bits of law LAND | Ownership Creation & Transfer: Estates & Interests Revision Note | Degree 30 JANUARY 2014 Introduction • formalities required to create or transfer legal estate or interest in land (legal or equitable) • formalities: determine whether transaction must be recorded in writing and specifies documents required • general rule: legal estates & interests must be created by deed & any sale, gift or other disposal of legal estate must also be by deed Legal estate • two formalities creation & sale of a legal estate: 1. contract to create or transfer legal estate (involves creation of an equitable interest) & 2. transaction completed when legal estate is created or transferred • deed requirements set out in legislation LAW OF PROPERTY ACT 1925 • s.52(1): any transfer of legal estate in land must take form of a deed • s.52(2): not apply to s.52(2)(a): assents by personal representative (document used by personal representatives to transfer ownership of deceased's land to beneficiary) s.52(2)(b): disclaimers under Insolvency Act 1986 s.52(2)(c): surrenders by operation of law s.52(2)(d): leases or tenancies or other assurances not required by law to be made in writing s.52(2)(e): receipts s.52(2)(f): vesting orders of the court or other competent authority s.52(2)(g): conveyances taking effect by operation of law • important statutory exception when deed is not necessary LAW OF PROPERTY ACT 1925 • s.54(2): applies to grant of a lease if three conditions are satisfied: 1. lease granted for term not exceeding three years 2. lease take effect immediately in possession (tenant has right to take possession as soon as lease granted) 1 of 6 3. lease granted in return for best rent which could be reasonably obtained, without taking fine or premium • if all three conditions satisfied: landlord can create lease without deed LONG V TOWER HAMLETS LBC [1998] CH 197 FACTS: • tenancy document executed 21 days before tenancy commenced & tenant could move in ISSUE: • could the lease fall under the s.54(2) LPA 1925 exception? HELD: • lease did not within s.54(2) LPA 1925, due to 21 day lapse in possession CRAGO V JULIAN [1992] 1 WLR 372 • if lease falls within s.54(2) LPA 1925 an assignment of that lease does have to be made by deed Deeds • requirements for a valid deed defined under Law of Property (Miscellaneous Provisions) Act 1989 (LPA 1989) LAW OF PROPERTY (MISCELLANEOUS PROVISIONS) ACT 1989 • s.1(2)(a): document indicates it is meant to be a deed s.1(2)(b): parties execute the document as a deed • s.1(3)(a): parties' signatures witnessed & signed by the witness s.1(3)(b): parties must deliver the deed • s.1 LPA 1989 applies to deeds after 31 July 1990 • prior to 31 July 1990: deeds had to be signed, sealed & delivered • today it may be difficult to establish if document is a deed HSBC TRUST COMPANY V QUINN [2007] EWHC (CH) 1543 • restrictive approach taken: 'something showing parties intended the document to have the extra status of being a deed' • parties to a deed deliver it by making it clear that they intend to be bound by the deed • conditional delivery is known as delivery in escrow, so if parties do not intend to be bound immediately it can be delivered in escrow 2 of 6 ALAN ESTATES V WG STORES [1982] CH 511 • 'maker of deed may retain it physically in his own possession and yet deliver it so long as he makes clear that he intends it as his deed presently binding on him' • difference between deed & an escrow not the binding quality but time & circumstances when obligation can be enforced • conveyancing transactions: parties usually deliver the deed transferring ownership from sellers to buyers as an escrow • buyer does not want to be bound until completion (buyer pays balance, parties move & seller transfers ownership) & seller not want to be bound until buyer has paid purchase price • completion takes place the condition is satisfied, delivery occurs & parties are bound by the deed Interests in land • general rule: to create or transfer a legal interest in land deed is required • equitable interests are created under a trust or by other means (landowner enters into a restrictive covenant or an estate contract) • formalities differ if equitable interests behind a trust • express trusts must satisfy s.53(1)(b) LPA 1925 (declaration of trust evidenced in writing & signed) • implied trusts can be informally created by actions of landowner & no formalities imposed (s.53(2) LPA 1925) • estate contract: contract to create or convey an estate or interest in land & formalities for binding estate contracts contained in s.2 LPA 1989 LAW OF PROPERTY (MISCELLANEOUS PROVISIONS) ACT 1989 • s.2: after 26 September 1989, to create a valid contract for the sale of land the contract must: s.2(1): be in writing s.2(2): incorporate all expressly agreed terms s.2(3): be signed by or on behalf of the parties • s.2(5): exceptions when a valid contract for the sale of land can be created without the need for formality: s.2(5)(a): short lease under s.54(2) LPA 1925 s.2(5)(b): sale of land made at a public auction s.2(5)(c): regulated under Financial Services and Markets Act 2000 except regulated mortgage contract Exchanging contracts • process of exchanging contracts is set out in case law 3 of 6 COMMISSION FOR THE NEW TOWNS V COOPER [1995] CH 259 • seller's solicitor draws up two identical copies of contract • seller signs one copy & buyer signs other • parties give their signed copies to their solicitors • solicitors exchange these contracts (seller's solicitor holding buyer's signed part & buyer's solicitor holding seller's signed part) • at exchange of contracts a binding contract exists between the parties • if either party withdraws from transaction without good reason, injured party has a remedy for breach of contract • following exchange: seller still owns legal estate & buyer acquires equitable interest in land • buyers can obtain remedy of specific performance compelling seller to perform their part of the contract for sale • estate contracts include equitable leases: if no deed used & term of the lease is too long to fall within parol lease exception (s.54 