Property Law and Practice/Land Law

A valid land contract is…

• Capable of specific performance (an ‘estate contract’)

• A contractual right to a legal estate

• An equitable interest in the land

In order to transfer legal ownership of an estate, what must be used?

A deed - must be intended as a deed, validly executed and delivered.

What must a lender do when they are put on enquiry/notice of the risk of undue influence?

• Bank must:

  • Write to the party who is granting the mortgage not for their benefit explaining that it needs confirmation from an independent solicitor that they have explained the transaction.

  • Ask that party to nominate an independent solicitor and provide all information to that solicitor.

  • Bank must not proceed to lend until confirmation received from the independent solicitor that transaction has been fully explained.

• Independent solicitor must:

  • Meet party who is entering into the mortgage not for their own benefit face to face, on their own

  • Explain why they have to come to see him/her ie. to stop them from being able to claim UI later

  • Explain documents and transaction in a meaningful way using non-technical language

  • Point out the risks

  • Emphasise he/she has a choice

  • Keep a detailed attendance note and confirm everything in writing

  • Send certificate to bank

Legal easements can be created by prescription when…

There is uninterrupted use for at least 20 years.

When is a right capable of being an easement?

• Dominant and servant tenement

• Must not be personal - must benefit land

• No common ownership

• Must ‘lie in grant’

• Must not involve permission, amount to exclusive possession or require payment

What is required for an express legal easement?

• Must be granted or reserved forever or for set period of time

• Must be created by deed

• Must be registered

What is an express equitable easement created?

• Requirements to be legal not met

• But complies with LP(MP)A 1989, s. 2 - in writing, contains all the terms and is signed by both parties

What are the modes of implied acquisition of easements?

• Necessity - landlocked

• Common intention

  • Dominant land sold or leased for specific purpose

  • Purpose known to both parties

  • Easement is essential to achieve common purpose

• Wheeldon v Burrows - common owner at the date of the transfer, contract or lease, who is enjoying ‘quasi-easements’ over their own land [grant only]

  • Continuous + apparent

  • Necessary for reasonable enjoyment

  • In use at date of transfer/lease

• s. 62 - upgrades informal permission on conveyance of dominant tenement [grant only]

When are express legal easements enforceable?

Always.

When are implied legal easements enforceable?

• Always for unregistered land

• For registered land where:

  • Easement is within the actual knowledge of the new owner

  • Obvious on a reasonably careful inspection of the servient land

  • Has been exercised with a year before the transfer of the servient land

When are equitable easements enforceable?

• For registered land - when protected by notice

• For unregistered land - when protected by D(iii) Land Charge

• Otherwise, purchaser not bound but volunteer always is

A restrictive convenant is…

Equitable only.

A positive covenant is…

Legal only.

What are the equitable rules (for restrictive convenants) on passing the burden and benefit of freehold covenants?

• Passing burden:

  • Must accommodate dominant tenement

  • Intention (presumed)

  • Notice (Charges Register)

• Passing benefit:

  • Must touch dominant land

  • Can pass by express annexation, statutory annexation, assignment or building scheme

What are the legal rules (for positive convenants) on passing the burden and benefit of freehold covenants?

• Passing burden:

  • Burden does not pass - original covenantor remains liable - indemnity chain required

• Passing benefit:

  • NB. Doctrine of mutual benefit and burden

  • Can pass by express or implied assignment

Which interests in land cannot be protected by notice?

• Trust interests

• Short leases (3 yrs or less)

What are the categories of overriding interest set out in LRA 2002, Schedule 3?

• Schedule 3 para 1: legal leases for a term of seven years or less

• Schedule 3 para 2: equitable interests held by people in actual occupation of the land (but must have been obvious on a reasonably careful inspection)

• Schedule 3 para 3: implied legal easements

What are the requirements of a lease?

• Certainty of term

• Exclusive possession

• If over 3 yrs, created by lease

How is the term of a periodic tenancy determined?

Based own how rent is calculated.

What are the formalities to create a lease?

• Lease over 7 yrs - deed + registration

• Lease 7 yrs or less - deed (overriding)

• Lease 3 yrs or less - no formalities (overriding) but must take effect in possession at market rent and no premium payable

When are leasehold covenants enforceable under ‘old leases’?

