being in writing, a trust ‘does not
come into being merely from a gratuitous intention to transfer or create a beneficial interest’
(Austin v Keele(1987) 10 NSWLR 283, PC per Lord Oliver of Aylmerton).

Formalities and equity

That being said, there are limited situations in which the statutory requirement for formality is
circumvented by the court exercising its equitable jurisdiction. The court will exercise that
jurisdiction where there is a concern about the statute being used in a manner that is contrary to
the intentions of the testator. This, as you will recall from your revision in Equity and Trusts, is a
reference to ‘secret trusts.’ The court when faced with these situations intends to avoid allowing
statute being used as an instrument for committing or abetting a fraud. The Law of Property Act
1925 was not intended to replace one form of fraud (i.e. the alleged beneficiary claiming the
existence of a trust) with another (i.e. the reliance by the trustee themselves on a technical fault
in the trust to avoid being rendered as the trustee).

Hence, in Rochefoucauld v Boustead [1897] 1 Ch. 196,the statutory requirement for writing was
held not to apply in a situation where A has acquired a title in land from X, on terms expressed
orally to A by X that the land is to be held by A on trust for B. If B were able to renege on these
terms by reliance on the statutory formalities, that would offend the equitable conscience of the
court. Note that this rule has no application where the declaration is made after the date of A’s
acquisition of title, because the passing of title would have had to be decided entirely according
to the requirements of s.53(1)(b) of the Law of Property Act 1925.
 33

Nevertheless, those situations where an express declaration of trust can be made without
evidence of writing are limited to secret trusts. Where the alleged beneficiary claims a secret
trust for their benefit, they cannot rely on the technical significance of a declaration of trust being
incomprehensible to a layperson (Pink v Lawrence (1978) 36 P. & C.R. 98). Rarer still is the
invocation of rectification, according to which a court may rectify a declaration of trust so that it
is in accord with the testator’s intentions which had hitherto been expressed imperfectly or not at
all in the declared trust (Wilson v Wilson [1969] 1 WLR 1740, ChD).By and large, an express
declaration of trust, evidenced and signed for in writing, will be conclusive of the testator’s
intention as it is stated in the written form. The declaration, so far as it concerns the persons
named in it, ‘necessarily concludes the question of title… for all time’ (Pettitt v Pettitt [1970]
A.C. 777 per Lord Upjohn).

Examination Consideration: Express trusts typically require to be put in writing, though there are
exceptional circumstances in which that requirement can be avoided. Can you remember which
case, mentioned above, had prescribed the principle for avoiding the requirement of putting an
express trust in writing? And what is the principle in question?

IMPLIED TRUSTS

Although there is an insistence on the need to uphold formalities and avoid complications
following informal creation of trusts of land, nevertheless there are exceptions to the need to
comply in an unyielding manner to ensuring all trusts are put in writing. Hence, unlike with
express trusts of land, implied trusts of land are not required to be evidenced in writing and do
not require the signature of the settlor (Law of Property Act 1925, s.53(2)).

In the context of implied trusts, there are two types of trusts: resulting trusts and constructive
trusts.

Resulting Trusts

Dealing first with resulting trusts, the presumption at the heart of such trusts is ‘no more than a
consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to
be drawn in the absence of any evidence to the contrary’ (Pettitt v Pettitt [1970] per Lord
Upjohn). According to this doctrine, the “nominal”purchaser (A) of some land, where they
purchase the land using money provided by another (B), is deemed by equity to be holding the
land on a trust that ‘results’ back to B, the “real” purchaser. This is an application of the principle
as stated by Eyre CB: ‘A trust of a legal estate… results to the man who advances the purchase-
money’ (Dyer v Dyer(1788) 2 Cox Eq. Cas. 92).

This rule serves to displace the usual rule, namely that equitable ownership follows legal title.
According to this rationale, given that A is the named purchaser of the land, they must also be
the beneficial owner of the land. With resulting trusts, equity is recognising a truism that if B
advances a large portion of money to A for the purpose of purchasing land, the advance of
money is more likely to be part of a bargain, and not a gift; the so-called ‘solid tug of money’
(Hofman v Hofman [1965] NZLR 795 per Woodhouse J). Resulting trusts recognise that B had
anticipated, and A had agreed to, there being something given to B in return.
 34

Resulting trusts will recognise in B, the party which provided the purchase-money to the person
with the paper title (A), a degree of ownership over the land which coheres in its degree to the
size of the contribution made by B to the purchase. If B provided the entirety of the purchase
money, then B is absolutely the equitable owner. In this manner, equity serves to give ‘the force
of law to moral obligations’ (Sekhon v Alissa [1989] 2 F.L.R. 94 per Hoffmann J).

Resulting Trusts and Inequity

Controversially, a resulting trust is still held to apply, and the moral obligation owed by A to B,
is no less diminished even where B has acted according to motives that would otherwise offend
the conscience of the court of equity. In the case of Tinsley v Milligan [1994] 1 AC 340, the
House of Lords held that A was subject to a resulting trust for the benefit of B, even though B’s
contribution was made because of their intent to defraud the Department of Social Security.

This case was examined in 2016 by the UK Supreme Court in Patel v Mirza [2016] UKSC 42,
and the Court decided not to follow the case of Tinsley only insofar that the case of Tinsley had
created a “reliance test”: if B had to prove the illegality of their actions in order to benefit from a
resulting trust, they would not be able to benefit from such a trust. But the Supreme Court in
Patel v Mirza went even farther. The Supreme Court held that a reliance test should not have
been imposed, and therefore even if a person had to prove unlawful behaviour on their part to
establish their title, they would still be entitled under a resulting trust.

Date of acquisition

It is said that resulting trusts come into being at the date of acquisition of the property by A: the
exact distribution of beneficial entitlement between A and B (i.e. the respective beneficial share
of each party over the land) is said to ‘crystallise’ at the date of acquisition (Bernard v Josephs
[1982] Ch. 391). In other words, according to the classic idea of resulting trusts, the only
intentions which are relevant are those which existed at the time of the taking of title by A
(Gissing v Gissing [1971]).Therefore, per this classic condition of resulting trusts, any
contributions that are subsequent to the date of purchase ought not to be declared relevant for the
purposes of a trust (Curley v Parkes [2005] 1 P. & C.R. DG15).

The problem with this notion is that it fails to take into account the idea of instalment-based
mortgages. If B does not contribute anything to the deposit for a mortgage, for example, yet once
the mortgage has commenced makes significant - or even the only - contributions to the
mortgage, according to resulting trust doctrine they still do not hold any beneficial entitlement to
the land. This is what gave rise to the idea of constructive trusts (Abbott v Abbott [2007] UKPC
53 per Baroness Hale of Richmond). Further discussion of constructive trusts is found below.

Examination Consideration: As a recap, by what time must a contribution be made in order to

constitute a resulting trust? It should also be noted that the idea of a resulting trust being valid, if
the circumstances which gave rise to it are inequitable, is academically controversial. Although
there are plenty of articles discussing the subject, two suggested ones are ‘Illegality in the
Supreme Court’ by R.A. Buckley (2015, L.Q.R. 341) and ‘Dirty Hands Reach Further’ by Steve
Evans (2015, N.L.J. 165).
 35

Presumptions

Resulting trusts, as mentioned, depend on a presumption: namely, that because B has advanced
some or all of the purchase-money for the land by the date of acquisition, B is presumed to hold
a beneficial interest via resulting trust. But this presumption is rebuttable: if evidence can be
provided which definitively demonstrates that B never intended to hold a beneficial interest over
the land, then a resulting trust will not apply. Again, it is the default position that the advance of
purchase money from B to A, so that A may purchase the land, will establish a resulting trust in
favour of B.

Further, although resulting trusts depend on a truism that an advance of significant portions of
money for purchase of land is a bargain and not a gift, there are occasions in which equity will
recognise that portions of money alleged to be gifts are exactly that: gifts. For example, where a
father announces at his son’s wedding reception that he, the father, intends to provide the
married couple with money to buy a marital home, that is a gift and does not give rise to a
resulting trust (Walker v Walker, unreported, 12 April, 1984, CA). The evidence required to
rebut the presumption of resulting trusts and to establish it is a gift must be compelling. As with
the case of Walker v Walker, the alleged gift will usually be found in the family context.

Statute also recognises that provisions of money reflect an intent to donate, rather than to be part
of a bargain. The doctrine of resulting trusts cannot apply merely because B, the current owner of
the legal estate, transfers that estate voluntarily to A (Law of Property Act 1925, s.60(3), and also
Ali v Khan [2002] 2 P. & C.R. DG19).

Presumption of Advancement

Resulting trusts can also be displaced by another, contrary presumption: the ‘presumption of
advancement.’ Under this latter presumption, an inference arises of intent to donate money
towards the purchase of a legal estate: the donor wished to ‘advance’ (that is, make a gift to) the
nominal purchaser of the legal estate. This presumption has tended to operate in the family
context where, contrary to the centrality of bargains over altruism, instead there may be altruistic
motives on the part of the donor towards the donee. There is a ‘moral obligation to give’ (Bennet
v Bennet (1879) 10 Ch. D. 474 per Jessel MR).

Conversely to the former presumption, compelling evidence can be rendered to show there was
no such altruistic motive; but otherwise the default presumption of advancement will apply. This
presumption reiterates ‘the prima facie position… that the equitable interest is presumed to
follow the legal estate and to be at home with the legal title’ (Calverley v Green(1984) 155 CLR
242 (HC of Australia) per Deane J). Expressed differently, if a father provides their son with
purchase money for purchasing a new home, the presumption of advancement applies, because
the bond of familial ties and affection is sufficient to give rise to an ‘obligation in conscience to
provide’ (Scott v Pauly(1917) 24 CLR 274 (HC of Australia)).

Oddly, these ties of familial obligation have been held not to apply to mother and daughter
relationships (Sekhon v Alissa [1989]). Further, the ties seem only to go one way: unless there is
absolute evidence to the contrary, money contributions made by the donor to their parent (rather
 36

than their child) is actually a resulting trust and is not displaced by the presumption of
advancement (Binmatt v Ali (1981) unreported, 6 October, CA).

It has been suggested that such notions are outdated; indeed, that the whole doctrine of presumed
advancement is outdated. It has been said that the presumption of advancement has now become
relegated to a ‘judicial instrument of last resort’ (Ali v Khan [2002] per Morritt V-C), as opposed
to a presumption of entirely equal standing when set against the presumption of a bargain that
ordinarily applies with resulting trusts. In particular, the presumption when applied from
husbands towards wives has received significant judicial criticism. In Pettitt v Pettitt, Lord
Diplock said the presumption was ‘an abuse of legal technique… to apply to transactions
between the post-war generation of married couples presumptions which are based upon
inferences of fact which an earlier generation of judges drew as to the most likely intentions of
earlier generations of spouses belonging to the propertied classes of a different social era.’
Similar criticisms have been made elsewhere (Lowson v Coombes [1999] Ch. 373 per Robert
Walker LJ).

Examination Consideration: Can you recall what the differences are between the usual
presumption, and the presumption of advancement? Would you be able to come up with a
scenario in which one of the presumptions and not the other applies?

There may be other ways in which the presumption of a bargain can be rebutted. For example,
the provision of money by B to A can simply be intended to constitute contributions towards
living expenses and shared outgoings (Mehra v Shah [2004] EWCA Civ 632).

Case in focus: Hannaford v Selby(1976) 239 E.G. 811

A couple bought a house in their own names and were able to buy the house by using a mortgage
loan. The wife’s parents move in with the couple, and the parents paid a weekly sum each week
towards the family outgoings over a significant period of time. When relations between the
parents and the couple fractured, the court had to consider the respective interests of the parents
and the couple over the house. Goulding J rejected the parents’ claim to a beneficial interest in
the home; Goulding J determined that the regular payments towards the shared outgoings of the
household gave the parents nothing more than an occupational licence, which itself was
revocable upon reasonable notice.

Key Points:

 The parties with the legal title purchase the land by way of loan.
 The parties claiming a beneficial entitlement stake their claim on financial contributions
towards the expenses and outgoings of the household of the land.
 Those contributions, having not been made towards the purchase price of the property,
could not constitute a financial contribution.
 NOTE: This case is from 1976 and therefore prior to the case law surrounding
constructive trusts. It should therefore not be relied on to suggest parties in place of the
parents would only be entitled to an occupational licence. It is simply presented here to
 37

indicate how the timing and size of financial contributions will be relevant to the question
of whether there is a resulting trust.

Loans

Loans are of a different nature: a lender does not advance money in the same manner as B does
in the scenario described above. The lender does not therefore take on any beneficial entitlement
under a resulting trust. Otherwise, lenders and building societies would be able to take almost
absolute beneficial entitlement to all properties for which they provide loans. Instead, the
lender’s entitlement to the property rests solely on their contractual entitlement to payment of the
capital plus interest. Breach of that entitlement gives rise to powers of sale and repossession,
otherwise the lender has no beneficial entitlement to the property. In exceptional circumstances,
a private lender (more likely an individual rather than a lending company) might derive greater
rights than the lender might usually obtain where the family arrangements are such that the
parties involved deem it appropriate to give the lender some degree of property ownership.

Case in focus: Re Sharpe (A Bankrupt) [1980] 1 W.L.R. 219

Sharpe (S) acquired an interest in a shop and maisonette (“the property”), and a great portion of
the purchase money was provided by S’s 77-year-old aunt (A). A had sold her existing home and
moved into the maisonette with both S and S’s wife. This was done on the understanding that A
would be able to stay in the property for as long as she wished. Acting on legal advice, A
obtained from S a promissory note in respect of this right of occupation given her financial
contribution. S later became bankrupt, and the court had to consider the respective interests of
the property in order to determine how much of the sale of proceeds of the property ought to go
to the other beneficial owners of the property. Browne-Wilkinson J held that A had no interest in
the land via resulting trust, because A had acted in the capacity of a lender; the money was paid
by way of a loan. However, given the promise of occupation, the court considered that A had
acquired a right, which was enforceable against S’s trustee in bankruptcy, ‘to stay on in the
premises until the money she provided indirectly to acquire them has been repaid.’ There was no
resulting trust; instead, the court considered there might be a ‘contractual licence or an equitable
licence or an interest under a constructive trust.’

Key Points:

 The person providing the purchase money was an ancestral relative of the nominal
purchaser of the property.
 The receipt of the purchase money was followed by a promise to allow the provider of
that purchase money to live in the property as an absolute right.
 The relative had acted ‘in the capacity of a lender’, and therefore had no resulting
interest.

Further difficulties

One persistent difficulty within resulting trusts is the ability to ascertain the contours of
“purchase money”: in other words, it has been a problem for resulting trusts doctrine to identify
 38

which financial contributions are contributions towards the purchase and those which are not,
meaning which contributions are ‘referable’ to A’s acquisition of title (Burns v Burns [1984] Ch
317, CA per Fox LJ). This problem is especially pertinent to those contributions which may have
been made after the date of the acquisition of the land, and yet relate to the land. These can be,
for example, payments for improvements of the land, or even full satisfaction of the purchase
price (Winkworth v Edward Baron Development Co Ltd [1986] 1 W.L.R. 1512).

It would seem that the most straightforward kind of contribution would be a direct cash
contribution towards the purchase price of the property up to the date of acquisition. The fraction
of their contribution towards the purchase price also defines their share: for example, where the
legal owner contributes two thirds of the purchase price, and the hopeful beneficiary contributes
the final third, that final beneficiary is entitled to a one-third share of the property (Cowcher v
Cowcher [1972] 1 W.L.R. 425 per Bagnall J). Contributions towards the family household,
however, are less likely to constitute money which are referable; Lord Diplock has said that the
mere sharing of family living expenses does not necessarily indicate such pooling of resources
will constitute a contribution towards the acquisition of family property (Gissing v Gissing
[1971]).

Given the advent of constructive trusts, resulting trusts are now usually reserved for
straightforward, though now atypical, cases where contributions towards the purchase money are
made prior to the date of acquisition (Curley v Parkes [2005]). More broadly, the law on trusts of
land has ‘moved on’ from the rigid and limited application of resulting trusts to the wider
doctrine of constructive trusts (Stack v Dowden [2007] per Lord Walker and Baroness Hale).

Constructive Trusts

The starting point is that, as mentioned already, land law tends not to recognise rights creation
where simply done orally; land law will usually require the creation of rights to be done by
written instruments (Law of Property Act 1925, s.53(1)(b)-(c)). However, equity may be
prepared to impose a trust where it sees that an estate owner has behaved unconscionably within
the context of a bargain. Where an owner of a legal enters into a bargain with another person to
allocate or share beneficial ownership of the land with the other person, and that bargain has
been acted upon in some manner, equity will prevent the estate owner from avoiding that
agreement; the court acts to ‘construct a trust’ to give effect to that bargain (Grant v Edwards
[1986] Ch. 638 per Nourse LJ).

The constructive trust provides ‘the formula through which the conscience of equity finds
expression’ (Beatty v Guggenheim Exploration Co.225 NY 380 (1919). The court seeks to
construct the trust on the basis of a given bargain which renders the legal owner’s subsequent
assertion of an absolute beneficial title unconscionable (Banner Home Groups plc v Luff
Developments Ltd [2000] Ch 372, CA).

Definition

The classis definition of a constructive trust was posited by Lord Diplock, in which His Lordship
stated that equity enforces or ‘constructs’ a trust in circumstances where ‘[The legal owner] has
 39

so conducted himself that it would be inequitable to allow him to deny to [the alleged beneficial
owner] a beneficial interest in the land.’ Lord Diplock sought to limit the reach and breadth of
this statement by a qualifying statement: an inequitable outcome will be prevented only if ‘[the
legal owner] by his words or conduct has induced [the alleged beneficial owner] to act to [the
alleged beneficial owner’s] own detriment in the reasonable belief that by so acting [the alleged
beneficial owner] was acquiring a beneficial interest in the land.’ As mentioned at the outset
regarding implied trusts, a constructive trust is fully enforceable because it is not required to be
in writing (Law of Property Act 1925 s.53(2)). When enforced, the constructive trust takes effect
as a ‘trust of land’ as per the Trusts of Land and Appointment of Trustees Act 1996.

As seen, the conscience of the legal owner in their words and conduct is crucial: the court cannot
impose a constructive trust unless, save the other requirements, ‘it is satisfied that the conscience
of the estate owner is affected’ (Ashburn Anstalt v Arnold [1989] Ch. 1 per Fox LJ). A legal
owner’s conscience is ‘affected’ if they disclaim an obligation of conscience that was based on
some prior bargain. This disclaimer of obligation amounts to a ‘breach of faith’ and thus gives
rise to the constructive trust (Gissing v Gissing [1971] per Viscount Dilhorne).

Elements

There are three essential elements, according to the Diplock formula:

1. The bargain,
2. Change of position (the so-called ‘acting to their detriment’), and
3. Equitable fraud (the unconscionable disclaiming of the bargain).

1. Bargain

The Court of Appeal in Oxley v Hiscock [2005] Fam. 211 identified as the first issue in any
constructive trust claim to be whether there was any common intention on the part of A and B
that each should have a beneficial interest in the land. So long as there was some manner of
agreement of shared beneficial entitlement to the estate, such an agreement can give rise to a
constructive trust. In short, Oxley asks whether there was a bargain. The second issue is a matter
of how much; that is, the amount of the beneficial entitlements as they are shared between A and
B. The House of Lords in Stack v Dowden [2007] 2 A.C. 432 said the court can settle this
question of how much by reference to what the parties ‘must, in the light of their conduct, be
taken to have intended.’ The timing of the bargain, unlike with resulting trusts, is a much less
critical question (James v Thomas [2007] EWCA Civ 1212 per Sir John Chadwick).

