HM Land Registry England

Land Law

Hazelden House is registered, with the legal title holder being Leo; therefore solely his name is on the proprietorship register in the HM Land Registry of England and Wales. Hazelden House was registered in 2004; thus the Land Registration Act (LRA) 2002 is enforceable, as it came into effect on the 13th of October 2003. The 1996 Trusts of Land and Appointment of Trustees Act (TOLATA) can also be applied. This essay intends to advise the involved parties of their rights. The parties are Erica as the legal owner’s wife, Erica’s mother Gladys who has contributed to purchase price, Leo as legal owner and vendor, and any potential buyer.

A potential purchaser could conduct a search, under s66 of LRA, on the proprietorship register of the land registry to verify who owns the property. The type of estate can be distinguished, from the register, as a Freehold (S1(1)(a) Law of Property Act (LPA) 1925), as opposed to a leasehold, which is also stated in the facts. Freehold was described as “a holding for an indefinite period of time” by Cursley et al. The three grades of freehold title under s9 of LRA are absolute, possessory and qualified; the relevant one here is absolute freehold. By carrying out this search a purchaser would discover that Leo is the sole title holder. Leo is also sole trustee, while Leo, Erica and Gladys are all beneficiaries of the estate.

The purpose of buying Hazelden House was as a matrimonial and family home for themselves, their children and Gladys. Thus under s15(1)(b) TOLATA this type of trust still has its collateral purpose, forming an exemplary trust of land which is broadly described as “any trust of property that consists of land” under s1(1)(a) of TOLATA. It covers both implied and express trusts (s1(2)(a) TOLATA). The trust in question is a domestic trust as they live there, as opposed to a commercial trust (Laskar v Laskar).

While it appears that Erica’s marriage will end in divorce the courts may still form Property Adjustment Orders, transferring property from Leo to Erica, under Part II of Matrimonial Causes Act (MCA), 1973. While doing so the courts will consider financial contributions, contributions towards family welfare, the length of the marriage, and the ages of both parties (s25(2) MCA). Furthermore Erica could receive a share in property by proving that an implied trust was present. It will not form a Resulting Trust (RT) as they only apply in commercial contexts, thus it forms a Constructive Trust (CT). A CT is based upon the parties’ actions, opposed to their intentions. In Gissing v Gissing Lord Diplock described a common-intention CT as:

“Parties… in… acquisition of land may… form… a common intention that the beneficial interest in the land shall be vested in them jointly without having used express words… In such a case… it may be possible to infer their common intention from their conduct.”

There are therefore two stages, the first being an agreement, expressed or inferred, and the second being some detrimental act on reliance of the agreement. In Gissing, the husband was the estates sole proprietor but his wife had made financial contributions towards household decorations, due to an agreement inferred from her husband’s conduct, giving her an interest. Financial contributions can therefore be either direct or indirect. Direct contributions are towards the acquisition of the property i.e. contributions towards the purchase price, deposit, legal charges or mortgage instalments. Indirect contribution would be, for instance, paying bills so that legal owner can pay mortgage instalments. This is an example of an implied common-intention CT, which does not require written evidence (s53(2) LPA 1925) and is therefore exempt from s53(1)(b) of LPA. Accordingly, where one has acted in detrimental reliance, it is inequitable to allow the proprietor to retract the agreement. Hence, as Gladys contributed towards the purchase price in reliance of Leo’s actions, it would be inequitable for Leo to now state that he did not mean to give her an interest by it. However, as the facts demonstrate, Erica did not make any financial contributions. In Eves v Eves it was held that non-financial contributions may also constitute detrimental reliance. Although many have argued against the justification for non-financial contributions, in the current leading case of Stack v Dowden, Lord Walker in the House of Lords stated that courts must look at the “whole course of dealings” and use a broad brush approach to quantify each party’s shares. Thus by using their discretion, courts can form greater justice when deciding Erica’s share in the property, taking into account all her contributions, for example cooking, cleaning and looking after the children.

Erica has a right to remain in occupation even though she has not contributed towards the acquisition of the property, via a spousal right of occupation (s30 Family Law Act (FLA), 1996). S30(2) FLA states that, where a couple are still married and one spouse has legal title to property (s30(1) FLA), the other spouse has the right:

• Not to be evacuated where in actual occupation; and
• To occupy if not yet in occupation.

Under s31 of FLA these rights form a minor interest. If protected they will bind a purchaser (s31(2) FLA). As this land is registered, Erica’s beneficial interest can be protected by an entry of notice on the register (s32 LRA). If not protected, her interest will not bind purchasers (s29(1) LRA). Unusually, s30(10)(b) FLA states that Erica’s interest cannot form an overriding interest although Erica is also in actual occupation. However, s33 FLA allows the court to give Occupational Orders so that Erica may retain occupation (Moore v Moore).