• Old leases - created before 1 Jan 1996

• Liability of original tenant and landlord continues for duration of lease

When are leasehold covenants enforceable under ‘new leases’?

• New leases - created from 1 Jan 1996

• Tenants automatically released on assignment

• Landlord must apply to tenant for release

• Covenants pass to new parties automatically

• AGA - landlord will only ever have current tenant and tenant immediately prior on the hook - outgoing tenant should enter indemnity

Where a landlord wishes to pursue a former tenant who remains liable under the terms of the lease for a fixed charge due to tenant default, the landlord must…

Service notice within 6 mths of charge becoming due.

Where an overriding lease is granted - as former tenant is called upon by the landlord to pay rent or other fixed charges due from an assignee - how long will the term of such lease be?

Remaining of term remaining + 3 days.

When are leasehold covenants enforceable between ultimate landlord and a subtenant?

• LTCA, s 3(5) allows restrictive covenants in new leases to be enforced against any owner or occupier of the premises

• But landlords will not be able to enforce any positive covenant directly against a subtenant - should  insist on any subtenant of the property entering into direct covenants with landlord to observe and perform the covenants in head lease

What remedies are available for breach of a rent clause?

• Action for debt (up to 6 yrs of rent max.)

• Forfeiture - must be express for legal lease

• Commercial Rent Arrears Recovery - principal rent only - min. 7 days owed on purely commercial property - 7 days notice for entry + further 7 for sale - must appoint enforcement agent

What does a Jervis v Harris clause do?

Allows landlord to enter property, repair and the recover costs as a debt.

What is required for forfeiture when a rent clause has been breached?

• Breach occurs and forfeiture cause contained in lease

• Must not waive right to forfeiture

• Serve demand for payment

• Forfeit - must obtain court order of residential

• Tenant can apply for relief from forfeiture

What is required for forfeiture when a clause other than a rent clause has been breached?

• Breach occurs and forfeiture cause contained in lease

• Must not waive right to forfeiture

• Must serve s. 146 LPA 1925 notice - must require breach to be remedied within reasonable time

• (If repair clause:

  • LP(R)A 1938 applies if lease granted for 7 yrs and at least 3 yrs left to run - landlord must inform tenant of right to serve counter notice within 28 days - if served, landlord must obtain leave of court

  • s. 147 LPA 1925 applies to internal decorative repairs - tenant can apply to court for relief from liability

• Forfeit - must obtain court order of residential

• Tenant can apply for relief from forfeiture - before (but not after) the court order and within reasonable time if peaceable re-entry

What happens to subtenants where a head lease is forfeited?

Sublease is also forfeited - but court has the power to vest the head–lease in the sub–tenant.

What is the notice to quit for a periodic tenancy?

• Yearly periodic tenancy - 6 mths notice

• Other - full period’s notice, to expire at end of period

• Weekly residential - 4 weeks notice

What is the maximum number of legal owners?

4.

What are the three registers of the official copies?

• Property register

• Proprietorship register

• Charges register

What are the factors to be considered for a right of way?

• Must be registered for benefitting land and also against land over which right of way passes

• Adequacy - legal or physical

• Person using a right of way is obliged in common law to contribute towards its maintenance

• If a private road is adopted, owners of properties that face on to the private road (‘frontagers’) are required to pay the costs of bringing the road up to adoptable standard

What are the different classes of title that may be found on the proprietorship register?

• Title absolute

• Qualified title

• Possessory title

• Good leasehold title

What does the restriction on the proprietorship register read when the property is held as TiC?

Form A restriction will be entered on the register of title – “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.”

If a surviving beneficial joint tenant is selling the property…

They should sign the contract and execute the transfer deed + also provide a certified copy of the deceased joint tenant’s death certificate.

If a surviving beneficial tenant in common is selling the property…

They will need to appoint a second trustee (often their solicitor) to sign the contract and execute the transfer deed with them + also provide a certified copy of the deceased tenant in common’s death certificate.

What will the mortgage entry on the proprietorship register read?