The problem is that the parties may not necessarily agree that a bargain they enter into is
necessarily of a proprietary nature (Binion v Evans [1972] Ch. 359 per Lord Denning). The
current basis in equity is that the emphasis lies with the conscientiousness of the legal owner
rather than on the intrinsic rights they seek to enforce against the alleged beneficial owner
(Banner Homes Group plc v Luff Development Ltd [2000] Ch. 372).

2. Change of position
 40

It is essential that the person claiming a beneficial entitlement under a constructive trust must
show they have ‘altered her position in reliance on the agreement’, thereby acquiring ‘an
enforceable interest… by way either of a constructive trust or of a proprietary estoppel’ (Lloyds
Bank v Rosset [1991] 1 A.C. 107 per Lord Bridge). There must exist a causal link between the
agreement and the detriment taken on by the alleged beneficial owner. As put by Lord Hope of
Craighead, there must be ‘a sufficient link between the common intention and the conduct which
is relied upon to show that the claimant has acted on the common intention to their detriment’
(Green v Green [2003] UKPC 39).

As to what facts might constitute a change of position, this can include contributions of finance
and the attention of one’s labour to a joint venture between themselves and the legal owner
(Chan Pui Chun v Leung Kam Ho [2003] 1 P. & C.R. DG2 per Jonathan Parker LJ).

3. Equitable fraud

According to this final element, what constitutes the equitable fraud is the legal owner’s
disclaimer of the bargain between themselves and the alleged beneficial owner. The legal
owner’s attempt to deny the existence and application of the agreement amounts to a form of
cheating, and thus the legal owner is penalised by the imposition of the constructive trust.

Case in focus: Bannister v Bannister [1948] 2 All ER 133, CA

B conveyed their freehold interest in two cottages to A, B’s brother-in-law, at a value much less
than the market value. This was done on the understanding, communicated orally, that B would
be allowed to live rent-free in one of the two cottages for the remainder of B’s life. The
conveyance made no reference to this oral promise. A later sought to evict B from the cottage
despite the oral promise. The Court of Appeal held that A’s legal title was bound by constructive
trust to give effect to the bargain between A and B. Scott LJ indicated a constructive trust is
imposed where ‘a person… insists on the absolute character of a conveyance to himself for the
purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to
another.’ Even where ‘no written evidence of the real bargain is available’, the equitable fraud
should displace this requirement.

Key Points:

 The property exchanged hands at a lower than market value.

 The parties were related.
 A upon becoming the legal owner had promised that B would live rent-free for the
remainder of their life.
 B had acted to their detriment by conveying the property to A. They acted according to
the bargain.
 The promise was made orally and was not recorded in the conveyance.
 A later sought to resile from their promise.

Examination Consideration: Implied trusts offer a means of avoiding the usual requirement for
trusts of land to be put in writing on the basis of specific criteria and circumstances. Do you
 41

recall the types of implied trusts which are relevant to trusts of land? Further, what are the
relevant tests for each type of implied trust, in particular the Lord Diplock formula

Joint Tenancies v Tenancies In Common

INTRODUCTION AND CO-OWNERSHIP

Co-ownership is where any two or more persons each simultaneously owns a given estate in land
and are thus entitled to an interest, or interests, in that estate. Co-ownership is put into four types,
two of which are discussed here: joint tenancies, and tenancies in common. Concurrent co-
ownership of both legal and equitable interests requires a trust of land (Law of Property Act
1925, ss. 34, 36). Since the passing of the Trusts of Land and Appointment of Trustees Act
(TOLATA) 1996, a trust of land is established where there are two or more legal owners of the
land, and a trust of land is established where there is one legal owner but more than one equitable
owner.

This chapter will first discuss joint tenancies, and touch upon the following areas: survivorship,
how and why a joint tenancy might be changed, the four unities, and the issues surrounding
family breakdowns and joint tenancies.

This chapter will then go on to discuss tenancies in common, and will discuss the following
points: that there is no right of survivorship; that the only unity present in tenancies in common
is that of possession; tenants in common have rights of occupation and enjoyment; no tenant in
common will ordinarily be expected to pay rent for occupying the property; contributions
towards the maintenance of the land will only be apportioned between tenants in common at the
time of a sale and not immediately; and equity exhibits a preference for tenancies in common,
such that equity will determine the existence of a tenancy in common even though the legal title
is necessarily shared between joint tenants.

Severance is not discussed here, as that is addressed in full in the chapter on Severance. Finally,
take note that the reference to tenants here has nothing to do with tenants and landlords. Tenant
here simply means ‘owner.’

JOINT TENANCIES

These types of tenancies are a type of co-ownership of land, under which each tenant - or ‘joint
tenant’ - is equally and ‘wholly entitled on the whole’ to the estate (Burton v Camden LBC
[2000] 2 AC 399, HL per Lord Millett). A joint tenancy is able to exist as either a legal or
equitable interest, or both. In joint tenancies, no joint tenant is said to hold a share in the land;
instead, each is invested with the whole interest in the land (Wright v Gibbons(1949) 78 CLR
313 (HC of Australia) per Dixon J), regardless of whether their interest is in the freehold or the
leasehold. Because each joint tenant is effectively a single composite person - given there are no
shares - they are deemed in the eyes of ‘outside world [as] one single owner’ (Hammersmith and
Fulham LBC v Monk [1992] 1 A.C. 478 per Lord Browne-Wilkinson). That said, a joint tenancy
 42

can later be severed into shares, thus rendering the interests as tenancies in common in equal
shares.

Joint tenancies have two characteristics in particular that distinguish them from tenancies in
common. First, joint tenancies provide a right of survivorship. Second, joint tenancies always
require the presence of the so-called four unities.

Right of survivorship

This right, also known as ius accrescendi, provides that upon the death of any of the joint
tenants, the entire co-owned estate is said to ‘survive to’ the living joint tenant(s). The rights of
the joint tenant upon death are therefore entirely extinguished upon death. The deceased cannot
have provided for their rights to be passed on to nominated beneficiaries in their will. This is
because, by definition, they have no share in the estate to pass on, because shares do not exist in
a joint tenancy.

The law is to a degree archaic in this area when it comes to multiple deaths of joint tenants: if
several but not all of the joint tenants die at a similar time, and it is not certain in what order they
died, the deaths are presumed as a matter of law to have occurred in order of seniority (the so-
called “commorientes” rule), and the youngest said to have ‘survived’ longest (Law of Property
Act 1925, s.184). On the other hand, one might argue that the right of survivorship continues to
reflect social norms, because with the death of one joint tenant in a family, the other family
members who are joint tenants automatically receive the rights of the deceased joint tenant. This
is a very convenient means of transferring rights: the only evidence that is required for the
transfer is the death of the joint tenant. No evidence is required to show the deceased joint tenant
intended and acted to dispose of their title.

The surviving joint tenant(s) takes the entire co-owned estate irrespective of their (lack of
contributions) towards the initial purchase of the property. Survivorship is therefore often a
useful measure for ensuring that a family home stays within the family. Since 1925, co-
ownership of any legal estate in land has necessarily been rendered as a joint tenancy. For the
legal estate, it is not ‘permissible’ to sever a joint tenancy into a tenancy in common (Law of
Property Act 1925, s.36(2)).

Legal title is generally unimportant: it is a paper title that is held on trust, meaning that the legal
title denotes the party with administrative and fiduciary responsibilities over the land, whereas
the equitable title denotes the person who may benefit from the land. It is therefore relatively
straightforward to create new joint tenancies of a legal estate, both because the distribution of
benefits flowing from the land does not need to change with an increasing number of those with
legal title, as these can be trustees, and also it means that where a joint tenant (with only legal
title) dies, the surviving joint tenants with legal title can resume the duties of the deceased joint
tenant without interruption. Trustees - i.e. those joint tenants with merely the legal title - can
therefore be relatively easily appointed (Trustee Act 1925, ss. 36, 40, 41(1); TOLATA 1996,
s.19(2)).

Changes in legal joint tenancy

 43

Joint tenants may opt to transfer the legal estate in land to themselves, or to transfer it to others,
and hold the land as legal joint tenants (Law of Property Act 1925, s.72). This can be a useful
mechanism where one of the joint tenants, acting in a capacity as trustee, intends to retire and/or
if someone else wishes to become a trustee.

The Four Unities

A joint tenancy necessarily requires the presence of the so-called “four unities” in order to exist
(AG Securities v Vaughan [1990]1 A.C. 417 per Fox LJ). Likewise, where all four unities are
present, the type of co-ownership is necessarily a joint tenancy (Corin v Patton(1990) 169 CLR
540 (HC of Australia) per Deane J). The four unities are unities of possession, interest, title and
time.

Possession

The unity of possession pertains to the right of each joint tenant to possession of the land; the
right of each tenant to the land applies to each and every part of the land. Therefore, no joint
tenant may take possession of any portion of the land, such as by sectioning off that portion of
land, to the exclusion of the other joint tenants (Meyer v Riddick(1990) 60 P & CR 50, CA).
There cannot therefore be a trespass by any joint tenant against another, except where one joint
tenant has wrongfully ousted another. According to the common law, joint tenants have no
remedy of possession against other joint tenants, no matter how irritating, intolerable, or
unpleasant the other joint tenant is (Wiseman v Simpson [1988] 1 WLR 35, CA). For statute,
there are exceptions where a joint tenant may legally oust another, such as where the other joint
tenant has been the perpetrator of domestic violence against the joint tenant applying or some
other occupant of the land (Davis v Johnson [1979] AC 264, HL).

Interest

This form of unity derives from the idea that each joint tenant is ‘wholly entitled to the whole.’
The interest of each and every joint tenant is exactly the same in terms of extent, nature, and
duration. No joint tenancy therefore can exist between a freeholder and leaseholder, because the
nature (and durations) of their interests differ. The same can be said for owners in possession and
owners in remainder, and for owners of a fee simple interest and those who own merely a life
interest.

Title

The unity of title holds that each of the joint tenants derives their title to the land from the same
act or document, such as an act of adverse possession, or a document such as a grant. For a co-
owned legal estate, this type of unity also means that when a purchaser is looking to purchase the
title to a portion of co-owned land, the purchaser need only purchase one title. Coupled with the
fact that the number of trustees of any given legal estate is capped at four (Trustee Act 1925,
s.34(2)), the purchaser will have no difficulty in investigating the title rights of the trustees,
because a) there are relatively few trustees needed to sign the relevant documentation, and b)
their interest is equal.
 44

Time

Put simply, this unity requires that the interests of all joint tenants must have been vested in them
at the same time.

Case in focus: A.G. Securities v Vaughan

The case concerned four occupants who had each entered into separate agreements with their
landlords. The occupants had agreed to submit a monthly payment in exchange for the exclusive
right to use a four-bedroom flat in common with the other occupants. The agreements were for a
six-month term. The landlord sought a declaration from the county court that the occupants were
mere licensees rather than tenants. When the matter reached the Court of Appeal, the court held
they were joint tenants of the flat. In order for the occupants to be declared joint tenants, they
would have to satisfy the four unities, according to Fox LJ. His Lordship summarised (at 432)
the four unities. His Lordship summarised the four unities with a sentence each: every co-owner
will be as much entitled to any part of the land as every other co-owner (unity of possession);
every joint tenant’s title to the land derives from the same act or document (unity of title); each
tenant’s interest must be vested at the same time (unity of time); and every co-owner’s interest
must be the same ‘in extent, interest and duration’, meaning no one tenant can act by himself to,
for example, surrender a lease or give a notice (unity of interest).

Key Points:

 The four unities are essential to establishing that co-owners have taken land as joint
tenants.

 Fox LJ was responsible for elucidating and summarising the four unities.

 All four unities must be present at the same time to establish a joint tenancy.

Family breakdowns and joint tenancies

Joint tenancies have given rise to issues where the joint tenants are a marital couple, or are in a
civil partnership, and their relationship irretrievably breaks down.

Ending of periodic lease

The first issue is that the legal joint tenancy over the periodic lease requires unanimous action by
joint tenants, yet where there is a breakdown in the relationship that unanimous action may not
be possible. As a result, the court has indicated that a single joint tenant may be entitled to bring
the lease to an end by refusing to enter into a further term for the periodic tenancy
(Hammersmith and Fulham v Monk [1992]).

The problem, as noted in Qazi v Barrow [2003] UKHL 43, is that the service of a notice to quit
by one tenant of a periodic lease effectively brought the lease to an end without any
consideration of the effect the loss of property had on the other joint tenant(s). The matter was
 45

considered in Manchester City Council v Pinnock [2010] UKSC 45. The Supreme Court, in this
case, determined that if a public authority seeks possession of a person’s home, it is open to the
person intending to continue to occupy the property to have the court consider if it is
proportionate, due to the damage done to the European Convention on Human Rights Article 8
right to privacy and to a family home.

Social norms

The terms of the equitable joint tenancy upon breakdown may not necessarily reflect social
norms of justice of who is entitled to what share, particularly where the breakdown is followed
by the parties no longer cohabiting (Stack v Dowden [2007] UKHL 17; Jones v Kernott [2010]
EWCA Civ 578). In both these cases, the court determined that a joint tenancy was not a viable
means of determining the interests, and therefore determined the interests were held as tenancies
in common, with the parties holding unequal shares. Ordinarily, the starting point would be that
the parties would each hold the property entirely, as per the four unities. However, upon
breakdown, the joint tenancy instrument was ill-equipped for distributing shares between the
parties, and the joint tenancy by its nature assumed - incorrectly - that the property would be co-
occupied and used by both parties. In neither case did the court concern itself with the date at
which the joint tenancies had been severed into tenancies in common; instead, the court was
investigating the common intentions of the parties.

In each case there were differing bases on which the court determined the joint tenancy was
actually a tenancy in common. In Stack v Dowden, the court found the following factors to be
relevant: a meticulous separation of the finances of each party, an unequal contribution between
them towards the purchase price, and unequal financial contributions to the householdafter the
purchase. In Jones v Kernott, the parties accepted that a joint tenancy had existed initially; they
disagreed on whether it continued or whether it had been severed by conduct into a tenancy in
common. Among the relevant factors were the following: a long period of separation during
which Mr Jones made no contributions at all towards the maintenance or purchase of the house,
and the parties’ joint decision to cash an insurance policy so that Mr Jones could purchase a
house.

It is unclear in these cases at what point the joint tenancies were severed into tenancies in
common. That said, there is precedent in statute for severing to occur in this manner for joint
tenancies: when property is owned by one or both spouses, and one spouse makes, or contributes
to making, a substantial improvement to the property, then the spouse responsible for the
improvements will acquire a share, or a larger share (unequal to that of the other spouse) in the
improved property (Matrimonial Proceedings and Property Act 1970, s.37). The problem is that
this section seems to assume that the property was held under shares before the improvements
were made, and the concept of shares is inimical to joint tenancies. Therefore, applying that
statute in accordance with the case law, it appears that the statute will act to sever a joint tenancy
where one of the spouses/civil partners makes a greater contribution to improving the land.

Examination Consideration: The joint tenancy can be summarised as a form of co-ownership,

comprising several concepts. It provides for survivorship, and it is typified by the four unities.
The idea of shares does not exist within joint tenancies; instead, shares are a concept which relate
 46

to tenancies in common. By way of revision, in what case did the court refer to the four unities,
and what are the four unities?

TENANCIES IN COMMON

Unlike with joint tenancies, in tenancies in common the co-ownership arrangements are such that
each of the co-owners holds a distinct share, or proportions of entitlement. Tenancies in common
take effect only in equity. The Law of Property Act 1925 s.1(6) describes tenants in common as
holding land in ‘undivided shares’; the word undivided is said to mean that the co-owned land
has not been divided physically. There are two defining characteristics to tenancies in common,
both of which set tenancies in common apart from joint tenancies:

1. There is no right of survivorship between tenants in common, and

2. The only unity which exists between the tenants in common is the unity of possession.

No right of survivorship

There is, unlike joint tenancies, no right of survivorship between tenants in common. The size of
each tenant in common’s share is defined, finite and fixed; it is unaffected by the death of any
tenant in common. Upon the death of any tenant in common, their share passes on to whomever
is named in their will or intestacy as the person to receive the tenancy in common.

Only unity of possession is required

Again, unlike with joint tenancies, tenancies in common do not require that all of the four unities
be fulfilled. Instead, there is only one requirement: that each of the tenants in common has a right
to possession of the land. If there was no unity of possession, meaning an equal shared right to
possess the land, there would not be co-ownership. Without co-ownership, the arrangement
would amount to separate ownership of physically distinct areas of land with boundaries between
them.

Occupation and enjoyment

As with joint tenancies, given the unified right of possession between tenancies in common, no
tenant in common is permitted to physically demarcate or erect boundaries on any part of the co-
owned land for their own use at the exclusion of all other co-owners. The tenants in common
each have the right to exercise other acts attributable to owners of land, so long as he does not
interfere with the equivalent rights of the other co-owners. This applies, regardless of the size of
the share of each tenant in common, meaning that a tenant in common with a much greater share
of the property cannot act in ways that exclude the right of possession of any other tenant in
common with a smaller share.

These views have backing in the case law: each and every tenant in common has a right to the
‘use and enjoyment of it [the land] in a proper manner (Bull v Bull [1955] 1 QB 234, CA per
Denning LJ). This right of possession also has statutory backing (TOLATA 1996, s.12(1)).
Except where a tenant in common acts to physically oust another tenant in common, or acts to
 47

unlawfully interfere with mutual rights of enjoyment, the notion of trespass between tenants in
common has no meaning at common law (Jacobs v Seward(1872) LR 5 HL 464, HL). That being
said, courts have the means to regulate the occupation rights between the tenants in common
(TOLATA 1996, s.14(2); Family Law Act 1996, ss. 33(3) and 36(5)).

What may also be noted is that there is no inherent right of trustees, i.e. those that hold the legal
interest in the land, to compel one beneficiary (i.e. a tenant in common with an equitable interest)
to sell their share to another beneficiary (Rahnema v Rahbari [2008] 2 P. & C.R. DG5; Bagum v
Hafiz and another [2016] Ch. 421 per Lord Dyson MR). Ordinarily, what is required is the
unanimous consent of all the beneficiaries for such an arrangement to be lawful and effective
(Saunders v Vautier(1841) 4 Beav. 115). Otherwise, it falls to the court under sections 14-15 of
TOLATA 1996 to deal with the dispute over shares in such manner that the dispute is resolved
justly and effectively.

Liability of occupation rent

Between the tenants in common, it is usually the case that no one tenant in common can require
the other tenant(s) in common to pay rent, even where one of the tenants in common effectively
enjoys sole occupation of the land. In this case of sole occupancy, what occurs is not an
abrogation of the right to possession on the part of the tenant in common who is not in
occupation. Their non-occupation is a matter of voluntary choice, and does not give rise to a
relationship of landlord and tenant (Henderson v Eason(1851) 17 QB 701). This is relevant to the
notion of trustees of land having the power to exclude some (but not all) of the beneficial co-
owners from occupation where the trust instrument grants the power (TOLATA 1996, s.13(1)).
Where a tenant in common is so excluded, the trustee can require the payment of ‘compensation’
to any beneficiary whose enjoyment of the land has been precluded or restricted (TOLATA
1996, s.13(6)(a)).