Gladys’ contribution towards the purchase of Hazelden House, establishes that an implied CT exists, rather than an RT (Stack v Dowden). This is because, while Gladys was not expressly informed that she has a share in property, Leo’s conduct was as such to make her act in detrimental reliance upon it. Gladys’ beneficial interest under this CT would ordinarily be a minor interest that required protection by entry of restriction; however Gladys also has occupational interest. Beneficiaries under a trust of land have an enforceable right to occupy against the proprietor and potential purchasers, under s12 of TOLATA. Gladys’ equitable interest and her actual occupation of the property is sufficient to form an overriding interest under schedule 3 paragraph 2 of LRA 2002 as seen in Strand Securities v Caswell. In Abbey National Building Society v Cann Lord Wilberforce stated that actual occupation must be discoverable, by a factual test requiring the physical presence of the individual on the land. It is irrelevant that Gladys is temporarily absent, as it was accepted in Chhokar v Chhokar, as long as she intends to return and reasonable evidence shows her occupation there i.e. clothes left behind.

Gladys can protect her beneficial interest by entering a restriction onto the register (s40 and s41 of LRA) alerting purchasers and therefore binding them. As there is a CT between Gladys and Leo, a notice cannot provide protection for Gladys’ interest, as stated in s33 of LRA. However, because it is unclear from the facts if Gladys has protected her beneficial interest, we must consider the implications if she did not. Gladys’ beneficial interest along with occupation forms an overriding interest, under schedule 3 paragraph 2 of LRA, which is automatically binding. However, occupation must be apparent at time of sale and easily discoverable on inspection. Furthermore, Gladys must reveal her occupation if questioned upon it (schedule 3 paragraph 2(b) and (c) of LRA). A purchaser however, could apply for possession under Order of Sale to break free of Gladys’ interest (s14 TOLATA).

Potential purchaser may want to rely on the principle of overreaching to take free of Gladys’ and Erica’s beneficial interests. They would do this by transferring their beneficial interest in the property (s12 TOLATA) to a right to proceeds of sale, demonstrating a shift in beneficial interest. Thus Gladys or Erica cannot later enforce their interest against the purchaser. Lord Oliver in City of London Building Society v Flegg hoped this method made it simpler for purchasers. However there are two provisions which govern overreaching, these are s2(1) and s27(2) Law of Property Act, 1925. S2(1) LPA explains the mechanisms of overreaching and prescribes its effects, while s27(2) LPA states the three preconditions which must be satisfied in order for it to be successful. The property must be subject to a trust, as it is here. The interest must not be exempt from being overreached under s2(3) of LPA, no current interest falls under s2(3) LPA. Lastly, the purchase money must be paid to a minimum of two trustees. However this is not possible here, as there is only one trustee, Leo. In Flegg there were two beneficiaries with overriding interests. However, due to financial reasons, the building society wished to take possession of property and sell it. The court allowed this because by paying money to two trustees, the building society had fully complied with s2 and s27 of LPA, and were no longer bound by the beneficiary’s interest, which had shifted to money. Thus successful overreaching had occurred. In contrast, in Williams & Glyn’s Bank v Boland overreaching did not occur. This is because the preconditions were not complied with when the money was only paid to single proprietor, being the sole trustee. Similarly with Leo being sole trustee, the preconditions for overreaching would not be satisfied.

Under s14 of TOLATA either of the parties may apply for a court order to resolve such a dispute; it is so broad, that anyone with an interest may apply. For example, Leo may apply as trustee (s14(1) TOLATA), Erica and Gladys may apply as beneficiaries, and a potential purchaser may apply as a third party. The types of orders than can be made are found under s14(2) TOLATA, which also gives courts the discretion to apply whichever order they see appropriate. The orders would favour either, Erica and Gladys allowing them to stay in occupation, or the purchaser who would be allowed to buy the property. The criterion that must be considered in forming this decision can be found under s15 TOLATA. As an implied trust, one must refer to s15(1)(b) TOLATA regarding the party’s intentions. While the matrimonial home purpose for buying the property can be ended by divorce, the family home collateral purpose is still present. This is because their children are still minors. Considering this, the court is unlikely to allow the sale of the home, unless of course the proceedings would be sufficient enough to afford suitable accommodation for the minors, as seen in White v White. Similarly if there is insufficient funding, then order of sale is not likely, as can be seen in Williams v Williams. The age of the children plays a crucial part as can be seen in Re Evers’ Trust, and here the children are minors, under 18 years (s15(1)(b) TOLATA). Additionally, when considering TOLATA the Human Rights Act (HRA) should also be applied, in accordance with s3 of the HRA. Article 8 which is the right to family life, and convention right Article 1 of the first protocol which covers the right to peaceful enjoyment of possessions are both relevant here. They would be considered along with TOLATA and favour the maintenance of the family home.