Title absolute

(01.07.2005) Proprietor(s): DEAN FISHER and TANYA FISHER of 22 Simpson Street, Redminster, RD2 8QP (01.07.2005) RESTRICTION: Except under an order of the Registrar no disposition by the proprietor of the land is to be registered without the consent of the proprietor of the charge dated 17 June 2005 in favour of Redminster Building Society referred to in the Charges Register.

What will the mortgage entry on the charges register read?

(01.07.2005) REGISTERED CHARGE dated 17 June 2005 registered on 1 July 2005 to secure the monies including the further advances therein mentioned.

(01.07.2005) Proprietor: Redminster Building Society of 28 High Street, Redminster RD6 9AR.

If covenants appear on the charges register, it means…

The property has the burden of those covenants.

When are covenants binding on the property?

• Can assume that restrictive covenants appearing in the charges register are binding on the property

• Positive covenants do not run with the land - a chain of indemnity is required

What will an indemnity covenant on the proprietorship register read?

(1 July 2005) Proprietor(s): DEAN FISHER and TANYA FISHER of 22 Simpson Street, Redminster, RD2 8QP.

….

(1 July 2005) The Transfer to the Proprietors contains a covenant to observe and perform the covenants referred to in the charges register and of indemnity in respect thereof.

What are the buyer’s options for dealing with covenants?

• Indemnity insurance - where current use is in breach

• Approach PWB for consent to the breach

• Or application can be made to the Upper Tribunal (Lands Chamber) to discharge the covenant

What shows unregistered title?

The epitome of title - a schedule of title deeds and documents accompanied by copies of them - must check chain of title from root of title to seller.

Which solicitor deduces title?

Seller’s solicitor.

What date must a root of title be from before?

1/12/1990.

What must old conveyances be checked for?

• Validly executed under common law formalities - must be sealed

• Must have a “Particulars Delivered” stamp

• Must include any plans referred to

What can be assumed about co-ownership of unregistered land?

s. 1 Law of Property (Joint Tenants) Act 1964

• JT - assume seller who is a surviving co-owner was a beneficial joint tenant if:

  • Conveyance from seller to buyer states that the seller is beneficially entitled to the whole of the property

  • No memorandum of severance

  • No bankruptcy order or bankruptcy petition

• TiC - assume TiC if above conditions not met

What is a ‘vacating receipt’?

Evidence that a mortgage has been repaid in unregistered land.

Who prepares the report on title?

Prepared by buyers solicitor for buyer.

What are the main land charge classes for unregistered land to be registered at the Land Charges Department of the Land Registry?

• C(iv) - estate contract

• D(ii) - restrictive covenant

• D(iii) - equitable easement

What are the standard searches for every purchase?

• Local search - LLC1 + CON29 (+CON29O)

• Drainage and water enquiries

• Desktop environmental search

• Chancel repair liability

What are the additional standard searches for unregistered land?

• SIM

• Central Land Charge Search (Form K15 against each owner in chain of title)

Which pre-contract enquiries will be raised?

• Commercial property:

  • CPSE1 - for all

  • CPSE2 - where there are commercial tenancies

  • CPSE3 - for grant of a new lease

  • CPSE4-6

• Residential property

  • Form TA6 - property information

  • Forn TA10 - fittings and contents

What remedy is available for misrepresentations in the responses to pre-contract enquiries?

Damages - but only where there is ‘a material difference between the represented and the actual description or value of the property’.

When is planning permission needed?

Needed for ‘development’ = building works or material change of use.

But exceptions may apply:

• Internal only

• Within same use

• Permitted development (GPDO 2015)

• No material change to external appearance

When do building regulations apply?

Apply to ‘building work’:

• Erection or extension of a building

• Installation or extension of a service or fitting that is controlled under the Building Regulations

• Work required where there is a material change of use

What are the local authority’s enforcement options for breach of planning permission?

• Enforcement notice (gives 28 days to rectify) - then stop notice (requires specified activity to stop - but not if dwelling house or carried on for 4 yrs)

• Breach of condition notice

• Injunction

• Time limit (before 25/4/2024) - 4 yrs for building works or change of use to dwelling house and 10 yrs for all other breaches

• Time limit (on or after 25/4/2024) - 10 yrs

• But planning enforcement order available outside time limit if deliberately concealed - magistrates court application must be made

What are the local authority’s enforcement options for breach of building regulations?

