Lecture Overview

  • Course Name: BL1103 Introduction to Contract & Property

  • Lecture Number: 7

  • Topic: Real Property

Learning Outcomes

By the end of this lecture, students will be able to:

  1. Explain the estate system
       - Distinction between freehold and leasehold estates.

  2. Distinguish between lease and licence
       - Application of the test in Street v Mountford [1985].
       - Identification of sham clauses.

  3. Describe land registration
       - Understanding the purpose and functionality of land registration and the mirror principle.

  4. Explain overriding interests
       - Understanding how certain interests bind a purchaser despite not being registered on the land register.

Case Scenario

  • Character Introduction: Priya    - Lives and works in Glasgow.    - Purchased a house in Birmingham as an investment property using most of her life savings.
       - The Land Registry title indicates it is a freehold property with no other registered interests.    - Priya plans a renovation costing £25,000 but finds a student named Sam living in the house.

  • Details of Occupation:    - Sam has a signed document titled "Licence to Occupy" with the previous owner.    - Monthly payment: £450.    - Remaining duration: 2 months.    - Clauses in the agreement include:      - The owner retains the right to enter at any time.      - The owner can permit additional persons to share occupation.    - Sam has lived there alone for 10 months with a door lock, without disturbances.

  • Conflict: Priya asks Sam to leave before the builders arrive, but he refuses.

Recap: What is Property?

  • **Types of Property: **   - Real Property: Rights in land (land, buildings, houses, etc.).
      - Personal Property: Rights in everything other than land.

Real Property Distinctions

  • Freehold:   - Ownership of land and buildings indefinitely.   - Also known as “Fee Simple Absolute in Possession.”     - Inheritability: No restrictions on inheritance.     - Comparison with “Fee Tail” which involves conditions that could end an estate.   - Freeholders have rights to:      - Use the property as desired.      - Possess it indefinitely.      - Pass it down to heirs without restrictions.

  • Leasehold:   - Defined as a proprietary right to exclusive possession of land for a fixed term, with the land itself owned by the freeholder.   - Term referred to as “Term of Years Absolute.”   - Leaseholders gain an estate in land from a superior estate (typically the freeholder).   - The lease is recognized as a property right, not just a personal right, meaning:      - Leaseholder has rights that can bind subsequent buyers of the freehold.

  • Tenancy:   - Holding or occupation of land under a lease (e.g., residential or commercial tenancies).

  • Easements & Charges:   - Rights over land (e.g., rights of way).
      - Rights affecting land (e.g., mortgages).

Estates in Land

  • Legal Framework:   - The Law of Property Act 1925, s.1(1):     - (1) The only estates in land capable of being conveyed or created are:         - (a) An estate in fee simple absolute in possession.         - (b) A term of years absolute.

  • Types of estates:   - Freehold   - Leasehold

Understanding Freehold Estates

  • Characteristics of Freehold:    - Ownership of land is indefinite, potentially infinite in duration.    - Free to transfer and inherit without restrictions.    - If intestate, property may revert to the Crown if no heirs exist.

  • Limitations on Freeholders:    - Statutory and legal restrictions apply:      - Easements (e.g., Right of Way)      - Planning Permissions      - Criminal Laws

Definition and Characteristics of Leasehold

  • Nature of Leasehold:   - A proprietary right granting exclusive possession for a fixed term.   - Created from a relationship with a superior estate (typically the freeholder).   - Leaseholder has an estate in land rather than just a contractual right.

Creation of Leaseholds

  • Definition: Term of Years Absolute

  • Legal Requirements:   - According to The Law of Property Act 1925, s.52(1):     - All conveyances of land must be made via deed to transfer legal estate.   - From The Law of Property (Miscellaneous Provisions) Act 1989, s.1(2):     - A deed must be:       1. Clearly intended as a deed.       2. Validly executed (signed and witnessed).

Definition and Description of Leases

  • Origins of the Term:   - The term 'Lease' derives from the French word “Laisser” (to let or leave), which originates from the Latin “Laxare” (to loosen or release).