In conclusion, Gladys has an automatically binding, overriding interest over the property and therefore she has a proportionate right to all proceeds. Similarly if Erica has protected her minor interest, her interest will also be binding upon any purchasers; however even if her interest has not been protected, the courts are not likely to order the sale of property as she is the guardian of two minors. It would only be possible if the proceeds from the sale would be sufficient to afford them suitable accommodation.

Bibliography

Table Of Cases:

Abbey National Building Society v Cann [1991] 1 AC 56

Chhokar v Chhokar [1984] FLR 313

City of London Building Society v Flegg [1988] AC 54

Drake v Whipp [1995] 28 HLR 531

Eves v Eves [1975] 1 WLR 1338

Gissing v Gissing [1971] AC 881

Laskar v Laskar [2008] EWCA Civ 347

Lloyds Bank v Rosset [1991] 1 AC 107

Midland Bank v Cooke [1995] 4 ALL ER 562

Moore v Moore [2005] HLR 5

Oxley v Hiscock [2005] Fam 211

Re Evers’ Trust [1980] 1 WLR 1327

Stack v Dowden [2007] 2 AC 432

Strand Securities v Caswell [1965] Ch 958

White v White [2003] EWCA Civ 924

Williams v Williams [1976] Ch 278

Williams & Glyn’s Bank v Boland [1981] AC 487

Table Of Statute:

Family Law Act, 1996

Family Law Act, 1996, s30

Family Law Act, 1996, s30(2)

Family Law Act, 1996, s30(10)(b)

Family Law Act, 1996, s31

Family Law Act, 1996, s31(2)

Family Law Act, 1996, s33

Human Rights Act, 1998

Human Rights Act, 1998, s3

Human Rights Act, 1998, Schedule 1, Part I, Article 8

Human Rights Act, 1998, Schedule 1, Part II, Article 1

Land Registration Act (LRA), 2002

Land Registration Act, 2002, s9

Land Registration Act, 2002, s29(1)

Land Registration Act, 2002, s32

Land Registration Act, 2002, s33

Land Registration Act, 2002, s40

Land Registration Act, 2002, s41

Land Registeration Act, 2002, s66

Land Registration Act, 2002, schedule 3 paragraph 2

Land Registration Act, 2002, schedule 3 paragraph 2(b)

Land Registration Act, 2002, schedule 3 paragraph 2(c)

Law of Property Act (LPA), 1925, s1(1)(a)

Law of Property Act, 1925, s2(1)

Law of Property Act, 1925, s2(3)

Law of Property Act, 1925, s27(2)

Law of Property Act, 1925, s52(1)(b)

Law of Property Act, 1925, s53(2)

Matrimonial Causes Act (MCA), 1973, s25(2)

Matrimonial Causes Act (MCA), 1973, Part II

Trusts of Land and Appointment of Trustees Act (TOLATA), 1996

TOLATA, 1996, s1(1)(a)

TOLATA, 1996, s1(2)(a)

TOLATA, 1996, s12

TOLATA, 1996, s14

TOLATA, 1996, s14(1)

TOLATA, 1996, s14(2)

TOLATA, 1996, s15

TOLATA, 1996, s15(1)(b)

Textbooks:

J. Cursley et al, Land Law, (6th ed., UK, Palgrave Macmillan Law Masters, 2009, pp. 51)

J. Gray and S. Gray, Land Law (6th ed. Oxford University Press, New York, 2009 pp.384)

J. Mackenzie & M. Phillips, Textbook on Land Law (12th ed., Online Resource Centre, Oxford University Press, 2008, pp. 377)

Journals:

E. Cullen, ‘Stock v Dowden: an end to uncertainty?’ (2008) 21(3) Insolv. Int. 43-46

N. Hopkins, ‘Regulating trusts of the home: private law and social policy’ (2009) 125 (Apr) LQR 323

S. Gardner, ‘Case Comment: Quantum in Gissing v Gissing constructive trusts’ (2004) 120 LQR 544

T. Etherton, ‘Constructive trusts: a new model for equity and unjust enrichment’ (2008) 67 (2) CLJ 275

Online Resources:

Land Registry, Know where you stand – Register your land (2010) [online]

accessed on 04/01/2010