Where rent is received from a letting of co-owned land, paid by a stranger occupying the land
that has been let out, the paid rent is divisible between the tenants in common in exact proportion
to the value of their respective share (Job v Potton (1875) LR 20 Eq 84).

Liability for repairs and improvements

When one tenant in common offers to pay for or make repairs or improvements to the co-owned
land at their own expense, they generally have no right of immediate recovery of his costs from
the tenant(s) in common. (This principle applies also for joint tenants.) That being said, the
tenant in common can endeavour to impose a lien on the co-owned property, or its proceeds of
sale, at such time when the land’s value is realised and distributed amongst the tenants in
common (Leigh v Dickeson(1884) 15 QBD 60, CA). By imposing a lien, the cost of the
improvements will be equally deducted from the share of each tenant in common at the time of
sale (Re Pavlou (A Bankrupt) [1993] 1 WLR 1046, ChD per Millett J). Alternatively, where the
trustees are acting for the beneficiary tenants in common, the trustee may impose ‘expenses in
respect of the land’ (TOLATA 1996 s.13(5)) and such expenses may reasonably include
maintenance and improvement works.
 48

Equity’s Preference for Tenancy in Common

The common law has tended to favour joint tenancies for purposes of certainty and the value of
the concept of survivorship, whereas equity has tended to favour tenancies in common. Equity
views tenancies in common as providing fairness in the property relations of co-owners (Kinch v
Bullard [1999] 1 WLR 423, ChD per Neuberger J). We have already seen this preference in the
cases of Jones v Kernottand Stack v Dowden. Each tenant in common is said to hold a beneficial
interest that is fixed and not vulnerable to ‘the gamble of the tontine’ (Corin v Patton(1990) per
Deane J). In tenancies in common, every share is a separate portion of wealth, distinguishable
from the other shares, and can be used by the tenant in common for commercial purposes or may
be passed down in the family.

As mentioned the common law favours joint tenancies, and this has been given statutory
backing: co-ownership must take the form of a joint tenancy where it pertains to a legal estate in
the land (Law of Property Act 1925, ss. 1(6) and 36(2)). Yet equitable estates can take the form
of either a joint tenancy or a tenancy in common. The question of whether the equitable estate is
one or the other will depend on whether the tenants have retained the right of survivorship or
have instead sought to delineate their interests as distinct and apportioned shares.

There is an advantage, regarding the equitable estate, for favouring tenancies in common.
Survivorship means that in the event any tenant dies prematurely, their interest passes wholly to
the other joint tenants, and thus the deceased tenant has no means of diverting the interest to the
persons they would have designated in their will. Tenancies in common, whether created so at
the outset or have come about following severance, the co-owner is thereby immune from the
risks associated with survivorship, and the tenant in common is now able to exercise full control
over their share of the property in terms of dispositions and wills.

What happens then where a tenant is simultaneously a joint tenant of the legal estate and a tenant
in common of the equitable estate? This simply amounts to a full separation of those measures
which attach to legal and equitable estates respectively. In other words, where a person is a joint
tenant in the legal estate, they would pass on all of the administrative functions and liabilities
(for example, a leaseholder of the legal estate being required to pay service charges to the
freeholder) to the remaining joint tenants, and where they are a tenant in common, they would
have the opportunity to pass on the rights of beneficial enjoyment of their share in the land to
whomever they designate.

Generally, as equity will follow the law, equity’s prior assumption is that where a person is a
joint tenant of the legal estate, they are also joint tenant of the equitable estate (Pettitt v Pettitt
[1970] AC 777, HL per Lord Upjohn; Cowcher v Cowcher [1972] 1 WLR 425, Fam Div per
Bagnall J). However, this is an assumption only, and can be displaced by indications from the
words and conduct of the parties that they intend to take the equitable estate as tenants in
common. There are a variety of circumstances which act to override the presumption of equity
following the law and declaring a joint tenancy of the equitable estate. Thus, in the following
cases, equity will declare a tenancy in common over the equitable estate rather than a joint
tenancy, and the list is not exhaustive (Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC
549, PC per Lord Brightman):
 49

1. Express or implied words of severance - This instance will usually arise in a document or
transfer or conveyance in which it is expressly or impliedly clear that the parties intend to
take distinct and separate shares in the land;

2. Absence of the “four unities” - As mentioned, the presence of all four unities is required
for a joint tenancy, so an absence of any of the unities (save for the unity of possession)
will necessarily mean the tenancy cannot be a joint tenancy;

3. Contributions towards the purchase price in unequal proportions - Where the

contributions are unequal, such circumstances give rise to the presumption that the parties
had intended to take distinct shares in the property that were proportionate to their
respective contributions, and given the contributions are unequal, the parties were
necessarily recognising that one party would hold a greater share of the estate over the
other tenant(s);

4. Commercial partners - Given that joint tenancies have the right of survivorship as an
essential characteristic, commercial parties would be presumed not to intend to divest the
whole of their share in favour of the other commercial party, and instead would have
opted to retain distinct shares (Lake v Craddock (1732) 3 P Wms 158);

5. Business tenants - Where such tenants take a joint tenancy, they are also presumed to
have taken a tenancy in common in equity given their ‘several individual business
purposes’ (Malayan Credit Ltd v Jack Chia-MPH Ltd [1986]);

6. Joint mortgagees - Mortgagees are of course the lenders in a mortgage relationship, and
so where there is more than one mortgagee, it would be in their respective business
interests to retain their own shares and contributions towards a property, meaning each
mortgagee is taken to have intended to ‘lend his own and take back his own’ (Morley v
Bird (1798) 3 Ves 628).

Case in focus: City of London Building Society v Flegg [1988] A.C. 54.

The case concerned four equitable tenants in common (of which, more below in the section
‘Tenants in Common’) and only two legal joint tenants. Mr and Mrs Flegg were the equitable
tenants in common and the parents of the two joint tenants, Mr and Mrs Maxwell-Brown. Mr and
Mrs Flegg had provided the bulk of the purchase monies for the property. Both the Fleggs and
the Maxwell-Browns were in occupation at all relevant times. The joint tenants charged the
property to the City of London Building Society without the knowledge, and therefore without
the consent, of the tenants in common. The joint tenants defaulted on the payments for the
charge. Given that the payments had been the responsibility of the joint tenants of the legal
estate, the arrangement satisfied the requirements for the Building Society’s interest to overreach
the interest of the tenants in common, following ss. 2 and 27 of the Law of Property Act 1925.
The tenants in common, being the equitable owners of the estate, had a personal claim against
the joint tenants because the interest of the Fleggs had been absorbed by the outstanding
mortgage debt. Had the Fleggs been joint tenants, their interest would not have been
overreached.
 50

Key Points:

 The joint tenants have the right to charge the property without the knowledge and consent
of the equitable owners.

 The interest of each tenant in common, being merely an equitable interest, could be
overreached by a party entitled to the charge over the property.

 The tenants in common had a personal claim against the joint tenants given the failure of
the joint tenants to maintain the payments and for not obtaining the consent of the tenants
in common.

Examination Consideration: Tenancies in common exhibit a range of features that distinguish

them from joint tenancies. The fact that they do not have a right of survivorship is often put
forward as their main advantage. Why is the lack of the right of survivorship potentially
advantageous and preferable for tenants in common? Also, if a tenant in common expends
resources to maintain or improve the trust property, and the property is later sold, what happens
to the pay-out of each tenant in common given the maintenance and improvements carried out by
the single tenant in common?

Easements and Profits - Creation Lecture

INTRODUCTION

This chapter will discuss the ways in which both easements and profits à prendre may be
created. The ways in which they may be created shall be addressed in detail after the terms
“easements” and “profits à prendre” are given working definitions. This chapter will be split into
two parts: conditions for the creation of easements and profits à prendre, and the mechanics for
the creation of easements and profits à prendre.

In the part entitled ‘Conditions’ we shall examine the necessary conditions for the creation of
easements and profits à prendre. In other words, what must parties claiming these rights be able
to demonstrate?

In the part entitled ‘Mechanics’ we shall first highlight the two principal methods of creating
easements and profits à prendre: grant or reservation. These two methods can give rise to rights
that exist at law and not only in equity, provided certain conditions are met. Pursuant to these
methods, creation may be achieved either expressly, by implication, or presumed, and the
extension of any rights indefinitely or for a fixed period or for any other period of time. Finally,
we shall see the means of creation can be formal or informal, and that easements and profits à
prendre can be created at law or in equity, depending on the circumstances of the creation of the
right.

DEFINITIONS OF EASEMENTS AND profits à prendre

 51

Before we examine both of these sections, we shall first give brief definitions of the concepts of
easements and profits à prendre, as this will help to understand what is necessary to bring them
about, and also how they are distinct from one another.

An easement is either a positive or negative right of use over land that is owned by another. By
positive, we mean a right that the right-holder is allowed to exercise on the land. By negative, we
mean a right that the right-holder has to prevent the other landowner from acting in a certain
manner over that land. The easement benefits the landowner and their land, the so-called
“dominant tenement.” The land over which the right is exercised (and there must be land to
exercise the right over) is called the “servient tenement.”

The main example of an easement is a right of way. This is a right that the owner of the
dominant tenement has to cross over or pass over the land owned by the servient tenement
landowner. For example, if A (the dominant tenement holder) has an easement of a right of way
over neighbouring land owned by B (the servient tenement holder), then we can say A is able to
e.g. walk across or drive across B’s land and B has no legal basis to stop A from doing so
provided that A exercises the right in accordance with the wording of the easement. Easements
now also include a right to park a given motor vehicle on the servient land, provided that it is
exercised in a manner which is civil and is exercised only to satisfy those needs which are
reasonably incidental to the enjoyment of the dominant tenement (Moncrieff v Jamieson [2007]
UKHL 42, in which the dominant tenement was practically inaccessible to reach without parking
a car on the servient land).

Profits à prendre, meanwhile, are to do with the right of one party (the owner of the dominant
tenement) to take part of the soil, minerals or natural produce that is found on or in land owned
by another party (the owner of the servient tenement). This is a right that does not occur in
easements. Further, profits à prendre exist “in gross”, which means that the land which
comprises the dominant tenement need not be adjacent or neighbouring to the land subject to the
servient tenement, whereas with easements there is a requirement for neighbouring or adjacent
land.

Profits à prendre entitle the owner of the dominant tenement to take either a part of the land
itself (such as soil or sand) or take parts of things that grow on or in the land (for example,
timber or crops) or to take living creatures that grow on or in the land or waters within the
servient tenement. Water is exceptional in that it cannot be owned (Alfred F Beckett Ltd v Lyons
[1967] Ch 449, CA).

Examination Consideration: Can you remember the distinctions between easements and profits à
prendre? In an exam, it is crucial to correctly discern whether a right of one landowner over land
owned by another is an easement or a profit à prendre because they each have different
conditions and different rights.

PART ONE: CONDITIONS

As we have seen following the definitions of easements and profits à prendre, both these rights
are a form of proprietary estoppel, meaning they can act to prevent the servient landowner from
 52

restricting the rights accorded to the owner of the dominant tenement in the exercise of that
right. 

Given the power this accords to a party claiming to have a valid easement or profit à prendre, the
court has set out a number of criteria that must be satisfied in order for an alleged easement or
profit à prendre to be valid. They were set out by Danckwerts J in Re Ellenborough Park [1955]
EWCA Civ 4 as follows:

1. There must be both a dominant tenement and a servient tenement,

2. An easement must ‘accommodate’ the dominant tenement,
3. The dominant and servient owners must be different persons, and
4. The right claimed must be capable of forming the subject matter of a grant.

1. There must be a dominant and servient tenement

The two portions of land, though separate, must (for easements) be adjacent and neighbouring to
each other, and must be two distinct parcels of land. We say that the benefit accrues to the
dominant land, and the servient land is burdened by the easement/profit à prendre (London &
Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 4 All ER 157). The reason there must
be two distinct parcels of land, each either having the benefit or the burden, is that the rights of
easements and profits à prendre are “real” rather than “personal” relationships: the rights and
liabilities apply to land, not persons. So for example, a person does not acquire an easement to
play at a golf club, because there is no dominant land that pertains to the easement (Banstead
Downs Golf Club v Customs and Excise Commissioners [1974] VATTR 219, VAT Tr).

This right is subject to the exception of statutory easements (see below in the section ‘Legal
creation of easements and profits à prendre’).

2. The easement must ‘accommodate’ the dominant tenement

In order for the easement/profit à prendre to be valid the right must confer a benefit on the
dominant land, not simply the person who owns the dominant land. This may seem an artificial
distinction, because land cannot be said, as a matter of common sense, to “enjoy” benefits
accruing from easements or profits à prendre. Nevertheless, this aspect of the conditions for
easements and profits à prendre is that the land itself must be benefited, not least because the
right is passed to a transferee of the dominant land.

This requirement of accommodation also underlines the point about the land being neighbouring
or adjacent for easements: it is for example nonsensical to suggest there can be ‘a right of way
over land in Kent appurtenant to an estate in Northumberland’ (Bailey v Stephens(1862) 12
CBNS 91 per Byles J).

Case in focus: Hill v Tupper(1863) 2 H & C 121

A canal-owner leased a portion of the canal to Hill (H). The portion was on the canal bank and
the landing stage, and the canal-owner had purported to grant H ‘a sole and exclusive’ right to
 53

dock pleasure boats on the canal. A landlord of a nearby inn (T) later sought to put rival boats on
the canal and thereby interfere with Hill’s business. H claimed to have an exclusive easement
over the waterway.

The court refused to recognise the purported right as enforceable. The court intended to prevent a
proliferation of similar claims, and was concerned that the right sought to be exercised by H was
phrased too broadly. Further, H was effectively seeking to amass a commercial monopoly over
the canal, and this monopoly in no way connected with the “ordinary use of the [dominant]
land.”

There was also no right which was appurtenant to the dominant tenement; the landing-stage
could not be considered as having been accommodated, but instead was simply a means to a
commercial end. The court thus held that H was a mere licensee, which was therefore
unenforceable against T.

Key Points:

 There was a purported agreement alleging an entitlement of “exclusive” use for docking
boats in the canal.
 Merely alleging this exclusivity did not warrant the creation of an easement with its
proprietary rights.
 The reasons for refusing to enforce the alleged easement were commercial (the
prevention of what would otherwise be a monopoly); the lack of a dominant tenement
(the land alleged to constitute as such was not directly benefited by the alleged
easement); and the alleged right was phrased too broadly.

Alongside this concern that the dominant tenement be accommodated by the easement, there has
been some controversy over whether the owner of the dominant tenement may also exercise the
rights granted to the dominant tenement over adjacent land owned by the owner of the dominant
land. For example, if A has the benefit of an easement over their land, Blackacre, A should also
have the benefit of that easement for the adjacent land also owned by A, Whiteacre.

There is some case law to suggest that the adjacent land (Whiteacre) may benefit from the
easement so long as its use is only ‘ancillary’ to the primary benefit which applies to Blackacre
(Massey v Boulden [2002] EWCA Civ 1634). However, this concept of ‘ancillary’ is rarely and
reluctantly applied by the courts (Das v Linden Mews Ltd [2002] EWCA Civ 590).

3. The dominant and servient tenements must be owned by different persons

Easements are rights that one person has over land owned by another person; therefore, it is
nonsensical to suggest a person has a right of an easement to the benefit and detriment of their
own land (Peckham v Ellison(2000) 79 P & CR 276, CA per Cazalet J). That being said, there is
a distinction between landlords and tenants. Therefore, tenants can acquire an easement over the
land to which they have a right of possession yet which is ultimately owned by their landlord.

4. Easements and profits à prendre must be capable of forming the subject matter of a grant
 54

The right must be able to be put into a grant by deed. From this point, there are several sub-
requirements to comply with in order to satisfy this condition:

1. There must be a capable grantor and capable grantee: The persons who create the
easement must both be competent and capable of doing so. An easement can only be
created by persons with the leasehold or freehold interests over the land, and no person
can seek to create rights that exceed their own proprietary interests (Wall v Collins [2007]
EWCA Civ 444).

2. The right must be sufficiently definite: In order for a right to be capable of forming the
subject matter of a grant, the alleged easement must be clear in its ambit. Therefore, those
rights which are too broadly phrased or ill-defined cannot form the subject matter of a
grant. We saw this in Hill v Tupper (1863). There is therefore no easement which grants
the alleged dominant tenement owner the right to a good view (Hunter v Canary Wharf
[1997] AC 655, HL). The right to a good view may only be attained by way of a
restrictive covenant that controls construction activities.

Equally, the right to wander freely over another’s land is also too broad because it is said to
confer a merely personal benefit because it empowers the dominant tenement owner rather than
the dominant tenement (Attorney-General v Antrobus [1905] 2 Ch 188, ChD).

3. The right must be the kind of right normally granted by easements: Courts are
reluctant to add new categories of rights to easements (Hill v Tupper (1863)), so if an
alleged easement points to a right that has not been hitherto recognised as an easement,
the court is unlikely to establish it is an easement, such as the alleged right to hit cricket
balls into a neighbouring “servient” land (Miller v Jackson [1977] QB 966, CA).

The courts are especially reluctant to implicate novel easements that are negative, meaning those
easements which refrain the servient tenement owner from doing something on their land
(Hunter v Canary Wharf [1997] per Lord Hope of Craighead). Therefore, an easement requiring
protection from the weather has been found to be illegitimate, because such an easement would
prohibit entirely lawful development on the “servient” land (Phipps v Pears [1965] 1 QB 76,
CA).

4. The right must not impose any positive burden on the servient tenement owner: An
easement will typically only require the servient tenement owner to allow the dominant
tenement to exercise the right enshrined in the easement without interference, such as the
right for the dominant tenement owner to park their vehicle on the servient tenement
owner’s land. Following on from this, unless the circumstances are exceptional, an
easement cannot require the servient owner to expend money, resources or time in any
positive or onerous action (Liverpool County Council v Irwin [1977] AC 239, HL per
Lord Wilberforce). Therefore, no easement can be created that requires the servient
tenement owner to maintain a supply of water or electricity for example; but equally, the
servient tenement owner may be required to not interfere with an existing utilities supply
(Duffy v Lamb(1997) 75 P & CR 364, CA).
 55

5. The right cannot deprive the servient owner of all beneficial proprietorship: An
easement cannot displace the possessory rights claimed by a servient tenement owner; if
a dominant tenement owner intends to take possessory rights over the servient tenement
land, they cannot do so by way of an easement, but rather by freehold or leasehold
ownership. Rights of easements cannot unduly interfere with the servient owner’s
‘enjoyment of their own land’ (Moncrieff v Jamieson [2007] per Lord Scott of Foscote).
The more extensive and far-reaching an alleged easement is, the less likely it is to be
upheld by a court, especially where the alleged easement purports to give the dominant
tenement owner ‘exclusive and unrestricted use of a piece of land’ (Reilly v Booth(1890)
44 Ch D 12, CA per Lord Lopes CJ). It follows that an easement which purports to allow
the servient owner to access their land by invitation only from the dominant tenement
owner cannot be a valid easement (Hanina v Morland(2000) 97(47) LSG 41, CA).

This aspect of making the right capable of forming the subject matter of a grant has undergone
some formulation throughout case law. First, an easement would not be enforceable only if it
would ‘leave the servient owner without any reasonable use of his land’ (London & Blenheim
Estates v Ladbroke Retail Parks Ltd [1993]). Therefore, an easement would be lawful even if it
restricted yet did not entirely eliminate the servient owner’s reasonable use of the land.