  • Structure of a Lease:   - Can be created for varying periods (weeks, months, years, decades).   - Common terminology:     - Leaseholder/Lessee/Tenant has exclusive possession rights.     - Lessor grants the lease.     - Tenant and landlord are common substitutes for lessee and lessor.

Licenses: Nature and Characteristics

  • Definition of a Licence:   - A personal right to be on someone else’s land. Does not create an estate in land.   - The person granting permission is termed the licensor, while the receiver is the licensee.   - Variability in formality ranging from informal to formal agreements.

Key Case Law on Tenancy

  • Case Study 1: Street v. Mountford [1985] AC 809:   - Facts: Mrs Mountford signed an agreement labelled "Licence" yet occupied a room paying £37/week with a clause allowing re-entry by the landlord.   - Verdict: The document's label is not decisive; the substance is paramount.
        - A lease is recognized if exclusive possession, a fixed term, and payment for rent are substantiated.
        - Three Hallmarks of a Lease:       1. Exclusive possession
          2. For a specific term
          3. At a rent

  • Case Study 2: Antoniades v Villiers [1990] 1 AC 417:   - Facts: A couple given separate agreements by the landlord to occupy a shared flat, with clauses for additional occupiers.
      - Verdict: Court disregarded sham clauses to reveal the underlying lease. The reality of the arrangement is crucial in discerning document intent and substance.

Identifying Lease vs. Licence

  • Assessment Questions:    - Can the occupier exclude others (including the landlord)?
         - Is there a clause limiting exclusive possession a sham?
       - Is there a specified term? (Fixed or periodic)    - Is there a payment for occupation?

Examples Examining Lease vs. Licence

  • Example Situations:    - Booking a hotel for 14 nights versus simple cinema ticket purchase indicates a licence.    - Market trader paying for a stall with exclusive access signifies a lease.    - Storing a car in a garage temporarily could indicate a licence, whereas a rehearsal space with exclusive access indicated as a lease.

Land Registration Overview

  • Legislation Reference:   - The Land Registration Act 2002 established a public register of titles maintained by HM Land Registry.   - Register includes:     - Property Register: Details of the land (indicates freehold or leasehold).     - Proprietorship Register: Identifies owners and title class.     - Charges Register: Records interests burdening the land (e.g., mortgages).

Mirror Principle in Land Registration

  • Definition:   - The register functions as a complete reflection of all interests affecting land (akin to a mirror).   - If registered, the purchaser is bound by those interests.

Overriding Interests

  • Definition:   - Interests that bind purchasers but are not recorded in land registry.

  • Reference: Land Registration Act, Schedule 3 specifies overriding interests as binders.

  • Focus on short legal leases and equitable leases for today's discussion.

Legal Leases and Their Registration

  • Legal Framework:    - Duration and registration stipulations for leases:      - 0 to 3 years: No deed or registration required.      - More than 3 years: Requires deed but not registration.      - 7 or more years: Requires both deed and registration.    - Compliance with these rules ensures binding conditions on purchasers.

Key Case Law: Equitable Leases

  • Case Study 3: Walsh v Lonsdale [1882] 21 Ch D 9:   - Agreement for a seven-year lease not formalized through requisite deed yet tenant occupied and paid rent.
      - Verdict: Valid contracts for leases lack formalities can yield equitable leases.
      - Criteria for Equitable Lease:     1. Must originate from a valid written contract.     2. Does not bind unless protected through notice or actual occupation.

Summary of Key Points

  • A legal lease of seven years or more binds purchasers due to property registration.

  • A short legal lease serves as an overriding interest, binding despite unregistered status.

  • Equitable leases require notation or actual occupation for binding effect if legal requirements are unmet.

Conclusion and Review

  • Recap of Offered Scenarios:
       - Priya’s situation reiterates ownership and rights amidst legal agreements involving Sam.

Q&A Session

  • Closing Statement: Thank you and invitation for questions.