Lecture 4 - Estates and Interests in Land PDF

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LAND LAW

LAW2213

Topic 2: Proprietary Rights – Estates and Interests in Land Learning Outcomes The aim of this lecture is to provide an overview of the different types of property rights – estates and interests – that a person may own in land. By the end of the lecture you should be able to explain: (a) What lawyers mean by the concept of an “estate” in land; (b) The key features of “freehold” and “leasehold” estates, the essential differences between them, and the main formalities required for their acquisition; (c) What lawyers mean by the concept of an “interest” in land; and (d) The different types of interest in land recognised in English law, the formalities required for their acquisition, and the purposes for which they are used in practice. Recommended Reading Mark Davys (2017) Land Law, 10th edition (Palgrave: London), chapter 2. You may also find it helpful to read the following statutory provisions: Law of Property Act 1925, ss.1, 52 and 54 Law of Property (Miscellaneous Provisions) Act 1989, ss.1 and 2 Estates 

Rights to exclusive control and enjoyment of land

Interests 

Interests are over someone’s estate. Limited rights over another person’s estate – sometimes known as “third party rights”.

Introduction Land is vital to almost all forms of social and economic activity (i.e. everybody needs places to live, work, play, etc), which ensures that it is constantly in demand. This level of demand, coupled with finite supply, also makes land a valuable commodity.

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In addition, parcels or plots of land are necessarily contiguous (i.e. next to other parcels of land). Activities carried out on one parcel of land are likely to affect the utility and value of neighbouring parcels. English law has responded to this situation by recognising various different types of property (or proprietary) rights in land. Estates and Interests in land are conceptual constructs (they are incorporeal hereditaments), distinct from the physical descriptions or components of land (corporeal hereditaments) that we covered in the last topic. Estates and Interests allow us to manage land effectively, so that it’s economic and social potentials can be realised. In particular, the law recognises two broad categories of property rights in land: 

Estates: rights to exclusive control and enjoyment of land

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Interests: limited rights over another person’s estate (sometimes know as “third party rights”)

Key points: 

Each of these categories is further sub-divided into different types of estates and interests.

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It is important to recognise that different people may own different types of property rights at the same time in relation to the same piece of land.

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Of the types of estate and interests, many (not all) estates and interests can be either legal or equitable (can ‘exist at law’ or ‘exist in equity’). This is important in order to work out how the interest may be protected and how priority may be determined (we will cover this when we look at Unregistered Land and Registered Land).

Estates in Land An estate in land gives the estate owner rights to “enjoy” the land. In this context, “enjoyment” may include rights to use the land (e.g. through occupation, development, cultivation, and extraction), and/or benefit from its value (by selling the land to realise its capital value, by renting it (leasing) to others to obtain an income, or by using it as security for the repayment of a debt).

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Doctrine of estates 2

“The land itself is one thing, and the estate in the land is another thing, for an estate in the land is a time in the land, or land for a time, and there are diversities of estates, which are no more than diversities of time …” (Walsingham’s Case (1573) 2 Plowden 547 at 555) In other words, different types of estate are distinguished by rights to enjoy land for different periods of time.  

Origins of the doctrine: Crown, allodial title, and bona vacantia Law and Equity?

Law of Property Act 1925, section 1(1): “The only estates in land which are capable of subsisting or of being conveyed or created at law are –



(a)

An estate in fee simple absolute in possession;

(b)

A term of years absolute.”

Law of Property Act 1925, section 1(3) “All other estates ... in ... land take effect as equitable interests.”

(Other types of estates (e.g. “life interest” and “fee tail”) used to be recognised as legal estates in land, but since 1st January 1926 have been recognised only as equitable interests which take effect under trusts of land. Do not panic – we will come back to all of these points later, but this is part of Land Law being a jigsaw). Types of Estate in Land (a) Fee simple absolute in possession (freehold) = right to enjoy land indefinitely into the future An estate of potentially unlimited future duration (e.g. g ranted “to X and his heirs”) 

“Fee” = capable of being passed on to successors (contrast “life interest”)

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“Simple” = not restricted as to possible successors (contrast “entailed” estates, “fee tail”)

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“Absolute” = Not dependent on or liable to be brought to an

Confusing? Focu on the ‘types’ o estat e for now

end by the ..SLIDES (contrast “determinable” or “conditional”) 

Determinable estates

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Terminate automatically on the occurrence of some future specified event (e.g. “to X for life or until she remarries”).

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Conditional estates 

Condition precedent (e.g. “to X on condition that she qualifies to practise as a solicitor”).

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Condition subsequent (e.g. “to X on condition that she does not marry a Scotsman”).

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Often difficult in practice to distinguish between “determinable” and “condition subsequent”.

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Termination of an estate subject to a condition subsequent is not automatic.