Second, the courts have had some sympathy with this notion, as in Moncrieff v Jamieson [2007]
where Lord Scott of Foscote said there was no reason ‘why a landowner should not grant rights
of a servitudal [sic] character over his land to any extent that he wishes.’ The House of Lords
reasoned that an easement which partially excluded the servient owner would be permissible so
long as it did not preclude the servient owner’s ‘possession and control’ of their land. This
principle was reflected in an earlier case in which the court reasoned that a servient owner cannot
be left with ‘no more than a shadow of ownership and possession’ (Clos Farming Estates Pty
Ltd v Easton [2001] NSWSC 525)..

Case in focus: Copeland v Greenhalf [1952] Ch 488, ChD

Greenhalf (G) had for 50 years used a portion of Copeland’s (C’s) land to store motor vehicles as
part of G’s repair business. G claimed the land could be used by himself at all times via an
easement. Upjohn J (as he then was) held the right claimed was too extensive to constitute an
easement, as G was effectively claiming the ‘whole beneficial user’ of that strip of land. In
effect, G was claiming beneficial ownership of that land. Upjohn J observed the right claimed by
G was ‘virtually a claim to possession of the servient tenement, if necessary to the exclusion of
the owner.’ Upjohn J took the view that G’s activities were more akin to adverse possession.

Key Points:

 The relevant portion of land was used almost exclusively by the person claiming to hold
the benefit of an easement.
 The right was deemed too far-reaching: it gave the purported dominant owner the ‘whole
beneficial user’ of that portion of land.
 56

 Given the way in which the land was used (i.e. to permanently store vehicles as part of
the “dominant owner’s” business), the right so claimed amounted to ‘virtually a claim of
possession.’

Examination Consideration: We have covered a whole range of elements that pertain to the
conditions for valid easements and - to an extent - profits à prendre. We managed to isolate the
conditions into four discrete conditions. Can you recall what they are? And can you remember
the case in which these principles were enumerated?

PART TWO: MECHANICS

Grants and Reservations

Grants arise where B creates in favour of A an easement or profit à prendre over the land owned
by B. Where the right is an easement, A of course must hold a portion of dominant land that is
capable of deriving the benefit of the easement.

Reservations meanwhile occur when the owner of the given land B disposes of part of that land
to A, on condition that B will be able to nevertheless exercise an easement or profit over that
disposed land. Thus the distinction between the two rights is that grants apply to land that has at
all relevant times been owned by the servient tenement holder, whereas with reservations the
servient land is formerly owned by one party and then, at the moment the land changes hands,
the person who formerly owned the land now holds an easement or profit over it.

Legal creation of easements and profits à prendre

Unlike with estate contracts, both easements and profits à prendre can be created (and can
therefore operate) at law. The creation and operation of such rights at law requires the fulfilment
of certain conditions:

1. Status of servient estate: The right must apply against a legal estate in the land, such as a
fee simple. If the right is created against an equitable estate, the right invariably and
inevitably is equitable only.

2. Duration: An easement or a profit à prendre has to be set out in a manner that is similar
to that found in freeholds and leaseholds, i.e. that the entitlement has to be set out ‘for an
interest equivalent to an estate in fee simple absolute in possession or a term of years
absolute’ (Law of Property Act 1925, s.1(2)(a); Land Registration Act 2002, s.27(4)
Schedule 2 paras 6(3) and 7(1)(a)).

Given that both these types of rights can exist either “in fee simple absolute” or for a “term of
years absolute”, it follows that the rights of easement and profits à prendre may exist for an
unlimited and undefined period. What should be noted is that if an easement or profit à prendre
is created for an indeterminate period other than in perpetuity, for example if it said to subsist for
life rather than indefinitely or for 100 years, then it will take effect in equity only.
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3. Mode of creation: In order for an easement or profit à prendre to exist at law it must be
created in one of four ways. It must either be created by deed, by statute, by implication,
or by prescription. The first three methods are discussed further below. The method of
prescription is addressed in the next chapter on Prescription.

Modes of Creation

As mentioned in the above section, an easement or profit à prendre can be rendered as a legal
right so long as, inter alia, the easement or profit à prendre is created in one of the approved
methods. Prescription is one of those methods but is not discussed here as it is addressed in full
in the chapter ‘Acquisition by Prescription.’

1. Deed: Any conveyance of a legal estate, which will either include a pre-existing
easement/profit à prendre or will introduce such a right, must be contained in a deed in
order to be valid. This is required by the Law of Property Act 1925, which requires (at
s.52(1)) that ‘all conveyances of land or of any interest therein are void for the purpose of
conveying or creating a legal estate unless made by deed.’

2. Statute: Both easements and profits à prendre are capable of being created by statute.
Statute is especially useful for the creation of easements where those rights are created
for the benefit of public or private service utilities companies as they maintain and
administer supplies of gas, electricity and water. Unlike the usual requirement, statutory
easements do not require the presence of an adjoining or neighbouring dominant
tenement.

3. Implication: There are certain circumstances in which the granting of an easement can
be implied or inferred on the part of the transferee of land (that is, the person receiving
the transfer). A deed of transfer will incorporate by implication all those rights which are
granted, therefore because they are part of the deed (see subsection (i) above) they must
be legal rights. It follows that the rights therefore become enforceable on the basis of the
deed transfer.

If the land is unregistered, the implied easement/profit à prendre is enforceable automatically

against any successors in title of the servient land. If the land is registered, the easement/profit à
prendre is an overriding interest. The types of implied grant can overlap, nevertheless they all
retain a central principle: a grantor ‘may not derogate from his grant’, meaning the person
making the grant cannot set the terms of the grant to be such that the terms undermine the very
purpose of the grant. Implication here refers exclusively to easements, and not to profits à
prendre. However, a right cannot be converted into an implied easement if the subject matter
does not satisfy the Re Ellenborough Park criteria (see under the section entitled ‘Conditions’).

Implication

There are four kinds of implied easements:

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1. Easements of necessity: Such an easement exists where the owner of the dominant
tenement cannot possibly exercise their rights over the dominant land without the
presence of an easement. The threshold for such an easement is high: even if an easement
is reasonably necessary for the proper enjoyment of the alleged dominant tenement, the
court will not infer an easement of necessity (Adealon International Corporation Pty Ltd
v Merton LBC [2007] EWCA Civ 362).

The court has limited powers to create temporary rights that resemble an easement. The Access
to Neighbouring Land Act 1992 entitles the court to make an ‘access order’ (as per s.1(1)-(2)):
these orders entitle the recipient of the order to access adjoining or neighbouring land in order to
undertake certain kinds of preservation works for property and buildings.

2. Easements of common intention: An easement may be implied in order to give effect to

a prior understanding of the parties. That said, ordinarily an easement of common
intention would also require that the easement be necessary (Nickerson v Barraclough
[1981] Ch 426, CA per Megarry V-C).

Case in focus: Wong v Beaumont Property Trust Ltd [1965] 1 QB 673

Wong (W) had purchased property to be used as a restaurant. Wong covenanted to comply with
all public health regulations, including the need to prevent noxious odours and smells. Neither W
nor his landlord, Beaumont Property Trust Ltd (BPT) knew that the only means of complying
with these covenants was to install a certain air ventilation system, and that such system would
necessarily be in the upstairs of the property separately owned by BPT. The Court of Appeal
held that W was entitled to an easement as it was necessary for him to comply with both the
terms of the lease and with all other covenants.

Key Points:

 The tenant had entered into a covenant for the restaurant (the dominant land).
 The covenant required the installation and use of a certain kind of equipment.
 The equipment required that it run through separate property (the servient land).
 As such, the parties had impliedly shared a common intention, because both parties, in
contracting for the lease, would have intended that the tenant be able to comply with the
covenants.

3. Quasi-easements (the Wheeldon v Burrowsrule): The case of Wheeldon v Burrows

(1879) LR 12 Ch D 31 dictates that an easement can apply, from which the grantor
cannot derogate, on a subdivision of land. It entitles the holder of the right to exercise the
same rights over a given section of land as those rights formerly exercised by the grantor
over the same portion of land. So-called ‘quasi-easements’ do not apply in profits à
prendre.

There are several requirements for establishing the validity of a quasi-easement:

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 The right must have been enjoyed over prolonged and substantial periods of time, and
should have been discoverable on a careful inspection; this criterion is known as the
‘continuous and apparent user’ (Hansford v Jago );

 The right must have been reasonably necessary for enjoyment of the alleged dominant
tenement (Wheeler v JJ Saunders Ltd [1995] 3 WLR 466); and

 Where the owner of the land had previously exercised the right now claimed by the
alleged dominant tenement owner, the right needs to have been exercised prior to and up
to the date of transfer.

A quasi-easement is advantageous to the owner of such a right for several reasons:

 It enables the owner to exercise those rights which might otherwise be precluded because
they - the rights being exercised - would suggest pretensions of ownership over the land.

 The kinds of rights that a quasi-easement provides for include rights of way, support, and
light, as well as those rights ‘enjoyed de facto during unity of possession [which] would,
had that unity not existed, have been easements’ (Nelson v Walker(1910) 10,CLR 560
(HC of Australia) per Isaacs J).

 The doctrine applies to both legal grants and those grants which only apply in equity
(Borman v Griffith [1930] 1 Ch 493).

4. Easements under the Law of Property Act 1925: The word-saving provision of s.62 of
the Law of Property Act 1925 is another means of implying an easement or a profit à
prendre. That section contains ‘general words’ which, in the absence of any contrary
statement or intention included in a given conveyance, will be implied into that
conveyance by operation of law. The words enable the holders of existing easements and
profits à prendre to continue enjoying the benefit of those rights following conveyance,
as well as those ‘liberties, privileges… rights, and advantages’ which relate to the land
being conveyed at the date of the conveyance (Kent v Kavanagh [2006] EWCA Civ 162).

One of the significant implications of s.62 is that it carves out an easement or profit à prendre
from quasi-easements and even revocable privileges which are subsisting at the time of the
conveyance (Peckham v Ellison (2000) per Cazalet J).

Section 62 tends to be engaged where there has been some ‘diversity of ownership or occupation
of the quasi-dominant and quasi-servient tenements prior to the conveyance’ (Sovmots
Investments Ltd v Secretary of State for the Environment [1979] AC 144 per Lord Edmund-
Davies). The presence of two separate tenements is essential, and the absence of such is likely to
be fatal to an implication of s.62 (Long v Gowlett [1923] 2 Ch 177). If separate occupation
ceases and the parties commonly occupy the land, such rights as granted under s.62 will be void
(Payne v Inwood(1996) 74 P & CR 42). The exception to this is found in the following case,
discussed in focus:
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Case in focus: P & S Platt Ltd v Crouch [2003] EWCA Civ 1110

Crouch (C) and his wife transferred to P & S Platt Ltd (P&S) property owned by the Crouches,
namely hotel premises near the coast. C retained adjacent land on which they had prior to the
transfer allowed hotel guests to moor their boats and go fishing. P&S had been granted the
option to purchase the adjacent land, but failed to do so and the grant expired. However, because
P&S took the hotel as a going concern, meaning they intended to carry on running the hotel as a
business, the Court of Appeal held that P&S had at the time of the transfer of the hotel also
acquired the adjacent land. The rights exercised over the land, such as fishing and mooring boats,
were part of the ‘continuous and apparent user’ which ‘appertained and were reputed to appertain
to and were enjoyed with the hotel.’

Key Points:

 An area of land was transferred by one party to another.

 The property on the given area of land was to be used for the same purpose, i.e. running a
hotel.
 The transferees of the land (P&S) had the option of purchasing adjacent land separately
but had failed to do so.
 Prior to the transfer, the adjacent land had been used for the exercise of various rights,
such as fishing.
 Because the rights exercised over that adjacent land had occurred ‘continuously and
apparently’, and ‘appertained to’ and were ‘enjoyed with’ the purchased land, the
purchasers were deemed to have a right of easement over that adjacent land despite the
failure to purchase it.

Examination Consideration: By merely examining the word count, you will have discerned that
the area of greatest interest in this Part is about how easements and profits à prendre may be
implied. Can you recall the different types of implication? And what other methods of creating
an easement or profit à prendre are possible?

CREATION OF EASEMENTS: HANDS-ON EXAMPLES

The sections set out above discuss two concepts: the necessary conditions for an easement, and
the means by which an easement is created. This section provides a series of problem questions
that probe different areas of the matters we have just been examining. The answers to the
questions can be found at the bottom of the page, however you are encouraged to attempt to
answer the questions first based on your own recall or notes of the topic before looking at the
answers.

There are essentially three steps to answering questions relating to easements:

1. The first is the need to identify that the right claimed is alleged to be (or may be
interpreted as) an easement or a profit à prendre. Depending on the answer, you will able
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to determine which of the following questions apply (recalling, for example, that profits
à prendre do not require adjacent or neighbouring land for the dominant tenement).

2. The second step is to ask whether the alleged easement or profit à prendre satisfies the
Re Ellenborough Parkcriteria. As a quick reminder, those criteria are:

1. There must be both a dominant and servient tenement,

2. The easement must accommodate the dominant tenement,
3. The dominant and servient tenements must be owned by different persons, and
4. The right claimed must be capable of forming the subject matter of a grant.

3. The third step is to examine how the right has arisen. It may have arisen by deed or by
statute, and you should certainly be aware of these possibilities. However, as you will
likely only have one question (or at most two questions) on easements in an exam, the
problem question will likely be directed to matters of implied easements. Therefore, if it
is an implied easement, recall the four kinds of implied easement:

1. Easements of necessity,
2. Easements of common intention,
3. Quasi-easements as per Wheeldon v Burrows, and
4. Easements as per s.62 of the Law of Property Act 1925.

Q1. Alan purchases the ground floor of a property owned by Business Plc. Business Plc retains
control of the floors above. Alan intends to open a restaurant in the newly-purchased portion of
the land, and in the course of doing so discovers that he needs to install a special air
conditioning unit as required by health and safety regulations. Alan had covenanted to comply
with all such regulations at the time of purchase. The air conditioning unit needs some of its
wiring to run through the floors owned by Business Plc.

Advise Alan.

Q2. Alan is also looking at setting up his utilities for the restaurant. He notes that Business Plc
already have the necessary piping and wiring for water, electricity, and gas for the floors of the
building still owned by Business Plc. He could get the utilities installed separately (i.e. without
needing access to the floors owned by Business Plc), nevertheless Alan asks Business Plc if they
will consider installing similar utilities connections on his behalf through their floors to his
restaurant, but Business Plc say it is not their responsibility.

Advise Alan.

Q3. Charlie enjoys the view of the lake from his property, Greenacre. Delia owns the
neighbouring plot of land. Delia informs Charlie that she has just received planning permission
to construct a new set of houses on her plot of land. When Charlie sees the plans, he realises the
houses will disrupt his view. He comes to you for advice, saying he’s sure a lawyer friend told
him that he can get an easement to prevent the construction.
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Q4. Excavators Inc, based in Northampton are looking to mine new resources as part of their
business. They have learned that the water of a particular lake in Cornwall would be especially
profitable given its unique properties. They approach the equitable owner of the land on which
the lake sits, Francis, to ask if they may be given special permission to take the water from the
land.

Advise Francis.

A1. This is a revised version of the case of Wong v Beaumont Property Trust Ltd. In that case,
you will recall the court considered implying an easement of common intention: both the parties
were taken to have intended that Wong would be able to comply with the relevant regulations,
and in the course of such compliance, Wong had to have access to the parts of the land owned by
Beaumont. And as you will recall from that case, an easement was indeed implied.

A2. Unlike in Q1, the person with the alleged dominant tenement (Alan) is looking to require the
owners of the servient tenement (Business Plc) to actively do something to the servient land
rather than simply allow Alan to do something on their land. As you will recall, any easement
that requires the servient tenement owner to actively and positively expend time, resources and
money on an activity is not a valid easement (Liverpool County Council v Irwin). Therefore, any
such attempt at an easement would fail.

A3. Charlie is in this instance looking to acquire an easement of retaining a good view of the
lake. The problem for Charlie, as per Hunter v Canary Wharf, is that the right is too broad, too
ill-defined, and in any event does not belong to the class of rights which have classically been
defined as an easement. Charlie’s hopes for an easement would therefore fail.

A4. There are two clues in this question that the type of right claimed is a profit à prendre. First,
the locations suggest that the land would not be adjacent or neighbouring. Second, Excavators
Inc is looking to take a natural resource from the land. You should note these relevant
characteristics, while also noting that Excavators Inc cannot actually acquire a profit à prendre
for the water because water is a resource that cannot be the subject of a profit à prendre as per
Alfred F Beckett Ltd v Lyons.

Freehold and Restrictive Covenants Lecture

This chapter will focus on covenants. With leasehold covenants, a covenant regulates the use of
land in some way. Freehold covenants refer to an obligation on an owner of the land to do
something, or take some ‘positive’ action, for example, having to make sure the grass on the
front garden is kept short. A restrictive covenant prohibits the owner of land from doing
something, for example, not being able to keep certain animals on the land. A basic way of
understanding a covenant is that it is a contract between landowners to do or not to do something
on the land.

This area of law would appear to be fairly simple and uncomplicated. However, as we know,
land is bought and sold frequently, this raises questions as to whether the new owners of the land
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are bound by the promises made by the previous owners. There are four key distinctions to
consider when attempting to determine whether a covenant is binding on a new owner of land:

1. The ‘running’ of the burden

2. The ‘running’ of the benefit
3. The rules of the common law
4. The rules of equity

This chapter will begin by outlining the distinctions between these four areas alongside with the
key cases. We will then go on to consider the importance of registering such covenants on the
land register. Next, more specific rules of freehold and restrictive covenants will be explored,
such as how exactly a successor in land can enforce covenants and actions of landowners which
may affect covenants. Finally, potential reform for this area of law will be explored, as some of
the rules and principles can be considered unfair and outdated.

The burden of a covenant

The ‘burden’ of a covenant refers to the land which has the obligation to do, or not to do in the
case of restrictive covenants, something. In our first example of the covenant to keep the grass
short, the owner of that land has the ‘burden’. The ‘running’ of the burden refers to whether a
new owner of the land has to abide by the covenant. Here is a quick example of where the
running a covenant becomes relevant:

 Party A and Party B are next door neighbours

 Party A enjoys keeping their front lawn pristine, but Party B’s is extremely overgrown
 To make sure their street looks good, Party A enters into a covenant whereby Party B promises
to keep the lawn cut short (this may likely be for a sum of money)
 Party B then sells their land on to Party C
 Does Party C have to keep their lawn cut short like Party B promised?

These terms are also important, and will be used throughout the chapter:

 The covenantor is the landowner making the promise (the person burdened by the promise,
Party B in the example)
 The covenantee is the landowner to whom the promise is made (the person with the benefit of
the promise, Party A in the example)
 The dominant land is the land of the covenantee
 The servient land is the land of the covenantor
 A positive covenant is one which requires action
 A negative covenant is one which prevents action (restrictive covenant)

The general rule at common law

The basic rule is that the burden of a covenant in relation to land does not run with the land at
common law, as per Austerberry v Corporation of Oldham(1995) LR 29 Ch. D. In other words,
in our example, the burden of cutting the lawn does not run at common law, Party C does not
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have to cut the lawn short as promised by Party B. This is fairly simple, following the basic rules
of privity of contract.

Case in focus:Rhone v Stephens [1994] 2 AC 310

In this case, the owner of a house entered into a covenant with the purchaser of a cottage that was
underneath the roof of the main house. On the sale of the cottage, the owner of the house
covenanted with the owner of the cottage that they would keep the roof in repair in order to
prevent any damage to the cottage. The roof fell into disrepair, but only once the owner of the
house had been changed. The question was whether the owner of the cottage may enforce the
covenant of repair on the successor in title.