Wales:

• Prosecution - 6 mths after discovering breach to prosecute. up to 2 yrs after completion

• Enforcement notice - 1 yr from completion

• Injunction - no limit if unsafe

England:

• Prosecution - unlimited

• Enforcement notice - 10 yrs from completion

• Injunction - no limit if unsafe

What are the key lending documents?

Residential:

• Mortgage offer

• Law Society and UK Finance certificate of title

• Legal charge/mortgage deed

Commercial:

• Facility letter

• CLLS certificate of title

What are the standard form property contracts?

• Standard Conditions of Sale

• Standard Commercial Property Conditions

What is the SCS/SCPC position on specified incumbrances?

• SCS - seller must disclose incumbrances that are registered

• SCPC - buyer is deemed to have made correct searches/enquiries

What is the default completion date and time?

20 working days after the contract, 2pm.

‘Time is not of the essence until a notice to complete is served’ - can only claim damages before notice served.

What is the SCS/SCPC position on VAT?

• SCS - purchase price inclusive of VAT

• SCPC - default is standard rated - use A1 for exempt supply and A2 for TOGC

What is the VAT treatment of different types of property?

• VAT exempt - residential + commercial over 3 yrs old where not opted to tax

• VAT zero-rated - new residential

• VAT standard - new commercial + commercial over 3 yrs old where opted to tax

What are the undertakings imposed by Law Society Formula B on exchange of contracts?

• Hold signed contract to other’s order

• Post signed contract to other solicitor by first class post/DX/hand on that day

• Send deposit

What is the transfer form for transfer of whole?

TR1.

What is the transfer form for transfer of part only?

TP1.

Who must execute the TR1?

• Always transferor

• Transferee if:

  • TiC or holding on trust for another

  • Providing an indemnity covenant, or other Panel 11 obligation

What are the pre-completion searches for registered land?

• Form OS1/OS2

  • 30 working day priority from day of result - must register within this time

• Form K16 - bankruptcy search

• (If a company - company search)

What are the pre-completion searches for unregistered land?

• Form K15

  • 15 working day priority to complete

• Form K16 - bankruptcy search

• (If a company - company search)

What are the standard forms for requisitions on title?

• Residential - Law Society TA13

• Commercial - Commercial Property Standard Enquiries (CPSE) Form SCR (Solicitor’s Completion Requirements)

What are the undertakings imposed by Law Society Code for Completion by Post on the seller’s solicitor?

• To redeem mortgage + to forward DS1 once received from lender

• To have seller’s authority to receive purchase money - day before

• To have seller’s authority to receive sums to repay mortgage etc. - day before

• To report completion funds received - morning

• To complete upon receipt of funds - morning

• To ASAP and no later than end of working day following completion send transfer deed/other docs. to buyer’s solicitor by first class post/DX

What is the effect of delay or failure to complete?

• Obliged to pay interest for each day’s delay under SCS

  • Buyer late - interest on purchase price less any deposit (SCS and SCPC)

  • Seller late - interest on whole purchase price (only under SCS)

• Common law damages also available (but deducted from SCS interest)

• Rescission only available after notice to complete served

  • Makes time of the essence

  • Parties must then complete within 10 working days

What are the post-completion steps?

• Pay SDLT/LTT

  • SDLT to be paid within 14 days - SDLT5 certificate will be issued once paid

  • [LTT (Wales) to be paid within 30 days - WRA certificate will be issued once paid]

• If charge given by company - must register at Companies House within 21 days of the creation of the charge

• Land Registry application

  • Form AP1 for already registered land

  • Form FR1 for unregistered land - must be made via post/DX - deadline of 2 mths

What are the rates of SDLT?

• Residential

  • 0-250k - 0%

  • 250k-925k - 5%

  • 925k-1.5m - 10%

  • 1.5m+ - 12%

• Non-residential

  • 0-150k - 0%

  • 150-250k - 2%

  • 250k+ - 5%

• First home - 0% up to 425k then 5% to 625k - but price cannot be over 625k

• Second home - 3% extra on whole price

When does a lease term “from and including” expire?