“In possession” = estate owner has an immediate right to possession of the land (contrast estates “in remainder” and “in reversion”)

(b) Term of years absolute (leasehold) = right to enjoy land for a certain specified period of time An estate of certain limited future duration (e.g. granted “to X and his heirs for 99 years”) 

“Term of years” = a certain period of time (does not have to be “years”, could be hours, days, weeks or months)

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“Absolute” = not determinable or conditional (as above for fee simple absolute in possession)

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Relationship between freehold and leasehold

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*Leases are both proprietary and contractual*

Formalities for legal estates Land law generally requires a high degree of “formality” for the creation and transfer of legal estates and interests. In other words, when parties to a land transaction want to create a new estate or interest, or transfer ownership of an existing estate or interest, then they must generally use a particular type of document, known as a “deed”. Law of Property Act 1925, s.52(1): “All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed.” There is, however, an exception for “short” leases: 4

Law of Property Act 1925, section 54(2): “Nothing in the foregoing provisions ... shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years ...”. (in this context, parol means orally, or by word of mouth). It is important to note at this point that it is also possible to acquire ownership rights in an estate “informally”, particularly under the rules relating to trusts, proprietary estoppel and adverse possession. However, usually the rights acquired by these means are necessarily equitable, rather than legal, which has important implications for their protection and priority (we will be examining the origins of the distinction between legal and equitable rights and its contemporary significance in more detail in the next topic). Interests in Land An interest in land is a property right which one person holds over another person’s estate. We will be concerned with the following types of interests: 

Easements and profits

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Covenants (Freehold covenants)

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Estate contracts

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Mortgages

[Other property rights in land: 

Rentcharges

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Rights of entry

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Chancel repair liabilities (Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 A.C. 546)]

As with estates in land, all interests may be further distinguished and classified as legal or equitable. This distinction between legal or equitable has important implications for their protection and priority (as noted above, we will be examining the origins of the distinction between legal and equitable rights and its contemporary significance in the next topic). Whether a particular interest is legal or equitable depends on (a) how it is classified by statute, and (b) how it has been created. The relevant statutory provisions are as follows: 

Law of Property Act 1925, section 1(2): 5

“The only interests in or over land which are capable of subsisting or of being conveyed or created at law are – (a) An easement, right, or privilege in or over land for an interest equivalent to an estate in fee simple absolute in possession or for a term of years absolute; (b) A rentcharge ...; (c) A charge by way of legal mortgage; (d) .... and any other similar charge on land ....; (e) Rights of entry ...”. 

Law of Property Act 1925, section 1(3): “All other ... interests, and charges in or over land take effect as equitable interests.”

It follows that estate contracts and freehold covenants can take effect only as equitable interests in land (i.e. because they are not listed in s.1(2) LPA 1925). Types of interest in Land (a) Easements and profits An easement is a right to make limited use of another person’s land. Examples of rights recognised as easements include: Positive easements: 

Right of way (Borman v. Griffith [1930])

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Right to use a coal shed (Wright v. Macadam [1949])

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Right to use a lavatory (Miller v. Emcer Products [1956])

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Right to use a communal garden (Re Ellenborough Park [1956])

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Right to use a car parking space (Moncrieff v. Jamieson [2007])

Negative easements: 

Right to support from neighbouring land (Dalton v. Angus & Co [1881])

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Right of access to light through a defined aperture (Colls v. Home & Colonial Stores [1904])

Note that, in each case, the benefit of the right attaches to, and forms part of, one parcel of land (known as the “dominant” land), and the burden of the right attaches to a different parcel of land (known as the “servient” tenement). 6

Profits à prendre are rights to remove the products of natural growth from another person’s land. There are several different types of profits: 

Graze animals (“pasture”)

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Cut and remove grass (“herbage”)

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Collect timber for various purposes (“estover”)

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Take fish (“piscary”)

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Cut and remove turf (“turbary”)

Note: all of the activities that can be carried out by virtue of positive easements and profits can also be carried out by virtue of licences (i.e. permission of the owner of the burdened estate). Rights will qualify as easements or profits only if they have been properly created or acquired as such. (b) Covenants A covenant is a promise made by deed. It is enforceable between the original parties to the covenant as a matter of contract. As the promise is contained in a deed, there is no need to prove consideration (an exception to the normal rules of contract law). Covenants relating to land may also take effect as property rights (i.e. be attached to, and run with land so as to be enforceable between future owners of the relevant land).  As a general rule only negative (restrictive) freehold covenants can “run” with freehold estates so as to bind successors in title of the original covenantor (i.e. future owners of the servient land).  Both negative and positive covenants can run with leasehold estates. A covenant is positive if it requires the covenantor “to put his hand into his pocket” to comply with its terms (per Cotton LJ in Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403). (c) Estate contracts An estate contract is a contract to create or transfer a legal estate or interest in land (e.g. contract for sale of a freehold or leasehold estate, contract to create an easement or a mortgage). Estate contracts also include:

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an option to purchase – i.e. a contract granting a right to purchase land at an agreed price within a specified time limit (note that if the person holding the option decides to exercise it, then the seller is contractually obliged to sell at the agreed price); and

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a right of pre-emption – i.e. a contract granting a right of first refusal in the event that land is offered for sale (note that the person granting the option is under no obligation to sell, but if s/he decides to do so, then s/he must first offer the land to the person holding the right of pre-emption).