The House of Lords held that the covenant was positive and could therefore not be enforced.

Circumventing the general rule

As you can see, the fact that positive covenants cannot be enforced leaves covenantee without a
remedy. Here are some quick examples of ways which this may be circumvented:

 A chain of indemnity covenants. Each successor of land will promise the previous owner that
they will be liable for any breach of covenants. In our example, Party C would promise Party B
that they would indemnify any damages Party B might need to pay Party A because of a breach
of covenant. Although this does not create a direct obligation for Party C to cut the lawn short, it
is in their best interest to do so, as if Party A sues Party B as a result, Party C must indemnify
Party B (a good way of understanding this is to draw a diagram out if you are struggling! It can
be complicated to read without visualising it)
 To lease the land instead of selling it, and replicate the covenants in the tenancy agreement. Ie.
Party B would rent to Party C, and one of the covenants in the lease would be to keep the lawn
short.

There are a variety of other very specific ways, but these are outside the scope of this chapter and
your course. The best way of enforcing a positive covenant is through equity.

Exam consideration: What is the purpose of equity and can you give an explanation? This will be
important in any essay questions in relation to the operation of equity in land law.

The general rule at equity

The leading case of Tulk v Moxhay [1848] EWHC J34 (Ch) created a certain set of circumstances
which would result in the burden of a covenant running. Where the covenant is restrictive in
nature, and the purchaser of land has notice of the covenant, they are bound by it.

Case in focus: Tulk v Moxhay [1848] EWHC J34 (Ch)

In this case, Tulk owned various pieces of land in Leicester Square. He sold one piece with a
covenant to not cover the land with buildings. The land was sold on multiples times. One owner
did build on the land, despite being aware of the covenant.
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It was held that the owner could not build on the ground, with an injunction being granted. The
court noted that a covenant is only enforceable under equity when an injunction is sought, but
not when damages are claimed.

When using the case of Tulk v Moxhay, four requirements must be satisfied:

1. The covenant must be negative

2. At the date of the covenant, it must be made to benefit the dominant land
3. The covenant must touch and concern the dominant land
4. The covenant must be made with the intention to burden the servient land.

The covenant must be negative

The test for whether a covenant is negative or not is whether they will have to pay anything to
comply with the covenant. In our previous restrictive negative covenant example of not being
allowed to keep animals on the land, it is clear this would not cost anything, therefore it is
negative (Haywood v Brunswick Permanent Benefit Building Society(1881) 8 QBD 403.

This is an important distinction to make because a covenant may be worded in a way which
seems negative - ‘not to allow the grass to grow too long’, the ‘not to’ seems negative but it is in
fact a positive obligation to cut the grass.

At the date of the covenant, it must be made to benefit the dominant land

Case in focus: London County Council v Mrs Allen [1914] 3 KB 642

In this case, the council sold land to Mrs Allen’s husband, his intention was to build houses on
the land. On part of the land, a covenant was agreed to not build upon the land, as the council
wanted there to be an open space for the residents of the land. It is important to note that the
council sold all of the land in the vicinity and did not retain any.

Mr Allen sold the part of the land which had the covenant to not build upon the land. Mrs Allen
built on the land anyway, and the council sought an injunction. The injunction was refused, as
the council did not own any of the land in the vicinity, therefore, as the covenant did not benefit
the dominant land, it did not run with the land and was not enforceable.

The best way to understand this rule is by reference to the London County Council case
explained above. Essentially, there must be some kind of benefit retained by the dominant land at
the date of the covenant. In the above case, as all of the land was sold at once when the covenant
was agreed, there was no dominant land.

The covenant must touch and concern the dominant land

In other words, the covenant must benefit the dominant land. There would be no use for a
restrictive covenant not to make noise if the dominant land was 100 miles away. Usually, this
test falls down to how far away the dominant land is from the servient land. In Kelly v Barrett
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[1924] 2 Ch 379 a five-mile distance between the dominant and servient land was considered to
be too much.

Case in focus: Newton Abbot Co-operative Society Ltd v Williamson and Treadgold(1952) Ch
286

In this case, Mardon owned two shops in a town that were 50 yards apart from each other. On
sale of one of the shops, a covenant was entered that the new owner would not sell ironmongery
(Mardon’s other shop sold ironmongery). However, the dominant land for the covenant was not
listed on the conveyance. Therefore, the question was whether this could be considered to touch
and concern the dominant land, despite there not being a dominant land specified

It was held that by examining the street the dominant land could be identified, therefore this was
sufficient enough.

The covenant must be made with the intention to burden the servient land

There is a distinction to be had between covenants that are intended to bind only the covenantor,
and those which are intended to bind the land itself and subsequent owners.

S79(1) of the Law of Property Act 1925 creates a presumption that a covenant created will be
intended to bind the covenantor, the land and any subsequent owners. This presumption may be
rebutted by any express statement in the covenant that it is intended to bind only the current
owner of the land. Therefore, this requirement is easily satisfied but you should still be wary of
the wording of the covenant.

The operation of privity of contract in covenants - binding the original parties

It is important to know that the original parties to a covenant will be bound by the covenant,
regardless of any sale of the land. Therefore, in our original example, despite the fact that Party
B have sold on their land, Party B are still liable for the covenant and Party A can seek a remedy
against them if the lawn grows too long. This seems extremely unfair Party B would not be
present at the property and may have little power over Party C to enforce the covenant. This
follows the principles of privity of contract.

Furthermore, if Party A sold their dominant land on to Party D, Party D would be able to enforce
the covenant against the owner of the servient land. This principle is stated in S56 of the Law of
Property Act 1925, whereby it is explained that any person can take the benefit of a covenant
despite not being named as a party to the conveyance or other instrument.

Similar to the above exploration of S79, this presumption under S56 can be rebutted if there is an
express statement that the benefit of the covenant is only to be for the current owner of the land,
and not any subsequent purchasers. Re Ecclesiastical Commissioners for England’s Conveyance
[1936] CH 430.
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A covenant is not only restricted to owners or successors in land. A generic class of persons can
be referred to, such as ‘the owners of all of the houses on this street’. However, the rule is that
only those persons who are identifiable and in existence at the date of the covenant can claim
under S56. This rule is subject to the Contracts (Rights of Third Parties) Act 1999

Referring back to our example, if Party B covenanted with 10 of their neighbours to keep his
lawn short, anybody who owns these properties at the time the covenant was created can enforce
the covenant. They do not need to be specifically referred to, just ‘the owners of the ten
neighbouring properties’ would be sufficient. However, if somebody else moved in to one of
these properties later, they would not be able to enforce the covenant as they were not
identifiable and in existence at the date of the covenant under S56. It is important to note that the
covenant may be enforceable under different ways discussed later, but not under S56 here.

Changes implemented by the Contracts (Rights of Third Parties) Act 1999

This piece of legislation made some changes to the way S56 operates. Essentially, it removes the
requirement that the third party wishing to enforce the benefit of a covenant must be in existence
at the time of the covenant.

This only applies to covenants made after 11 May 2000. If so, and one of these requirements are
met, a third party may enforce the covenant:

1. The covenant expressly states the third party

2. The third party is identified by name, a member of a class or a particular description (they do not
need to be in existence).

The second requirement means that successors in title will be able to enforce covenant rights
against the convenantee.

The benefit of a covenant

If you thought determining whether or not the burden of a covenant was complicated,
unfortunately, whether the benefit of a covenant runs with the land is just as complicated. As is
the case with a burden of the covenant, the common law and equity have differing rules and you
will need knowledge of both.

Benefit of a covenant at common Law

Similar to the burden of covenants, there are four clear requirements:

1. The covenant must ‘touch and concern’ the land

2. The covenantee must hold a legal estate in the land on the date of the covenant
3. The buyer of the land must derive their title from the original covenantee
4. The benefit must have been intended to run with the land at the date of the covenant

The covenant must ‘touch and concern’ the land

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Similar to the rule on the burden of a covenant, there must be some benefit to the dominant land.
The test for whether the covenant touches and concerns the land was formed in P & A Swift
Investments v Combined English Stores Group [1989] AC 632:

1. Does the covenant benefit the owner of the dominant land? The benefit to this owner ends
when ownership of the land ends
2. Is there an effect on the nature, quality, mode of use or value of the dominant land?
3. Is the covenant be worded in a generic manner to apply to all owners of the dominant land - it
must not be addressed to a specific individual.

The covenantee must hold a legal estate in the land on the date of the covenant

This requirement is fairly straightforward. Simply, the covenantee must hold a recognised legal
estate in the land. This can either be through fee simple absolute in possession or a term of years
absolute under S1(1) of the Law of  Property Act 1925.

The buyer of the land must derive their title from the original covenantee

This test changes dependant on whether the covenant is pre-1926 or post-1926. For pre-1926
covenants, the new owner of land must hold the same legal estate as the original covenantee. For
post-1926 covenants, as per S78(1) of the Law of Property Act 1925, the new owner of land only
needs to hold either a fee simple absolute in possession or a term of years absolute.

The benefit must have been intended to run with the land at the date of the covenant

Again, this requirement is different dependant on whether the covenant is pre or post 1926. For
covenants created after 1926, there is a presumption under S78(1) of the Law of Property Act
1925 that the covenant is presumed to have been intended to run with the land. Under pre-1926
covenants, the parties must show they intended the benefit of the covenant to pass to new
owners.

Following these four requirements being met, the benefit of the covenant has passed at common
law, meaning the current owner can sue for breach of covenant. If any one of the requirements
have not been met, the test fails and the covenantee must look to equity for a remedy.

Benefit of a covenant at equity

There are four different ways in which the benefit of a covenant may run in equity. The first of
those is extremely simple, and it is that the covenant msut ‘touch and concern’ the land. You can
refer to the test discussed above from P & A Swift Investments v Combined English Stores Group
if you need a recap on what that means. The other three ways are slightly more niche. These are:

1. Annexation
2. Assignment
3. A building scheme
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Annexation

Annexation is where the benefit of a restrictive covenant is clearly applicable to a defined area of
land in such a way that the benefit of the covenant will pass on any transfer of the land. This can
be a confusing principle and case law has attempted to clarify it. Federated Homes Ltd v Mill
Lodge Properties Ltd [1980] 1 WLR 594 ruled that the annexation rule does not apply to
covenants entered before 1926. To further understand this rule, the different types of annexation
will be considered.

Express annexation

In express annexation, the document conferring the covenant will be drafted in such a way that it
is clear that the covenant is made the benefit the land and not the covenantee. The covenantee
may be mentioned in the document, but as long as the drafting is clearly focussed on the actual
land, it will be considered express annexation.

For example - ‘This covenant is entered to with Party A and his successors in title to the land’.
Despite mentioning the name of the party, it is clear there is an express intention for the covenant
to run with the land.

Exam consideration: Would the wording ‘This covenant is entered into for the benefit of John
Smith’ be an express annexation to the land?

Case in focus: Renals v Cowlishaw(1879) 11 Ch D 866

In this case, the wording of the conveyance was that the covenant was for the benefit of ‘the
vendor, their heirs, administrators and assigns’.

It was held that the phrase did not identify any dominant land, therefore it could not be
considered an express annexation.

Case in focus: Rogers v Hosegood[1900] 2 Ch 388

In this case, the covenant stated it was made ‘with the intent that the covenant may ensure to the
benefit of the vendors their successors and assigns and others claiming under them to all or any
of their lands adjoining’

It was held that the phrase ‘all of any of their lands adjoining’ was sufficient in identifying a
dominant land, therefore there was a valid annexation.

The above cases show two covenants with very similar wording, but highlight the importance of
identifying a dominant land.

Annexation of large pieces of land

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When annexing a large piece of land, you wish to place a covenant over, you can either choose to
annex the covenant to only the whole of the dominant land, or to annex the covenant to each and
every part of the dominant land. There are a number of differences between the two.

Disadvantages of annexing to the whole of the dominant land

The case of Re Ballard’s Conveyance [1937] Ch 473 highlights the disadvantage very well. In
situations where the servient land is small and the dominant land is large in comparison, there
may be an issue in proving that every part of the dominant land benefits from the covenant.
Imagine a scenario where the dominant land was 1000 acres and the servient land was a small
patch in one corner of the 1000 acres. How can you argue that there is a benefit for the opposite
corner of the dominant land?

In Re Ballard’s Conveyance, the court held that a 16-acre servient land did not benefit the whole
of the 1700 acre dominant land, meaning the annexation had failed. However, if the covenant
had been drafted for the benefit of each and every part of the dominant land, there would be a
valid annexation to any part of the dominant land that benefits from the covenant. The benefit
would then be able to be passed on to any purchasers of smaller parts of the land.

However, recent case law has shown a growing trend in a relaxation of this rule, allowing an
annexation of the whole of the dominant land to be effective even where the servient land is
small. For example, in the case of Wrotham Park Estate v Parkside Homes [1974] 1 WLR 798.
In this case, there was conflicting expert evidence as to whether or not the covenant benefitted
the whole of the dominant land. The judges decided that if there was any doubt, the decision
should be made in favour of the dominant land, and the annexation will be valid, meaning the
covenant is enforceable. Therefore, when faced with a question of this kind, if there is any doubt,
cite this case as authority that the courts would likely decide in favour of the dominant land.

Subdivision of dominant land

Where there has been a successful annexation to a dominant land, then the dominant land is
subdivided and sold on, the owners of the subdivided land cannot enforce any covenants attached
to the original dominant land. This was confirmed in the case of Russell v Archdale [1964] Ch
38, where the court held that an annexation to the whole of the land would not extend to any
subdivided and sold land. However, if the covenant is an annexation to each and every part of the
land, the covenant will be enforceable.

Therefore, consider whether the annexation is to the whole or each and every part of the
dominant land. If it is to the whole, and the land is subdivided, the owners of the new divided
land will not be able to enforce any covenants. However, the covenantee who owns part of the
original land will still be able to enforce the covenants.

Disadvantages of annexing to each and every part of the dominant land

After we have discussed the disadvantages of annexing as a whole, it would seem that the
obvious choice would be to annex to each and every part. However, as you can imagine, the
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number of dominant owners could end up being extremely large, which may create problems in
itself.

Imagine a situation in which the servient land is subject to a covenant to the dominant land, and
the dominant land is then subdivided into smaller plots closer to the servient land. If the owner of
the servient land wishes to negotiate with the owner of the dominant land to remove the covenant
for a fee, they may do so. However, if they agree a fee and the covenant is lifted, the owners of
the smaller plots of land on the dominant land will still be able to enforce the covenant. The only
solution to this would be to negotiate with each and every owner of the parts of the dominant
land with the benefit of the covenant - time consuming and a lot more expensive! This would not
be an issue if the annexation was only to the whole of the dominant land.

The case of Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594 meant that
any restrictive covenant entered into after 1925 resulted in an automatic annexation to each and
every part of land owned by the covenantee at that point. The case of Crest Nicholson v
McAllister [2004] 1 WLR 2409 rejected the Federated Homes reading and held that the
dominant land must be mentioned in the conveyance, or identifiable from the surrounding
circumstances. It was held that any annexation would be to the whole of the dominant land
unless there was an express mention of the covenant being for each and every part.

Assignment of the benefit

The rules of assignment are relevant and helpful where annexation has failed, either through a
failure of valid annexation, or where the dominant land has been subdivided where the
annexation was only to the whole of the dominant land.

If some kind of assignment seems to have taken place, the requirements of Miles v Easter [1933]
Ch 611 need to be met:

1. The covenant is for the benefit of some identifiable land

2. The identifiable land must be benefitted
3. The assignee must acquire some of the identifiable land
4. The assignment of the restrictive covenant must be simultaneous with the conveyance of the
land

The covenant is for the benefit of some identifiable land

This is satisfied if the document conveying the covenant expressly mentions the dominant land,
or as per Newton Abbot Co-operative Society discussed earlier in the chapter, if you can identify
the dominant land from the surrounding circumstances

The identifiable land must be benefitted

The case of Earl of Leicester v Wells-next-the-Sea [1972] 3 All Er 77 ruled that the whole of the
identifiable land must be benefitted. The judges have set a low threshold for this, with large areas
of land being benefitted.
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The assignee must acquire some of the identifiable land

The assignee need not acquire the whole of the land, but some will be sufficient. This was
confirmed in Stilwell v Blackman [1967] 3 All ER 514.

The assignment of the restrictive covenant must be simultaneous with the conveyance of the land

This requires that when the piece of land is transferred, there should be an express clause in the
transfer document that assigns the benefit of the covenant. However, there are some exceptions
to this requirement.

1. If equity can enforce the maxim ‘equity looks on as done that which ought to be done’ - in other
words, where both parties intended to include the assignment clause but forgot - Northbourne v
Johnstone [1922] 2 Ch 309
2. Where the owner of the dominant land dies and it devolves to the next owner, the new owner
can enforce the covenants benefitted the land as if it had been expressly assigned - Leicester v
Wells-next-the-sea

Building schemes

A building scheme is where land is sold or leased in lots/plots, and these pieces of land are
subject to benefits and burdens of covenants which the purchasers are subject to and will be
mutually enforceable between the current owners. When validly created, all properties are
servient and dominant.

Taking our examples between Party A, B and C who had the covenant of keeping the grass cut
short. If this was a building scheme, each party would be able to enforce the covenant against
each other.

The requirements for a building scheme were set out in Elliston v Reacher [1908] 2 Ch 374, and
a fifth was added in Reid v Bickerstaff [1909] 2 Ch 305

1. Both parties derive title from the same seller

2. Prior to selling, the seller set out the land for sale in lots
3. The restrictions were to be for the benefit for all of the lots
4. Both parties purchased the lots under the impression that the restrictions were for the benefit
of all of the lots
5. The creator of the building scheme must have set up a scheme for a defined area of land

Remedies

Contractual remedies

If a covenant is broken, the regular remedies for breach of contract of damages for breach and an
injunction preventing breach can be sought under most circumstances. However, a claim for
damages cannot be brought against a successor in title because there is no privity of contract as
per Rhone v Stephens [1994] 2 AC 310. This can be circumvented by a claim under the Senior
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Courts Act 1981, where an injunction or damages can be sought, but damages are usually
reduced significantly - Small v Oliver & Saunders (Developments) Ltd [2006] 3 EGLR 141

Avoidance of delay

If an individual is seeking an equitable remedy, there must not be any delay when making a
claim. Silence to a breach can be considered acquiescence and the right to any remedies under a
breach may be lost. This was illustrated in Gafford v Graham(1998) 77 P&CR 73. Therefore,
dominant owners should not tolerate breaches and should ensure to apply for a remedy as soon as
possible.

The Law of Property Act 1925 S84(2) declaration

Often the difficult with a covenant is not determining whether it has been breached or not, but
rather whether it is enforceable or not. A declaration under S84(2) will establish whether or not a
covenant is binding on a person, or the person seeking to enforce it is able to enforce it.

Exam consideration: What do you think the effect of the burdened and benefitted land coming
into common ownership and occupation would be?

Reform of the law

Issues with the current law

 The burden of a restrictive covenant does not run at law, but does in equity
 The rules under equity are complicated
 The benefit of a covenant runs at law and equity but under different rules
 The rules are more complicated than the burden rules
 The annexation and building scheme rules are technical and difficult to apply sometimes

The potential solution

‘Land obligations’ have been suggested as a new type of interest in the land. These obligations
may be positive or negative, and they will be registrable interests. This would make them more
akin to easements, meaning they will pass with the property and there would be less
complications when ascertaining whether they are enforceable or not. The Law commissions
2011 report - ‘Making Land Word: Easements, Covenants and Profits à Prendre, Law Com No.
327 gives an in-depth explanation of this solution.

