Land 2 What is Land? and Mortgages

Interests in Land

Powerful proprietary right of more limited use, sometimes referred to as incumbrances

List of Interests

Found in LPA 1925, s1

Types of Legal Interests

Easement, right or privilege, a charge by way of legal mortgage or rights of entry

Types of Equitable Interests

Freehold Covenants, Estate Contracts, Interests in a trust of Land, Easements granted for an uncertain term

Mortgage

A loan of cash which is secured by rights granted over the property

Easement

Proprietary right to use land which belongs to somebody else, must be granted for a term equivalent to tone of the legal estates (LPA 1925, s1(2)(a)

Right of Entry

Right for a landlord to re-enter leased premises and end the leasehold estate in the events of tenant default or some other specified event

Restrictive Convent

A promise preventing a landowner from doing something on their land

Estate Contract

A contractual right to a legal estate

Interest in a Trust of Land

Where the trustee holds property for the benefit of the beneficiary, can be express or implied

Key Differences between Legal and Equitable Interests

Remedies and Enforcement

Definition of Land

Found in LPA 1925, s205(1)(ix)

Purchase of Land LPA 1925, s62

A buyer of land gets everything that falls within the legal definition of land

Corporeal Hereditaments

Physical things attached to the land called “fixtures” in practice

Incorporeal Hereditaments

The benefit of any proprietary rights that the land has but which have no physical substance for example an easement

Airspace

Rights to airspace over land is restructured to such height as is necessary for the ordinary use and enjoyment of the land

Bernstein of Leigh(Baron) v Skyviews and General

A plan flying hundreds of feet above a property

Anchor Brewhouse Developments v Berkley House Developments

The jib of a crane trespassed in the airspace above the claimant’s property and an injunction was granted

Grigsby v Melville

Court of appeal held that the cellar was owned by the claimant as the conveyance of land ordinarily carries with it all that is beneath the surfacec

Exceptions to the Ground Below Rule

Mines of gold and silver belong to the crown,

Issue of Fixtures and Chattels

When land is sold, the seller will need to know what is a fixture or a chattel as they can only take chattels

The Degree of Annexation Test

Botham v TSB Bank plc (Chattels)

Ornamental items, carpets, curtains, light fittings attached by screws, unintegrated kitchen appliances

Botham v TSB Bank plc (Fixtures)

Kitchen Units, Items installed by a builder and bathroom fixings

D’Eyncourt v Gregory

If chattels are incorporated into the architectural design, they may be classified as fixtures, even though they are not firmly affixed

Leigh v Taylor

A chattel may be securely affixed to the land, but remain a chattel if the purpose of annexation is better enjoyment of the chattel as such

Elitestone Ltd v Morris

If a chattel cannot be removed from the land without destruction or demolition, it will be deemed to be intended to form part of the land and therefore a fixture

Legal Mortgages

Capable of being a legal interest in land (s1(2)(C)), must be created by deed and registered at the land registry (LRA2002, s27(2)(f))

Failure to register a mortgage (s27(1))

The mortgage will not take effect as a legal mortgage but could still be an equitable interest

Types of Equitable Mortgage

Mortgage of an Equitable Interest and Defective Legal Mortgage

Mortgage of an Equitable Interest

Can be created informally, need only be in writing and signed by the guarantor (LPA 1925, s53(1)(C))

Defective Legal Mortgage

Mortgage over registered land which is not granted by a valid deed or is not completed

Discharge of Mortgages

Once repaid in full, the mortgage entries at the Land registry must be cancelled

DS1 Form

Used to discharge a mortgage over the whole of the land in a title

DS3 Form

Used if only part of the land in the title is being released from the mortgage

Legal Date of Redemption

Every mortgage has a date specified for the full repayment of the loan

Equitable Right to Redeem

Recognises that a mortgage is security for a loan and not an opportunity for the lender to gain something more

Postponement of the Right to Redeem

Courts may allow a lender to postpone the date in rare circumstances but there is an equitable rule not to clog or fetter the equity of redemption

Toomes v Conset

Courts look at clauses which postpone the legal date for redemption very closely and will not allow a clause when it prevents redemption altogether

Fairclough v Swan Brewery Co Ltd

A clause postponing redemption was struck out until 6 weeks before the end of the lease was virtually worthless

Knightsbridge Estates Trust Ltd v Byrne

Court upheld the postponement of redemption and would not allow early repayment as the borrower would eventually get back exactly what had been mortgaged and had been given a favourable low rate of interest

Samuel v Jarrah Timber and Wood Paving Corporation Ltd

An option granted at the same time as the mortgage will normally be declared invalid

Reeve v Lisle

If an option is granted in a subsequent transaction it may be upheld if independent of the mortgage

Warnborough v Garmite

If the mortgage and option are granted on the same day, but are in fact completely separate the equity of redemption is irrelevant and the option can be upheld

Collateral Advantages

Will be struck out if it is unconscionable, in the nature of a penalty or is repugnant to the equitable right to redeem

Solus Tie

Lender makes it a condition of the mortgage that the borrower buys all its supplies from the lender

Noakes & Co Ltd v Rice

Solus Tie as it exceeded the mortgage term, the borrower would not get back what he had mortgaged as at the end of the term what would have been a freehouse would be a pub still subject to the solus tie

Biggs v Hoddinott

It is possible for the lender to gain a collateral advantage to himself, as long as it is unconscionable or oppressive

Cityland and Property Holdings Ltd v Dabrah

Overall interest rate of 38% was unconscionable and Court reduced it to 7%, emphasising the imbalance of bargaining power

Multiservice Bookbinding Ltd v Marden

A mortgage term would be unconscionable if it were imposed in a “morally reprehensible manner which affects the lender’s conscience”

Falco Finance v Gough

If a penalty interest rate imposed in the event of borrower default far exceeds the lender’s losses in the circumstances then it will be void

Davies v Direction Ltd

A lender will not have acted improperly and a higher interest can be justified if the borrowers have a poor credit history and are a credit risk

Paragon Finance v Nash

Lender is entitled to take its own commercial needs and may be justified in imposing a higher interest rate, where it is in financial difficulties itself providing it is not exercising any discretion for an improper purpose