In most cases, an estate contract gives the buyer an equitable interest in the land from the date of the contract (i.e. the buyer acquires both contractual and property rights). The reason for this stems from the combination of (a) the availability of the remedy of specific performance in transactions relating to land, and (b) the operation of the equitable doctrine of conversion (“equity looks upon as done that which ought to be done”). Under s.2 of the Law of Property (Miscellaneous Provisions) Act 1989, certain formalities are required for contracts for the sale or other disposition of land. In particular, such contracts must be: 

“... made in writing ...”

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“... incorporating all the terms ...”

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“... signed by or on behalf of each party ...”

Failure to comply with these formality requirements = NO CONTRACT (d) Mortgages We will not be looking at mortgages as a separate topic in this module, but it is important to have a basic understanding of what they are and how they may be created as they often find their way into problem questions. A mortgage over land (technically “a charge by way of legal mortgage”) is an interest in land granted to secure repayment of a debt or performance of some other obligation. A legal mortgage must be made by deed. A mortgage is an interest in a property that you grant to someone to secure some sort of arrangement. Charge by way of legal mortgage = an interest granted to secure repayment of a debt or performance of some other obligation. The interest is deferred.

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The bank gives you the loan, and you give the bank the mortgage. The loan is a contract between yourself and the bank. Borrower = mortgagor Lender = mortgagee A mortgagee (lender) acquires a property interest in the mortgagor’s (borrower’s) land. If the mortgagor fails to discharge his or her obligations under the mortgage, the mortgagee can sell the mortgaged land and use the sale proceeds to repay the outstanding debt. A mortgagee is generally in a much stronger position than an unsecured creditor: For example, suppose X is bankrupt with debts of £500,000 and assets worth £200,000 (including land worth £150,000). Y is one of X’s creditors and is owed £100,000. If Y has a mortgage over X’s land (i.e. Y is a secured creditor), then Y can realise its security interest by selling the land and keeping the amount required to repay the debt owed by X (i.e. the full £100,000). However, if Y is an unsecured creditor, then Y will have to compete with other unsecured creditors for a share of X’s assets. Assuming there are no secured creditors, X’s assets of £200,000 will be distributed pro rata between the creditors at the rate of 40p in the £ (i.e. £200,000/£500,000). In this scenario, Y will receive only £40,000. Under the Law of Property Act 1925, s.205 (xxi), a mortgagee is treated as equivalent to a purchaser: “Purchaser means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property …” Formality in Land Transactions Why does land law put so much emphasis on formalities (i.e. deeds, written contracts, and, as we will see, registration requirements) in transactions relating to land? 

Fraud

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Evidence

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Caution

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Standardisation

Summary 9

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Concept of an estate in land

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Doctrine of estates (time)

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Two main forms of estate: 

Freehold (fee simple): a freehold estate has an unlimited duration

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Leasehold (term of years absolute): a leasehold estate has a term of years.

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Concept of an interest in land

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Four main forms of interest:

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Easements and profits

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Covenants

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Estate contracts

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Mortgages

Formalities for land transactions There is a lot of information and new terminology to digest in this topic. To help you

start to make sense of this, on the following page create a simple diagram that shows the filtration from corporeal/incorporeal to estates/interests, to legal/equitable (Lectures 02 and 03). You can add further details to this as we move through the next topics as you make sense of more information.

Covenants 

A covenant is a promise made by a deed

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A covenant is necessarily an equitable interest – there was a historic problem. Who do equitable interest bind? – section 1(3) of the Law of Property Act lays down equitable interest

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Everyone is bound by legal rights.

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Who is bound by equitable rights? Who is not bound by equitable rights –

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A covenant is a promise, an agreement – could even be said to be a contract. But it is made by a deed – a deed is different to a contract. A deed has more formal requirements, like presence of a witness.

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A covenant is enforceable between the original parties, as a matter of contract. 10

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No need for consideration for a covenant

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Bound by privity of contract

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Covenants relating to land may also take effect as property rights

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A promise is made by a deed, it becomes a covenant.

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There is dominant land and servient land, when involving covenants. There will also be a covenantee and a covenantor.

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Can release your covenant.

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As a general rule, only restrictive covenants can “run” with freehold estates as to bind successors in title of the original covenantor (i.e. future owners of the servient land). If it Is a restrictive covenant (or a positive covenant), then future owners can be bound by the covenant.

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Both restrictive and positive covenants ca...