Leases Lecture

LEASES

INTRODUCTION
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Many of the questions you will be dealing with in land law questions will relate to leaseholds
rather than freeholds. By and large, the characterisation of an estate as a leasehold will not be the
focus of a question. Typically, it is the other aspects of a problem question which are of more
importance, whether it be easements, or a mortgage relationship, or covenants.

However, on occasion the question will be about one of two questions:

1. Is the relationship of the parties actually a lease?

2. If it is (or if it is not), what does that mean for the obligations of the parties?

If the issue is whether or not the relationship is a lease, it is usually in the context of whether it is
a lease or a licence. This shall be discussed in the section below entitled ‘Key Characteristics of
Leases.’ Further on, we shall address some of the obligations owed by leaseholders. As with all
other chapters, there will be example problem questions at the end.

But first, some background:

BACKGROUND

A leasehold is defined in the Law of Property Act 1925 as an estate in the land for a term of
‘years absolute’ (Law of Property Act 1925, s.1(1)(b)). A lease (or as it is otherwise called, a
leasehold) is conferred by a landlord (also called the lessor) on the tenant (lessee). The lease
grants to the lessee a right of exclusive possession for a finite period of time. The period of time
can be fixed or may be periodically extended. The period can be for any period of years: from
one year to one million years (Law of Property Act 1925, s.205(1)(xxvii). Any area can be
designated as a leasehold so long as it grants, for a definite period, a right of ‘exclusive domain
of a particular individual’ (AG Securities v Vaughan [1988] UKHL 8 per Lord Oliver of
Aylmerton).

Aside from the restriction on the period of time for which a leaseholder may own land, there is
no substantial distinction in the rights between leaseholders and freeholders. As the court has
observed, the tenant leaseholder is equally able to exercise rights over land as would a freeholder
(Street v Mountford [1985] 2 All ER 289 per Lord Templeman). 

Case in focus: Bruton v London & Quadrant Housing Trust [1999] UKHL 26

In the case of Bruton the House of Lords sought to draw a distinction between leases and the
‘term of years’ aspect. Lord Hoffmann said the creation of a lease does not in itself give rise to a
right of an estate in the form of a term of years. It was sufficient to define a lease as any
agreement for exclusive possession at a rent. Essentially, this key characteristic of leases is of a
contractual, rather than proprietary, nature. Whether or not a term of years is created will
‘depend upon whether the landlord had an interest out of which he could grant it’ (per Lord
Hoffmann). This ratio was repeated by the House of Lords when it stated that such tenancies,
absent a term of years absolute, are contractual rather than proprietary and are not binding on
third parties (Kay v Lambeth LBC [2006] 2 AC 465 per Lord Scott of Foscote).
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Key Points:

 Leases can, but do not require, a term of years absolute.

 Leaseholds at root only require exclusive possession at a rent.
 As such, leaseholds are perhaps more contractual than proprietary.

KEY CHARACTERISTICS OF LEASES

In the landmark case of Street v Mountford [1985]the court identified three key components of
the ‘term of years’ aspect of leaseholds. They were identified as follows:

 Exclusive possession;
 For a fixed or periodic term certain; and
 In consideration of a premium - meaning a lump sum -  and/or periodical payments.

We shall now deal with some of these requirements in detail, as well as several other aspects of
the leasehold relationship.

Any given lease or tenancy must grant a right of exclusive possession

The right of exclusive possession over land is said to be the ‘proper touchstone’ of a lease or
tenancy (Radaich v Smith [1959] HCA 45 per Windeyer J). A tenancy by definition must involve
a granting by the landlord of exclusive possession, and so a tenancy without the right of
exclusive possession is a contradiction in terms. Lord Templeman observed in Street v
Mountford [1985] that the tenant is entitled to ‘keep out strangers and keep out the landlord
unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter
and view and repair.’ By contrast, a person holding a bare licence to occupy has no such right to
‘exclude other persons’ (AG Securities v Vaughan [1988] per Lord Oliver of Aylmerton).

Therefore, if a freeholder seeks to retain an unlimited right of access to the property over the
leaseholder - as opposed to the right of access in limited and prescribed circumstances - then
such an assertion by the freeholder would be unlawful. For example, requiring the tenant
occupier to vacate the property for a prescribed period each day is inimical to the right of
exclusive possession accorded to all lawful tenants (Aslan v Murphy (No. 1) [1989] EWCA Civ
2).

What should be borne in mind is that a right of occupation does not mean a right of possession.
Certain parties, described as licensees, will have a right of occupation, such as students in
university accommodation or residents in a care home, but will not have a right to exclude other
persons (Mehta v Royal Bank of Scotland (2000) 32 HLR 45).

Case in focus: Westminster City Council v Clarke [1992] 2 AC 288

Clarke (C) was the occupant of a room at a hostel, run by Westminster City Council, intended for
homeless persons. As per the regulations of the hostel, no occupant was entitled to any particular
room. Further, the hostel was entitled to require occupants to share rooms with other occupants,
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forbade visits from non-occupants unless permission was granted, and its staff were entitled to
access any room ‘at any time.’ The House of Lords determined that C’s claim for a tenancy was
irreconcilable with the ‘totality, immediacy, and objectives of the powers exercisable by the
council and the restrictions imposed on’ any given occupant such as C. He had no right of
possession; this right was fully reserved and retained by the Council, and the House of Lords
took the view that the Council was entitled to do so in order ‘to supervise and control the
activities of occupiers.’

Key Points:

 The person claiming the tenancy was agreed to be an occupant.

 Taken together, the nature of the agreement of the occupation meant no tenancy could subsist
given the ‘totality, immediacy and objectives of the powers exercised by the council’.
 The place occupied by him imposed several requirements, the totality of which were
irreconcilable with a notion of exclusive possession on the part of the occupier.
 Examples of such requirements include the ability of staff to enter the rooms at any time, and
no occupant could claim the right to occupy any specific room.
 The powers were said to be immediate because these powers could be exercised at any time by
the council.
 The objectives were seen by the court as legitimate, namely controlling and supervising the
occupants.

Distinction between lease and licence

As you will have seen, there is much discussion around whether a given arrangement is a lease or
a licence, typically in the context of whether the occupant is claiming a right of exclusive
possession and the person granting the right of occupation claims they had only granted a
licence. Yet the importance of the distinction goes beyond the right of exclusive possession: a
lease grants the leaseholder a transferable and enforceable right in the property, whereas a
licence confers no rights of transfer or enforcement at all over the property (Ashburn Anstalt v
Arnold [1988]).  Certain legislative protections apply only to tenants and not to licensees (Rent
Act 1977, s.1 for protected tenancies, Housing Act 1988, s.1 for assured tenancies, and the
Landlord and Tenant Act 1954, s.23 for business tenancies). In the residential context, however,
leases and licences can look very similar. Hence, in looking at ways to distinguish between the
two categories, the courts have arrived at various principles:

1. Exclusive possession is necessary but not sufficient for tenancies: Although it is a given that
leases will require exclusive possession, there are certain arrangements by which exclusive
possession applies despite there being no relationship of landlord and tenant. In the case of
licences, there may appear to be a degree of exclusive possession on the part of the licensee
over a portion of a property, but the person who owns the property at large will retain exclusive
possession over the remaining part of the property. The important factor is that exclusive
possession, although apparently held by the licensee, is overall held by another party, such as
the case of a lodger in a bed-sit or the occupant of serviced housing (Gray v Taylor [1998] 1 WLR
1093). Where the accommodation is underpinned by some element of friendship or familial
relations the court is likely to find that the occupant was not intended to have conferred on
themselves the vital element of exclusive possession (Heslop v Burns [1974] 1 WLR 1241). Yet if
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the agreement confers on the occupant a right of exclusive possession, unencumbered by

control from the party owning the property, the court will find that the arrangement is a
tenancy, even if the occupant is subject to certain onerous conditions under the occupation,
such as in the case of a charitable housing trust (Bruton v London & Quadrant Housing Trust
[1999]).

2. The status of the lodger: Typically, an occupant will be designated as a lodger and therefore a
licensee, rather than a tenant, if the owner of the premises is contractually obliged to provide
attendance or services ‘which require the landlord or his servants to exercise unrestricted access
to and use of the premises’ (Street v Mountford [1985] per Lord Templeman). The lodger by
definition is someone who cannot claim the right to ‘call the place [meaning the property] his
own’ (Street v Mountford [1985] per Lord Templeman). This is because the lodger will never be
able to lawfully resist intrusion by the owner of the premises, as the owner ‘retains possession’
in order to supply the contractually mandated services or attendance (Antonaides v Villiers
[1990] 1 AC 417 per Lord Templeman).

3. The ‘tolerated trespasser’: In certain contexts, the parties are never taken to have intended a
mutually binding legal relationship vis-à-vis the property. For example, where a local authority
landlord obtains a possession order under the Housing Act 1985 against a council tenant after
the tenant defaults on their rent payments, and yet the local authority allows the individual to
remain in the property on condition of payment of rent arrears and future rent, the situation is
described as being one of ‘limbo’, in which the individual ranks not as a leaseholder or licensee
but as merely a ‘tolerated trespasser’ (Burrows v Brent LBC [1996] 4 All ER 577 per Lord Browne-
Wilkinson).

4. Labelling by the parties is irrelevant: When ascertaining the nexus of legal rights and
obligations, the courts will not take the labels given by the parties to themselves as conclusive.
Instead, the courts will look at the substantive rights granted to each of the parties as they
ascertain the ‘true bargain between the parties’ (Aslan v Murphy [1989] per Lord Donaldson of
Lymington MR). The courts take the view that the parties may mistakenly, or intentionally, mis-
label themselves in order to shape the legal relationship, whereas it is the terms of the
agreement which are of greater significance. Examples include:

 Clore v Theatrical Properties Ltd and Westby & Co Ltd [1936] 3 All ER 436, in which the so-called
‘lease’ was actually held to be a licence; and
 Addiscombe Garden Estates v Crabbe [1958] 1 QB 517 in which the so-called ‘licence’ was found
by construing the terms of the agreement to actually be a lease.

In short, the definition given by the parties to the agreement is only relevant insofar as it
correctly and accurately reflects the nature of the terms of the agreement. It is the terms which
define the relationship, not the label. As Bingham LJ observed in Antonaides v Villiers [1990]:
‘A cat does not become a dog because the parties have agreed to call it a dog.’

A lease or tenancy must be for a fixed term of years absolute

We have seen that the leasehold can be stated to last for any duration - whether one year or one
million years - but it is crucial that an ascertainable period is given. The leasehold has to be
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given in strictly numerical terms; it is presumed by the common law that this gives certainty.
Therefore, particular phrases which fail to give a period of years as defined by a numerical value
will fail for uncertainty. Examples of failed periods include:

1. A purported lease that was said to last for ‘the duration of the war’ ([1944] 1 All ER 305); and
2. A lease that would run ‘until Britain wins the Davis Cup’ (Prudential Assurance Co Ltd v London
Residuary Body [1991] UKHL 10).

The courts have occasionally questioned the rationale of needing a certainty in the stated period.
It has been said to have no ‘satisfactory rationale’ (Prudential Assurance Co Ltd v London
Residuary Body [1991] per Lord Browne-Wilkinson), and the court has considered relaxing the
requirement of the term of years absolute requirement (Ashburn Anstalt v Arnold [1988] EWCA
Civ 14).

Case in focus: Prudential Assurance Co Ltd v London Residuary Body [1991]

The title to the property held by London Residuary Body (LRB) was formerly held by another
party. That other party had granted ‘tenancy’ in 1930, with the tenancy said to exist until such
time as the land required improvements to the road. The rent was initially £30 per year, yet by
the 1980s the annual rental value had increased almost a thousand fold. Thus, once LRB held the
title, they sought to contest the validity of the term of years as defined in the tenancy; that is,
they sought to argue that the lease was for a term of years to be given in a defined numerical
value rather than by the wording given in the tenancy. LRB sought to be able to argue that the
giving of half a year’s notice would be sufficient in the former case. The court agreed with that
assessment, ruling that a tenancy defined by a period of such an indeterminate nature could never
be a valid lease.

Key Points:

 The tenancy was initially created on the basis of a certain event coming to pass.
 That event never materialised, nor was a term of years quoted in the tenancy.
 Such a form of wording for the duration of a tenancy, according to the court, can never be valid.

Statute does provide for a number of exceptional leases that will automatically be converted into
time-bound leases. A lease for life, or a lease until marriage, will be converted into a 90 year
lease, dependent on the death or marriage of the original lessee (Law of Property Act 1925,
s.149(6)). Likewise, a perpetually renewable lease shall be converted automatically into a 2,000
year term to be determinable exclusively by the lessee (Law of Property Act 1922, s.145,
Schedule 15).

Periodic tenancies

There is also the exceptional scenario of the periodic tenancy. In this instance, after a fixed-term
period has come to an end, the tenant continues to retain rights of exclusive possession over the
property indefinitely. The tenancy can proceed indefinitely until such time as either the landlord
or tenant serves a notice to quit on the other party. This may seem to conflict with the
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requirement of certainty of years, nevertheless periodic tenancies are recognised as valid (Law of
Property Act 1925, s.205(1)(xxvii)).

The courts have provided various means of explaining (or explaining away) the discrepancy. For
example, the court has suggested that:

1. Periodic tenancies are an isolated exception and that the ‘certainty of years’ requirement simply
does not pertain to them (Re Midland Railway Co’s Agreement [1971] Ch 725 per Russell LJ).

2. In an alternative explanation, the court has recognised periodic tenancies as a continuing and
subsisting active agreement between the parties that they wish to remain in a leasehold
relationship (Hammersmith and Fulham LBC v Monk [1992] 1 AC 478).

3. The life of the periodic tenancy is contingent entirely on the parties’ mutual agreement, and
thus the tenancy has ‘no greater life than the period up to the time when the next notice can be
given and would terminate’ (Crawley BC v Ure [1996] 1 QB 13 per Hobhouse LJ).

4. Upon either party serving a notice to quit, the periodic tenancy is said to have reached ‘the end
of its natural life’ and thereby reaches its ‘predetermined end in accordance with the terms of
the tenancy agreement’ (Barrett v Morgan [2000] 2 AC 264 per Lord Millett).

The parties cannot contract away their legal status

We mentioned above how the parties are not free to define their relationship solely by the label
they accord to the relationship. On a similar, connected point, the parties cannot reduce or erode
the status of their relationship where the status on a construction of the terms is already defined
and set by the common law or statute. In other words, the parties cannot agree to render the
rights of a tenant, say, to be anything less than those ordinarily enjoyed by a tenant.

Case in focus: Street v Mountford [1985]

Mountford, upon paying a weekly so-called ‘licence fee’, was granted an exclusive right of
occupancy over a portion of a flat as per a written so-called ‘licence agreement.’ Under the terms
of that agreement, Mountford explicitly disavowed any intention to take the property under a
tenancy. Despite the inclusion of this exemption of tenancy rights, the House of Lords said that
she was a tenant because the agreement exhibited all of the relevant characteristics of a lease,
despite this disavowing of such rights. Therefore, Mountford qualified for the protections
accorded to tenants under the Rent Act 1977. Lord Templeman said that ‘if the agreement
satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties
cannot alter the effect of the agreement by insisting they created only a licence. The manufacture
of a five-pronged implement for manual digging results in a fork even if the manufacturer,
unfamiliar with the English language, insists that he intended to make and has made a spade.’
Therefore, the parties could not contract out of the Rent Act protections.

 The agreement to grant exclusive occupation used such language as ‘licence fee’ and ‘licence
agreement.’
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 The agreement included a term amounting to a waiver by the occupant of all status and rights of
a tenancy.
 However, given the terms of the agreement as a whole, the court saw the agreement was in fact
a tenancy.
 The court underlined that labels for terms does not decide the legal effect of terms, and the
supposed waiver was null and void.
 Given the above, the occupant retained the rights of a tenant.
 A similar line of reasoning was adopted in Bruton v London & Quadrant Housing Trust [1999]
where the court held that the party, designated by the court as the landlord, could not contract
out of obligations to conduct repairs on the property.

Identifying sham or pretence terms

Given the above, certain landlords will want to avoid the effects of a tenancy. After all, the rights
accorded to an occupant under a tenancy are far more onerous for a landlord than are those
accorded to an occupant under a licence. Notice requirements are more stringent, a tenant will
have the right to exclude the landlord in most circumstances, and the landlord is thus far less able
to oust the occupant under a tenancy. Therefore, some landlords have sought to include certain
terms that erode the legal status of the tenant.

In response, the courts are vigilant for such ‘sham’ or ‘pretence’ terms. Where the court finds
such a term, it can render the term unenforceable, null and void. The act of discarding such terms
- ‘pro non scripto’ (Antonaides v Villiers [1990] per Lord Templeman) - enables the court to
properly direct the parties as to the legal effect of the agreement, and prevents vulnerable persons
seeking accommodation from being exploited.

Case in focus: Antonaides v Villiers [1990]

Villiers and his partner had both entered into identical ‘licence’ agreements with Antonaides
simultaneously for the occupation of an attic flat. In the agreement, Antonaides purported to
retain rights to use the flat in common with them ‘at any time’ (meaning that Antonaides could
occupy the flat with them) and would also have the right to introduce any number of other
licensees to also share the (very small) premises with Villiers and his partner. Antonaides never
exercised the contractual term entitling him to use the flat in common with them. The House of
Lords held that this ‘non-exclusive occupation licence’ was an example of a sham agreement.
Once the ‘sham’ aspects of the agreement had been stripped away, the court held that the terms
of the agreement in their totality pointed towards a tenancy on the part of Villiers and his partner.
The court took the physical circumstances of the living space to be a relevant factor: given its
very small size, the court said this revealed the ‘air of total unreality’ surrounding Antonaides’s
attempt to effectively deny the couple their legal right to a tenancy. Such clauses as the one
entitling Antonaides to reside with them in the space could not have been ‘seriously intended’ to
have any practical effect. The only reason for their inclusion was to ‘avert the ordinary legal
consequences attendant upon letting the appellants into possession at a monthly rent.’

Key Points:

 The residents were being granted rights of occupancy under a so-called ‘licence agreement.’
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 The agreement included terms to the effect that the owner could also share occupation with the
occupants, and could introduce further occupants at any time.
 Such terms were not exercised by the owner of the property.
 The portion of the property occupied by the occupants was very limited: an attic flat.
 The court held that the limited physical space gave the lie to the terms, as did the fact that they
were not exercised.
 The court held that such terms were pretence terms, intended merely by the landlord to ‘avert
the ordinary legal consequences’ which flowed from a landlord and tenant relationship.
 As such, given the nature of the remaining terms that were held to be valid, the court
determined that the agreement was in fact a tenancy.
 In a similar case - Aslan v Murphy (No. 1) [1989] - the court held that when construing the ‘true
bargain of the parties’, the bargain could not sensibly be said to require the tenant to vacate the
property every day between 10:30am and midday, as the agreement had purported to include
in its terms.