LPA 1925), if formalities for an estate contract have been followed an equitable lease comes into existence Proof of ownership • buyer requires the seller to prove ownership (title) of legal estate in land • proving ownership depends whether title to land is registered or unregistered • unregistered: seller provides documents showing unbroken chain of title (he & predecessors entitled to possession of land) through deeds & conveyances • good root of title: 15 years of documents, including description of property & no doubt on title of seller • conveyances also show third party rights binding on the land (covenants & easements) • disadvantages of unregistered land: uncertainty of good title & lost or fraudulent conveyances Registration • Land Registration Act 1925 introduced registration of title, now replaced by Land Registration Act 2002 (LRA 2002) • system of registration implemented: all information in conveyances, including third party rights, put into register of title • mirror principle: register should reflect land ownership & third party rights • mirror principle exceptions, not reflect: full history, details of rights affecting the land capable of registration but are not registered, rights obtained by fraud not binding even if on register & matter of common knowledge • curtain principle: buyers of registered title only concerned with information on register, register not reflect equitable interests arising under trusts then matter remains behind curtain & buyer not able to enquire, if buyer follows correct procedure (overreaching) can take free of equitable interests under the trust • insurance principle: if register not accurate anyone who suffers loss may be compensated • landowners can voluntarily register titles or compulsory first registration is triggered when unregistered land is sold • transactions which trigger compulsory first registration set out in LRA 2002 4 of 6 LAND REGISTRATION ACT 2002 s.4: registration applies • s.4(1)(a): transfer of a qualifying estate s.4(1)(a)(i): for valuable or other consideration, by way of gift or court order s.4(1)(a)(ii): by means of an assent s.4(1)(a)(iii): giving effect to a partition of land subject to a trust • s.4(1)(aa): transfer of a qualifying estate s.4(1)(aa)(i): by deed that appoints a new trustee • s.4(1)(g): creation of a protected first legal mortgage of a qualifying estate • s4(2): qualifying estate is unregistered legal estate which is s4(2)(a): freehold estate • s.4(8): under s.4(1)(g) s.4(8)(a): protected legal mortgage: if it takes effect on its creation, protected by deposit of documents relating to the mortgaged estate s.4(8)(b): first legal mortgage: on its creation, ranks in priority ahead of any other mortgages • registration required when legal fee simple changes hands • approx. 95% titles now registered • time limits apply LAND REGISTRATION ACT 2002 • s.6(4): registration must take place within two months of relevant trigger • landowners make application for first registered to district land registry, who allocate a title number to new register • estates capable of being registered with separate title number: legal fee simple absolute in possession & legal leases granted for terms of more than seven years Registered titles • after title has been converted to registered title different rules apply to transfers & whether incumbrances (such as easements) bind the land • first register - property register: containing description of land by reference to a title plan • second register - proprietorship register: name & address of owners (registered proprietors), limitations on registered proprietors' powers to deal freely with land (warnings about trusts & need for overreach) • third register - charges register: proprietary rights that burden the land (such as restrictive covenants) • register proves registered proprietor owns the land • title absolute: indicates land registry have assessed evidence & entirely satisfied as to owner (this is best class of title) • if title to land is registered deed to transfer ownership of the land is a transfer (unregistered land is conveyance) • on sale of registered title, completion of transfer does not transfer legal estate from sellers to buyers buyers names must be entered on the register 5 of 6 LAND REGISTRATION ACT 2002 • s.27(2): dispositions which are required to be completed by registration s.27(2)(a): transfer of already registered title s.27(2)(b): grant of a new lease for a term of more than seven years s.27(2)(e): legal easements cannot be registered with a separate title, created by express grant by deed: registered on the property register of the land benefitting from the easement (proprietor of the land as the legal owner of the easement) s.27(2)(f): legal charges (mortgages) cannot be registered with a separate title, need to be protected by entry on the charges register of the land burdened by the mortgage • registered land conveyancing transaction: contract, completion & registration Electronic conveyancing • Electronic Communications Act 2000 gives ministers power to make regulations to allow electronic conveyancing • under electronic conveyancing all stages of process carried out electronically LAND REGISTRATION ACT 2002 Part 8: Electronic Conveyancing • s.91(2): electronic conveyancing only applies to registered titles unless transaction triggers compulsory first registration • s.91(3): electronic documents must: s.91(3)(a): make provision time & date when take effect s.91(3)(b): electronic signature of each person by whom it purports to be authenticated s.91(3)(c): each electronic signature is certified s.91(3)(d): met other conditions as rules may provide • s.92: land registry authorise access to secure electronic network for conveyancing • electronic document capable satisfying s.2 LPA 1989 (written contract) & s.52(1) LPA 1925 (deed needed to effect grant or conveyance) • registration of transactions simultaneous with completion This article can be found online at www.bitsoflaw.org/land/ownership/revision-note/degree/creation-transfer-estates-interest where links to further resources are available. 6 of 6