Expires on day before that day.

When does a lease term “from” expire?

Expires on that day.

What are the rent “quarter days”?

25 Dec, 25 March, 24 June, 29 Sep.

Before which anniversary may more SDLT/LTT be due on rent review?

Before 5th anniversary.

What is the process for Open Market Rent Review?

Valuer will consider:

• Rent payable for comparable premises

• Terms of the hypothetical lease 

  • Assumes that:

    • Premises are vacant and available

    • There is a willing landlord and a willing tenant

    • Tenant has complied with all its covenants under the lease

    • Landlord has complied with all its covenants under the lease

    • On the terms of the actual lease other than the rent payable

    • Term of the hypothetical lease is the term remaining of the actual lease

    • If damaged or destroyed, the premises have been repaired or rebuilt

  • Disregards generally operate to ignore what the tenant has done voluntarily:

    • Effect of the tenant’s occupation on the rent

    • Goodwill attached to the tenant’s business

    • Tenant’s improvements (other than as obliged under the lease)

What are the pre-contract enquiries for grant of a new lease?

CPSE1 + CPSE3.

What are the pre-contract searches for grant of a new lease?

Same as if buying freehold.

What are the pre-completion searches for grant of a new lease?

• OS1 search with a lease of whole

• OS2 search with a lease of part

• OS3 if lease is not registrable

When is a lease registrable?

• Lease up to 3 yrs

  • Does not need to be registered

  • Cannot be noted against title

• Lease more than 3 yrs up to 7 yrs

  • Does not need to be registered

  • Can be noted against title

• Lease more than 7 yrs

  • Must be registered

  • Will be noted against title

What form is used to register a lease?

• Form AP1 if landlord’s title is registered

• Form FR1 if landlord’s title is unregistered

What is the effect of alterations being ‘improvements’?

Alteration that are ‘improvements’ (from perspective of tenant) will be upgraded from a qualified covenant to a fully qualified covenant by s. 19(2) LTA 1927 - so landlord must act reasonably in deciding to withhold consent.

How can a tenant circumvent an absolute covenant against alterations?

• If alterations are improvements, can serve notice under s. 3 LTA 1927

• If landlord objects, tenant can apply for the court’s permission to carry out the improvements

• Court will give permission if:

  • Add to the letting value

  • Are reasonable and suitable to the character

  • Will not diminish the value of any other property belonging to the landlord

• And if landlord does not object in 3 mths, tenant can go ahead

Is a qualified user clause upgraded by statute?

No. But landlord is prevented from charging a lump sum or increase the rent for giving consent unless the change of use also requires structural alterations.

What does the Code for Leasing Business Premises state regarding internal non-structural alterations?

Requires internal non-structural alterations to be subject only to fully qualified covenant for leas of part and no consent for lease of whole.

Are covenants against assignment upgraded by statute?

Yes - will be upgraded from a qualified covenant to a fully qualified covenant by s. 19(1)(a) LTA 1927 - so landlord must act reasonably in deciding to withhold consent and must be within reasonable time (28 days).

Are covenants against underletting upgraded by statute?

Yes - will be upgraded from a qualified covenant to a fully qualified covenant by s. 19(1)(a) LTA 1927 - so landlord must act reasonably in deciding to withhold consent and must be within reasonable time (28 days).

What are the enquiries for assignment of a lease?

CPSE1 + CPSE4.

What are the searches for assignment of a lease?

Same as if buying freehold.

Who signs the licence to underlet/assign?

All three parties.

What are the searches and enquiries for an underletting?

Same as grant of a lease.

What is the process for deducing title for an underletting/assignment?

• If lease over 7 yrs - only need copy of registered leasehold title

• If lease under 7 yrs - need copy of registered leasehold title + copy of landlord’s freehold title

What must an assignee/tenant inform the landlord of following underletting/assignment?

Must inform landlord that transaction is complete within 1 mth.

What does the Code for Leasing Business Premises state regarding underletting/assignment?

• Requires fully qualified covenant for underletting/assigning whole

• Requires permission to share with group companies without consent

• Requires permission to charge lease without consent