That all being said, a label will not necessarily be irrelevant. Although the courts are certainly
concerned with preventing the exploitation by dishonest landlords of vulnerable tenants by the
use of such language as ‘licence agreement’ (see for example Bankway Properties Ltd v
Pensfold-Dunsford [2001] 1 WLR 1369), sometimes the label can actually be a useful ‘pointer.’
Arden LJ observed in the Court of Appeal that it would be ‘a strong thing for the law to
disregard totally the parties’ choice of wording and to do so would be inconsistent with the
general principle of freedom of contract’ (National Car Parks Ltd v Trinity Development Co
(Banbury) Ltd [2001] EWCA Civ 1686).

Examination Consideration: You will have noticed that certain cases have been referred to again
and again in this section. They include Street v Mountford, Antonaides v Villiers, Bruton v
London & Quadrant Housing Trust, and AG Securities v Vaughan. These are the classic cases on
questions of leases versus licences, and it is important that you remember what each case
contributes to this area of the case law. It is recommended that as a minimum you can recall what
legal principles these cases represent, as well as some of the pithy phrases used by the court,
such as the “spade” speech from Lord Templeman.

OBLIGATIONS

Aside from the requirement that a lease entitles the leaseholder to exclusive possession of the
property in a term of years, a lease also entails other obligations which ‘remain outstanding on
both sides throughout its currency’ (National Carriers Ltd v Panalpina (Northern) Ltd [1981]
A.C. 675 per Neuberger J). There are various express obligations that a landlord will owe to their
tenant. Here we shall discuss some of the implied obligations owed by a landlord to a tenant.

1. Covenant for quiet enjoyment: Upon granting a lease to a party, the landlord thereby also
agrees, both on his part and on the part of others, to refrain from doing anything which
‘substantially interferes with the tenant’s title to or possession of the demised premises or with
his ordinary and lawful enjoyment of the demised premises’ (Southwark LBC v Mills [1999] 3
WLR 939 per Lord Millett). This effectively means the tenant will be free from harassment either
by the landlord or by others when done with permission from the landlord. It extends also
preventing the removal of the tenant’s belongings, as well as the cutting off of utilities supplied
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to the property (Perera v Vandiyar [1953] 1 All ER 1109). It is not an absolute right: if the
landlord takes all reasonable precautions to avoid disturbance in, for example, the carrying out
of covenanted repairs on the premises, then the interference will be lawful (Jones v Cleanthi
[2006] EWCA Civ 1712).

Case in focus: Southwark LBC v Mills [1999]

The Council had let a series of flats, of which the sound insulation was poor and thus there was
daily unwanted transmission of noise. Despite this, the House of Lords held there was no breach
of the covenant for quiet enjoyment. The inadequate sound-proofing was a product of the
structure itself, ‘for which the landlord assumed no responsibility.’ The noise was generated by
neighbours as they lawfully and reasonably exercised their own rights of enjoyment over their
respective properties, and the building had been adapted for multiple occupation. Given these
factors, the court held it ‘must have been within the contemplation of the prospective tenants that
the adjoining flats would be let to residential tenants, and that the occupiers would live normally
in them’ (per Lord Hoffmann).

Key Points:

 The tenants each experienced a great degree of noise from adjacent flats. The noise was
described as ‘horrendous’ and thus interfered with the right to quiet enjoyment.
 However, the interference was the result of the structural design and was not the result of
actions by the landlord.
 Given the nature of the structure, and given that the flats were being let out for multiple
occupation, the court held that it was within the contemplation of the parties that the adjacent
properties would be let out for residential purposes.

2. Covenant against derogation from grant: The landlord is prevented from leasing out the
property to another on terms which effectively negative the usefulness of the grant. Expressed
differently, the landlord cannot engage in conduct which is inconsistent with the purpose for
which the lease was granted, or undermines the exercise of that purpose (Chartered Trust plc v
Davies [1997] EWCA Civ 2256). For example, a landlord had granted a lease for the storage of
explosives and then allowed his adjoining land to be used for mining operations (Harmer v
Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200).

3. Obligations in respect of repair, maintenance and general amenity: Classically, the common
law has seen fit to impose only the bare minimum on landlords as to what they may let out. For
example: ‘fraud apart, there is no law against letting a tumble-down house’ (Robbins v
Jones(1863) 15 CBNS 221 per Erle CJ). This view has continued into the 21 st century: if the tenant
‘wants more he should bargain for it and be prepared to pay the extra rent’ (Southwark LBC v
Mills [1999] per Schiemann LJ). The courts take the view that they are not empowered to create
obligations in addition to those agreed upon by the parties.

However, there are exceptions to this Victorian view. Under the common law, the landlord is
required to provide for the following:
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1. Implied condition of fitness for human habitation: The premises must be reasonably fit for
habitation at the commencement of the lease (Smith v Marrable(1843) 11 M&W 5) provided
that the premises is residential and furnished.

2. Implied duty of care: The landlord must take reasonable care to keep in repair certain facilities
used by the tenant(s) e.g. the lifts in a block of flats. The duty is imposed where its breach
renders ‘the whole transaction… inefficacious, futile and absurd’ (Liverpool CC v Irwin [1976]
UKHL 1). This extends only to those facilities which are essential.

3. Liability in negligence: Whereupon a defect in the premises arises after the commencement of
the lease, the landlord may be liable for defects which arise after its commencement depending
on their negligence in the causative effect of those defects (Sharpe v Manchester CC (1977) 5
HLR 71, CA).

4. Liability in nuisance: In certain instances, certain acts or omissions of the landlord may be taken
to unduly interfere with the tenant’s comfortable and convenient enjoyment of the premises
(Sharpe v Manchester CC (1977)). However, a landlord is usually not liable for the nuisance
caused by other tenants (Chartered Trust plc v Davies [1997]), though it may constitute an
infringement by the landlord on the tenant’s right to privacy and family life under Article 8 of
the European Convention on Human Rights (Lee v Leeds CC [2002] EWCA Civ 6).

Examination Consideration: There are essentially three obligations imposed on landlords towards
their tenants. The obligations are not absolute and are case-sensitive. Can you recall the wording
which underlies the test for each obligation? -----------------------------------

Creating a Mortgage Lecture

Introduction

The focus of this chapter will be on the creation of a mortgage. A mortgage is something you
will have heard about before, but may not have an understanding of. When an individual wishes
to pay for the purchase of a property, it is very unlikely they will have sufficient free assets to
buy the property outright. Therefore, they will seek a loan to finance this up-front purchase. In
return for the loan, the lender will take ‘security’ over the property. In other words, if the
borrower of the money does not pay their loan back, the lender can take the property and sell it in
order to get the money they lent back plus interest. This is called a mortgage. Mortgages can also
operate on land already owned. For example, if I own a property outright worth £100,000, I may
wish to mortgage this property for a £50,000 loan in order to start my own business. Again, if I
fail to pay the loan repayments back, the lender can take over my property and sell it to get their
money back.

The term ‘mortgage’ is used interchangeably with the more modern term of ‘charge’. Usually,
‘mortgage’ is used when referring to land, whereas ‘charge’ is used with other chattels or
property (you can mortgage any type of property, for example, a car if you so wish). This chapter
will focus solely on mortgages that relate to land, you may come across charges of other property
in your studies of commercial or company law.
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What may seem a basic concept is complicated by the conflicting rights of the
mortgagee/chargee (the lender of the money) and the mortgagor/chargor (the borrower of the
money). Imagine a scenario where the mortgagor has had a number of financial emergencies in
one month; their car has broken down and so has their boiler. Unfortunately, they cannot pay
their mortgage repayment on time. Would it be fair if the mortgagee could immediately take and
sell the property to get their money back? Clearly not. Therefore, there are various rules and
safeguards that we will explore.

What is a mortgage?

The case of Santley v Wilde [1899] 2 CH 474 defined a mortgage as ‘a conveyance of land as
security for the payment of a debt or the discharge of some other obligation’. As mentioned in
the introduction, in its most basic form it is the borrowing of money with security for that debt. If
the borrow defaults on the payment, a lender may use the property to recover the sum and any
interest. The most common way a lender will do this is by selling the property.

The different types of mortgages

There are a number of differing types of mortgages. The majority of these are no longer used,
however, they may still exist and need to be understood. In modern times, the registration of title
means that the ‘registered charge’ is most commonly used.

Legal or equitable

The first way a mortgage or charge can be differentiated is by being either legal or equitable.
Almost any interest in land can be used as security under a mortgage. However, the type of
interest used as security will impact the type of mortgage formed. If a legal interest is used as
security, the mortgage can be legal or equitable. However, where an equitable interest is used,
for example, an equitable lease, the mortgage can only be equitable.

Pre-1926 mortgages

Although this method of creating a mortgage is no longer possible, it is important to know how it
operates in order to understand old case-law. This mortgage would be made by the borrower
transferring his legal estate to the lender in exchange for the loan. If the borrower defaulted on a
payment, the lender would then sell the property. One of the main issues here was that it would
not allow the borrower to place a second mortgage on the property if they so-wished, because the
lender had legal title of the property. The Law of Property Act 1925 reformed this by creating
new forms of mortgages that did not involve the transfer of legal title. These different methods
will now be explained.

Legal mortgage under the Law of Property Act 1925 S85

As an alternative to the pre-1926 method of transferring legal estate to the mortgagee, S85 allows
the mortgagor to grant a long lease of the property to the mortgagee. The lease will be terminable
once the loan is repaid.
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The advantage of this method is that the legal title of the estate is retained by the mortgagor,
whilst the mortgagee also has an estate with rights in relation to the land. The lease will be
created with an extremely long term, for example, 1,000 years, to ensure the lease does not
expire before the debt is repaid. There is also a safeguard under S85(2) of the statute which
provides that if the pre-1926 method of creating a mortgage is used by transferring legal estate, it
will automatically be converted into a 3,000 year long lease.

This method of creation of a mortgage is advantageous because it allows a second mortgage to

be granted over the property. This may be created by granting a lease to a second mortgagee that
is longer than the first lease to the original mortgagee.

Legal mortgage of a term of years under the Law of Property Act 1925 S86

Where the legal estate being mortgaged is a lease, the whole term of years would be assigned to
the mortgagee pre-1926. Under S86 the lease no longer needs to be assigned, but instead the
creation of a sub-lease would create a mortgage. The same advantages as above apply - the
mortgagor retains a legal estate, yet the mortgagee has an estate in the land. Similar to above, an
attempt to use the pre-1926 method of assigning the lease will result in the lease being converted
into a sublease for the current unexpired period of the main lease, minus 10 days. This period of
ten days allows a second sub-lease to be granted for a second mortgage.

Charge by deed under the Law of Property Act 1925 S87

This method of creating a legal mortgage is the method used most commonly today. As opposed
to granting a lease or sub-lease over the property to the mortgagee, a deed will be executed by
the mortgagor confirming that there is a mortgage/charge over his land by way of legal
mortgage, the condition being repayment of the loan plus interest.

S87 gives the same powers and remedies to the mortgagor and mortgagor as would be given if
the property had been leased or subleased by S85 or S86.

Case in focus:Grand Junction Co Ltd v Bates [1954] 2 QB 160

In this case, a charge under S87 had been created for a leasehold property. The landlord then
begun forfeiture proceedings under S146 against the tenant. If the landlord succeeded, the lease
would have ceased to existed, meaning the charge under S87 would be destroyed. However,
there was a question of whether S87 had the effect of giving the rights of a sub-lessee to the
mortgagee, meaning they could apply for relief from forfeiture under subtenant rights.

It was held that S87 did give him the right to relief, just as if they had the mortgage by sublease
under S86. This highlights the importance and effect of S87.

The S87 method has two main advantages of the S85 and S86 methods. Firstly, it is in a very
simple form, a simple deed document; there is no need for leases or subleases as per the other
methods. Secondly, particularly relevant to S86, if there is a covenant against sub-leasing the
property, the S87 method of creation circumvents this covenant, as there is no actual sub-lease.
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Therefore, the S87 method is the most commonly used and is the usual method of mortgage.
These charges will usually include a number of covenants, for example, preventing the
mortgagor from granting leases. Provisions detailing repayment and interest terms will also be
included.

Registered land

Where land is registered, a legal charge should be used. Under the Land Registration Act 2003
S23(1)(a) the power to create a legal charge is provided. Similar to S87, a charge should be
created by the completion of a deed. However, in line with other provisions in relation to
registered land, the charge must be registered before it will have legal effect (but it will operate
in equity).

The case of Cityland and Property (Holdings Ltd) v Dabrah [1968] Ch 166 ruled that a legal
charge is created by simple words showing an intention that the land is to be mortgaged with the
repayment of a loan. There does not need to be an express mention of a legal charge. S25 of the
Land Registration Act 2003 confirms this along with the Land Registration Rules 2003 rule 103.

First registration

As we know from the previous chapters, one of the aims of modern land law is for all land to
become registered, due to the difficulties that come with unregistered land. Unregistered land
must be registered when certain things happen with the land. The grant of a legal mortgage is one
of those triggers.

As per S4(1)(g) of the Land Registration Act 2002, the creation of a ‘first protection legal
mortgage’ of a qualifying estate means the property will then be required to be registered. A
‘protected’ legal mortgage is one which is protected by the deposit of documents relating to the
estate - ie. The title deeds.

Following the registration of the estate, the charge must be then registered as per the Land
Registration Act. Once registered, the charge will take effect as a charge by deed by way of a
legal mortgage - even if it was created in a different manner such as a S85 or S86 mortgage.

Equitable Mortgages

The equitable principle of ‘Equity regards as done that which ought to be done’ can apply to
create an equitable mortgage. This principle operates where there has been a contract to create a
legal mortgage but it has not yet been executed as a deed. This will give rise to an equitable
mortgage from the date the contract is formed. This contract must be in writing as per S2 of the
Law of Property (Miscellaneous Provisions) Act 1989. The same will apply to a legal mortgage
which has not been properly executed. However, the remedy of specific performance will only
be available if the mortgage money has been advanced to the mortgagor (Walsh v
Lonsdale(1882) 21 ChD 9. In absence of this, the mortgagor must seek damages.

Informal mortgage by deposit of deeds

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Equity will also protect an individual where it was clear that the owner of the property intended
to charge their property in relation to a loan. One of the main examples of this is where the estate
owner deposits their title deeds with the lender in return for a loan. The case of Russel v
Russel(1783) 1 Bro CC 269 confirmed this.

However, for an informal mortgage to be formed, S2 of the Law of Property (Miscellaneous

Provisions) Act 1989 requires there to be an agreement made in writing. This was confirmed in
United Bank of Kuwait plc v Sahib [1997] Ch 107, meaning the simple deposit of deeds with the
lender is not enough, a written agreement must accompany this.

Equitable mortgage of an equitable interest

As was previously mentioned, a legal mortgage cannot be created in an equitable interest. An

equitable mortgage is created by the pre-1926 method of transferring the whole legal estate to the
mortgagee. This transfer must be made in writing to pass the equitable interest.

Rights of the mortgagor

Now we know exactly how a mortgage is created and the different forms it can take, we can
begin to look at the rights of the mortgagor and mortgagee. We will start with the mortgagor.

The right to redeem

The right of redemption refers to the right of the borrower to ‘redeem’ the mortgage once the
loan and all of the interest has been repaid. Following this repayment, the mortgage ends and the
lender no longer has any right over the property.

Redeeming at law

The right to redeem at law is a contractual right. Therefore, the borrower should turn to the
contractual provisions to identify when they can redeem. It may be a certain date and in a certain
way. The contractual provisions cannot be altered or ignored - Kreglinger v New Patagonia
Meat & Cold Storage Co Ltd [1914] AC 25.

Redeeming at equity

The equitable right of redemption is far more relaxed than its legal counterpart. Equitable
redemption is possible as long as the loan and any interest has been repaid. This approach is
taken by equity as the purpose of the mortgage is to provide security for the loan - once this has
been paid, there is no reason why the mortgage should continue to exist.

The equity of redemption

In an equitable mortgage, where the legal estate has been transferred to the mortgagee, the
mortgagor owns the ‘equity of redemption’, this must be distinguished from the equitable right to
redeem - if you are faced with a question in relation to an equitable redemption ensure to use this
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terminology. This refers to the mortgagor’s equitable interest in the property, which is an interest
in land - Pawlett v Attorney General(1667) Hardres 465.

Protection on the equity of redemption

Equity protects the rights of the mortgagor, and does not allow any arrangement that prevents the
mortgagor from redeeming, and prevents any burdens imposed on the property during the term
of the mortgage operating once the mortgage is redeemed. Some of these restrictions will now be
considered.

Prevention of redemption

If a provision in an equitable mortgage prevents a mortgagor from redeeming it will be void. For
example, as seen in Toomes v Conset(1745) 3 Atk 261 a condition that would result in the land
becoming the mortgagee’s absolutely.

This equitable principle even prevents the mortgagee from having an option to buy the property
as part of the mortgage, as if exercised, the mortgagor’s right to redeem would disappear.

Postponement of redemption

A provision that postpones a redemption in such a way that the right to redeem is worthless will
also be void. Following, there is no equitable right to redeem before the date of redemption, but
once that date has passed, nothing can postpone redemption.

Case in focus:Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441

This case involves freehold property. The company mortgaged their property with a term of
repayment of 40 years. The mortgagor wished to redeem earlier, and the court held the
postponement of redemption for 40 years was valid, as it was a commercial agreement between
businessmen for a fee simple estate.

The rule in this case is that the circumstances must be taken into account. A term of repayment
for 40 years may not be valid for a domestic mortgage, but in the commercial world the
circumstances are different.

Case in focus:Fairclough v Swan Brewery Co Ltd [1912] AC 565

This case involves a leasehold. The postponement of the date of redemption is much stricter for
leaseholds, as a lease is finite. In this case, the lease was for a term of twenty years. The date of
the redemption of the mortgage on the lease was up to six weeks before the end of the lease. The
mortgagor attempted to redeem early after only three years.

It was held this was a valid early redemption, as if the mortgagor had redeemed the lease with six
weeks to end it would have been virtually worthless, and very different from the lease with seven
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years to run. Therefore, the postponement of redemption is unlikely with leases in most
circumstances.

Exam consideration: Do you think the postponement of redemption of a lease after two weeks of
a ten year lease would be likely?

Other advantages for the mortgagee

The mortgagee may also insist on terms which are unrelated to the actual mortgage, but provide
a benefit to the mortgagee. For example, in a commercial mortgage, the mortgagor may agree to
only buy their supplies from a company owned by the mortgagee.

These kinds of agreements are valid so long as they are not in breach of competition law or
unconscionable. However, they are only usually valid for the duration of the mortgage (Biggs v
Hoddinott [1898] 2 Ch 307), even if the mortgagor has agreed that the agreement will continue
after the redemption of the mortgage.

Case in focus:Kreglinger v New Patagonia Meat & Cold Storage Co. Ltd [1914] AC 25

This case is an example of where an agreement may be valid after the redemption of the
mortgage. In this case, there was a five year agreement that the mortgagor would offer their
sheepskins to the mortgagee. However, the mortgage was redeemed after two years, the question
was whether this agreement should continue.

The House of Lords held that the agreement should continue for the full five years, as it was
reasonable, being for a short period and could be seen a separate agreement from the actual
mortgage. The business context also meant that it was an agreement formed by people who knew
what they were doing.

Despite the above case, oppressive or unconscionable agreements may be invalid even whilst the
mortgage agreement is in effect. An example of this comes from Cityland & Property
(Holdings) Ltd v Dabrah [1968] Ch 166 where an excessive premium on the mortgage was
unreasonable and was held to be invalid.

Right to grant a lease

As we know, the S85 and S86 powers require the mortgagor to grant a lease to the mortgagee.
Therefore, it would be impossible to grant a second lease over this property. The same would
apply for a S87 mortgage, as it creates mortgage with the powers of S85 and S86.

Therefore, S99 of the Law of Property Act 1925 gives a statutory power to the mortgagor to
create a lease that is binding on the mortgagee. However, this is very unlikely to be utilised, as
the right to grant leases is usually excluded.

Right to sue
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The mortgagor also has a right to sue in relation to their land, despite the estate being subject to
the rights of the mortgagee. S98 of the Law of Property Act 1925 alleviates any potential
problems with the mortgagor bringing any action.

Right to surrender

The mortgagor may accept the surrender of a lease but only where a new lease is to replace this
surrendered lease within one month of termination - S100 of the Law of Property Act 1925

Rights of the mortgagee

The right to title deeds and charge certificates

In relation to unregistered land (pre-1926 mortgages), the mortgagee has the right to possession
of the title deeds of the property. This is because possession of the title deeds represents the legal
estate, and of course, in pre-1926 mortgages, there must be a transfer of a legal estate. However,
this is not required for post-1926 mortgages, but it is standard procedure for the mortgagee to
hold the deeds, because it prevents the mortgagor from making any further mortgage without the
mortgagee’s approval and knowledge.

As discussed earlier in the chapter, with registered land, a legal charge must be registered. As per
Section 27(2)(f) of the Land Registration Act 2002, the charge must be registered with the
mortgagees name as the proprietor. A charge certificate used to be issued pre-2002. The
mortgagee has the right to possession of these, however, they are no longer issued, but may still
be used for properties mortgaged before the 2002 Act.

The right to possession

S85, S86 and S87 mortgages have the effect of giving a lease or sublease to the mortgagee.
Therefore, the mortgagee has right to possession of the land from the date of the mortgage
(National Westminster Bank plc v Skelton [1993] 1 WLR 72). There may be restrictions on this
right, for example, possession can only be taken where there has been a default by the mortgagor
on the mortgage repayments.

Clearly, it would not be normal practice for the mortgagee to take possession whenever they like.
Usually, it is only used prior to the mortgagee exercising their right of sale when the mortgagor
has defaulted on sale. The taking of possession must be peaceful, and will usually require the
court’s permission. The protections afforded to the mortgagor will be explored further later in
this chapter.

The right to insure

Due to the mortgagee’s interest in the property, they will want to ensure that the property is
insured, as if the property is destroyed, so is their security. Therefore, terms relating to the
mortgagor providing insurance for the property are commonplace. In absence of these terms,
S101(1)(ii) of the Law of Property Act 1925 implies a term allowing a mortgagee to insure the
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property against fire loss/damage. The premiums paid by the mortgagee will be added to the
money owed by the mortgagor.

The right to lease

Once a mortgagee takes possession of a property, they then have a right to lease the property.
This lease binds the mortgagor. However, these leases are rare as once possession is taken the
mortgagee is usually looking to sell the property

Remedies of the mortgagee

As a mortgage provides security for the loan, a number of remedies are available to the
mortgagee in the event of a default of the mortgagor. The most obvious remedy would be a claim
under contract law for repayment of the loan. However, the mortgagor evidently does not have
the money to pay the mortgage repayments, therefore it is unlikely you will be able to recover
the debt from them. Therefore, a mortgage allows for more complex remedies to ensure the
security of a mortgage is effective.

Foreclosure

Foreclosure is the process of the mortgagee taking possession of the property. The remedy of
foreclosure cannot be effected until the contractual obligation of the mortgagor to keep up with
the mortgage repayments has been broken - Williams v Morgan [1906] 1 Ch 904.

The first step of foreclosure is for the mortgagee to obtain a court order as per Re Farnol Eades
Irvine & Co Ltd [1915] 1 Ch 22, and then possession of the property transfers to the mortgagee
as settlement of the mortgagor’s debt. The mortgagee can then sell the property. It is interesting
to note that if the property sells for more than the debt owed, the mortgagee does not need to pay
the balance to the mortgagor. This is one of the main reasons foreclosure is rarely used in
modern times, as it is unfair on the mortgagor, another reason for this is that mortgagor has the
right to ask for an order for sale rather than a foreclosure under S91(2) of the Law of Property
Act 1925, and as you will see when we explore an order for sale it is much preferable.

Possession and sale

We have touched on how a mortgagee will take possession of a property in order to repay his
debt, which will usually be by a sale. However, there may be certain circumstances in which the
mortgagee may use any income generated from the property to repay the debt. For example, if
the property has been let out to a tenant. In these circumstances, a mortgagee would appoint a
receiver to manage to land and ensure the land continues to produce income and is not
mismanaged, ensuring they do not become personally liable for any mismanagement.

Section 101(1)(i) of the Law of Property Act 1925 grants the mortgagor the power to sell the
land, even if it is not explicitly given in the deed. The power arises when the mortgage money is
due, which is usually the contractual date of redemption. However, there are three further
conditions imposed by S103 of the Law of Property Act 1925:
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1. The mortgagee must serve a notice that payment is required on the mortgagor and this
default continues for three months; or
2. The interest payable is two months in arrears; or
3. A covenant of the mortgage deed has been breached

This remedy is advantageous in comparison to foreclosure for a few reasons. Firstly, a court
order is not required for a sale as is the case with foreclosure. The sale may be negotiated in any
way the parties see fit, it may be through an auction, for example, and the mortgagee may also
place conditions on the sale. The sale is also preferable to the mortgagor as the mortgagee may
be liable to the mortgagee for any loss as a result of negligence when selling the property.

The case of Target Home Loans Ltd v Clothier [1994] 1 Ell ER 439 also provides for an
interesting advantage to the mortgagor. The court may delay an order for possession if they
believe the mortgagor can obtain a higher price by selling the property themselves. The case of
Barrett v Halifax Building Society(1995) 28 HLR 634 has further shown the courts willingness to
allow the mortgagor to sell the property, as it is almost inevitable that they will be able to get a
better price for the property. The only time where this is unlikely to be the case is where there is
negative equity in the property. In other words, when the debt owed is greater than the value of
the property. If this is the case, the mortgagee will be entitled to immediate possession and sale.
As mentioned, as a final remedy, the mortgagee may sue for the debt and bankrupt the
mortgagor.

What happens once the property has been sold?

When a mortgagee sells a mortgaged property, they transfer good title to the purchaser free of
any of the mortgagor’s interests and rights. However, the property will be subject to estates and
interests which were in effect prior to the mortgage. By way of example, if a property had been
mortgaged twice, once to Bank A, and five years later to Bank B. If Bank B sold the mortgaged
property, the buyer would take subject to the mortgage of Bank A, as this interest existed before
Bank B’s mortgage. If Bank A sold the mortgaged property, the buyer would not be subject to
Bank B’s mortgage.

You should remember that even though S85, 86 and 87 grant a lease or a sublease to the property
to the mortgagee, any purchaser of the land from the mortgagee will obtain the full estate of the
land, not just the lease/sublease.

If the mortgagee has sold the property to a purchaser whilst the mortgagor retains occupation in
the property, the new owner will be able to obtain an order of possession against the mortgagor.

What happens to the proceeds of sale?

S105 of the Law of Property Act 1925 states that the mortgagee selling the property becomes a
trustee of the proceeds of sale. The proceeds of sale must then be distributed in this particular
order:
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1. The payment of any money required to discharge encumbrances prior to the mortgage
which the sale is not subject to;
2. Payment of costs and expenses incurred in arranging the sale;
3. The amount required to discharge the mortgage debt, including interest and any other
payments required
4. The balance is to be paid to the mortgagor or anyone else entitled (British General
Insurance Co Ltd v Attorney-General (1945) 12 LJNCCR 113

As you can see, this is a huge difference from foreclosure, as the mortgagor will actually be able
to retain any balance of the proceeds of sale left after the discharge of the debt.

Exam consideration: If you were to take out a loan for £50,000, and your property was worth
£100,000, on a mortgage would you prefer foreclosure or a sale? Can you explain why?

If the proceeds of sale are insufficient to discharge the mortgage debt after all of the other
repayments, the mortgagee retains the power to sue the mortgagor for the remainder of the debt
as per Rudge v Richens(1873) LR 8 CP 358. This often leaves the mortgagee out of pocket, as a
mortgagor’s only valuable asset is likely to have been the property itself. Any action for a claim
by the mortgagee of damages is subject to a 12-year limitation period, because mortgagees may
sit on the debt until a time the mortgagors have regained assets.

Protection for the mortgagor

The process of possession and sale seems fairly straightforward. However, as you can imagine,
there are a myriad of situations in which this will be extremely detrimental for the individuals
living in the home. If they do not have the funds to pay a mortgage, is it likely they will be able
to begin renting another property to live in?

Ability to pay debts

The first protection afforded to the mortgagor is where they can provide evidence that despite
being in arrears to the mortgagee they will be able to pay their debts shortly. This will prevent
the mortgagee from forcing a sale at this point.

Obtaining of possession

We have touched upon the requirement of the mortgagee to obtain possession before a sale. The
first important thing to note is that this may not done by force, as it would be a criminal offence
as per S5 and 6 of the Criminal Law Act 1977. The mortgagee must make an application to the
court, this will give a further period of time for the mortgagor to pay their debts and the court
even has a power to extend this, despite being used rarely (Cheltenham & Gloucester plc v
Krausz [1997] 1 Ell ER 21).

Dwelling-houses
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If the property includes or is a dwelling-house (inhabited as a residence rather than a business),

the Administration of Justice Act 1970 S36 protects the inhabitants. The mortgagee will have to
produce an application for possession, and the court will decide what action to take. Again, if the
mortgagor may be able to pay the debts within a reasonable time the possession will be
postponed. For this to be applicable the mortgagor must continue paying the current instalments
(First National Bank plc v Syed [1991] 2 All ER 250).

If the house is vacant, the mortgagee may repossess without an order (Ropaigealach v Barclays
Bank plc [1999] 1 QB 263.

This protection is not afforded to the mortgagor if they give up possession of the property only to
later realise that they may use this protection to delay the sale - Barclays Bank plc v Alcorn
[2002] All ER (D) 146

Reasonable period of time

A ‘reasonable’ period of time has been used numerous times in this section. What exactly is this
reasonable period? The courts take a holistic approach, considering the circumstances of each
case.

Case in focus:Cheltenham and Gloucester Building Society v Norgan [1996] 1 WLR 343

This case involved the consideration of what would be a ‘reasonable’ period to be able to repay
mortgage arrears in the context of a domestic instalment mortgage.

The first consideration would be the length of the outstanding term of the mortgage. If there was
ten years remaining, and the arrears were three months, it would seem appropriate for this
‘reasonable’ period to be longer than if there was only one year outstanding on the mortgage.

Mortgagee’s duty to obtain a proper price

The mortgagor is also afforded protection by the mortgagee’s duty to obtain a proper price for
the property. This is highlighted in Raja v Lloyds TSB Bank plc(2001) Lloyds Rep Bank 113,
where it was compared to a duty of care. Therefore, it is commonplace for a mortgagee to
appoint a receiver to sell the property, to avoid any breach of duty.

Protection where the mortgagor has leased the property

If there are tenants of the mortgagor in the property, some further protections apply. Various
issues can arise if a covenant of the mortgage was not to lease the property. This would result in
the tenant being obliged to leave immediately without notice.

The Mortgage Repossessions (Protection of Tenants) Act 2010 has given some protection to the
tenant in such a situation, only applicable to dwelling houses. Service of a notice is now required
before a mortgagee can enforce an order for possession. The tenant may apply to the court and
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postpone the repossession for up to two months, giving them sufficient time to find alternative
accommodation.

Mortgagee’s power to appoint a receiver

As previously mentioned, a mortgagee can appoint a receiver to manage the possession,

management or sale of the repossessed property. They are most commonly utilised in relation to
commercial properties but can be used for dwelling-houses.

The right to appoint a receiver may be express but is also implied by S101(1)(iii) of the Law of
Property Act 1925. The power arises when the power to sale arises, ie when the mortgagor
defaults on the repayments of the mortgage.

The receiver must be appointed by written document executed by the mortgagee, and this
receiver becomes an agent of the mortgagor (not the mortgagee!), as per S101. Similar to the
proceeds of sale, any income generated by the receiver must be applied in this order:

1. Payment of any outgoings on the land, such as the current mortgage repayments;
2. payment of the insurance premiums;
3. payment of interest on the loan;
4. payment of capital on the loan if the mortgagee agrees; and
5. payment of any balance shall go to the mortgagor

Remedies in equitable mortgages

The remedies we have explored above have focussed on their applicability to legal mortgages.
However, some of the remedies face issues in relation to equitable mortgages. The main
difficulty with equitable mortgages is that every remedy will require a court order. Each remedy
shall be addressed in turn

Foreclosure

Even for a legal mortgage, foreclosure requires the permission from the court, therefore, nothing
changes for equitable mortgages! You should still bear in mind the disadvantages of foreclosure
we explored earlier in the chapter.

Possession

It has been suggested in case law that an equitable remedy holds no right to possession (Barclays
Bank Ltd v Bird [1954] Ch 274). This is an area which is uncertain and various different legal
possessions have been taken. Most academic opinion has stated that an equitable mortgage does
in fact have a right to possession. However, it seems possession can only be taken with a court
order, demonstrated in Barclays Bank v Bird.

Sale
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The statutory power of sale is only granted to mortgages by deed, therefore does not apply to
equitable mortgages automatically without a deed. Therefore, to exercise the power of sale an
execution of a memorandum or deed evidencing the transaction would be required.

Issues may still arise with an equitable mortgage when there is a deed, as Re Hodson and
Howe’s Contract (1887) 35 ChD 668 decided that an equitable owner cannot covey the legal
estate because they have no legal ownership of the property. The usual way to circumvent this is
include a deed declaring a trust or the power of attorney to confer a separate power of sale.

Appointment of a receiver

The statutory power to appoint a receiver is only applicable where the mortgage is made by deed.
Therefore, without a deed, the mortgagee must apply to the courts for the appointment of a
receiver

Liability of mortgagees and other parties

We have touched on the fact that the mortgagee or receiver can become liable to the mortgagor
in certain circumstances. For example, if the property is mismanaged, or sold for less than
expected. There are various questions to ask; what happens in the case of market slumps, or
negligent valuations?

The leading case in this area is Silven Properties v Royal Bank of Scotland plc [2004] 1 WLR
997. The courts considered the duties of the mortgagor/receivers and the mortgagees.

Mortgagee’s duties

Before we cover the mortgagee’s duties, it should be noted that the mortgagee does not have to
exercise any of their powers, they can simply do nothing. They will not be forced to take
possession or sell the property if they do not wish to, even if this would benefit the mortgagor.

Duty to take reasonable care of the property

When the mortgagee is in possession of the property, they must take reasonable care of it. This
has been confirmed in cases such as Downsview Nominees Ltd v First City Corporation Ltd (No.
1) [1993] AC 295

Not to be a trustee of his powers

A trustee must do everything to the maximum benefit of the beneficiaries. However, a mortgagee
is under no obligation to maximise the benefit of the mortgagor. In other words, they can sell the
property when the like, irregardless of whether a different time of sale would have been more
beneficial - Raja v Austin Gray (a firm) [2002] EWCA Civ 1965.
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A mortgagee may have a number of motives for choosing to sell a repossessed property at a
particular time. So long as one of these motives is to enforce the security and repay their debt,
the sale will be valid - Meretz investments NV v ACP Ltd [2007] Ch 197.

Duty to obtain market value

The Silven case confirmed that the mortgagee has an equitable duty to obtain a ‘fair’ or ‘true’
market value for the property on the date of sale. The transaction must not be rushed through a
low sale price to only cover the debt, as if they had sold the property properly the mortgagor may
have been able to recover any of the balance, as per Palk v Mortgage Services Funding plc
[1993] Ch 330.

It was suggested in Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938 that this duty is
a duty in negligence, and the mortgagor could claim damages for negligence. However, modern
cases have confirmed the duty is in equity, meaning the mortgagor can only claim for the
difference between the value the property is sold for and the actual value of the property.

Receiver’s duties

Selling the property

The receiver’s duty is identical to what the mortgagee’s would be when selling. They must
obtain a proper market value - Medforth v Blake [2000] Ch 86

Acting in relation to the property

Unlike the mortgagee, who may remain passive and not actually sell the property, the receiver is
under a duty to not remain passive - they must take positive steps to sell or maintain the value of
the property.

Setting aside

Where the sale of a property is fraudulent, the sale can be set aside. It is often difficult to
differentiate between a sale at an undervalue and fraud, the presence of deception of some kind is
usually sufficient.

Ending a mortgage

Formalities

The mortgage will end either if a remedy is used to terminate, or the mortgagor has repaid his
debt. On termination by repayment the mortgagor needs evidence of the repayment, so that
anybody wishing to buy the land can be sure they buy it free from the encumbrance of the
mortgage.
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For registered land, the mortgagor will want to remove the charge from the register. Once the
registrar has received documents as evidence of the discharge of the mortgage, they will remove
the charge from the register.

For unregistered land, the mortgagee must execute a memorandum of discharge which should be
endorsed on the back of the mortgage deed. This will be full evidence of a discharge.

Time

Although the mortgagee can be passive, if there is no action for a long period of time the
mortgage may be brought to an end - Ashe v National Westminster Bank plc [2008] 1 WLR 710.
This period of time is in line with the limit for statutory claims - 12 years under the Limitation
Act 1980.

Priorities

There is the potential for land to be mortgaged multiple times. Therefore, mortgagees will want
to know about all other interests in the land and which interests have a priority over their interest,
for example, if there is a first mortgage on the property, if that debt was discharged first on sale
of the property, would there be enough left over to repair their second mortgage debt?

In order to determine which mortgage has priority, you will need to determine who had the
interest first, what type of interest it is and exactly what has been mortgaged.

Priorities of equitable interests

The general rule for equitable interests is that if the interests are equal, the one which was made
first will take priority. This is fairly straightforward.

Priorities of legal interests

The first thing to consider is whether the title to the estate is registered or not.

For registered title, S28 of the Land Registration Act 2002 governs the priorities of legal
interests. The basic rule is the same as equitable ones; the first one created takes priority, unless
one of the exceptions apply.

The first exception comes from S29 - if there is a registrable disposition which is registered, the
rights of anybody with an interest in relation to that estate before the registrable disposition is
created are not effective until after the registration of that disposition. This is quite confusing so
let’s look at a practical example:

1. There are two registrable interests, Charge 1 and Charge 2

2. The basic rule would be that Charge 1 takes priority because it was made first
3. If Charge 1 is not registered when Charge 2 is registered, Charge 2 will take priority.
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There are also two further rules. Firstly, the later disposition must be a disposition for value, in
our example above, Charge 2 would have needed to be for value to take priority. Secondly, if the
earlier disposition is not registered, but is protected by notice or is a Schedule 3 (overriding)
interest, it will take priority despite not being registered.

For unregistered title, there are a number of considerations.

1. If the mortgagee holds the title deeds of a legal mortgage, it takes priority against all
other mortgages
2. If the mortgagee holds the title deeds of an equitable interest, and a later interest is legal,
the legal interest has priority unless the mortgagee knew of the earlier interest. If the later
interest is equitable, the one created first prevails
3. If the mortgagee does not hold the title deeds of a legal mortgage, it will take priority if
registered as a class C(i) land charge
4. If the mortgagee does not hold the title deeds of an equitable mortgage, it will take
priority if registered as a class C(iii) land charge