Transfer of Freehold Land – Contract and Conveyance PDF

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Lecture notes for Transfer of Freehold Land; Contract and Conveyance in Land Law...

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Transfer of Freehold Land – Contract and Conveyance Lecture 1: The property market in England is crucial to understanding this topic because it shapes the legal rules that we have for transfer and what formalities are necessary. Land is thought of as a commodity so rules need to be quick easy and simple for transfers, and the market affects the way that litigation shapes the law. It changes when it is at a peak so land becomes more valuable. This topic links to other topics because fairness and certainty and publicity are key in land law topics. Certainty is important because property rights affect parties and third parties rights like mortgages and easements for example. Property rights are good against everyone and it allows third parties to find out information. This links to land registration and in informal acquisition of rights, like AP, there is no for written formalities. The three key stages of transfer: 1. Pre-contract – informal negotiations. This is the most basic stage and no contract has been made yet 2. Conclusions of contract for sale – ‘exchange of contracts’. This is where there is often a physical process where there are 2 identical copies of the same document and once signed by the two parties, they then swap these. 3. Completion of transaction by deed – transfer has taken place. The legal rights, as opposed to equitable rights, transfer to the buyer. The first problem that makes buying property long and drawn out: 1. Informal negotiations: neither party is bound and applies even if one party makes an offer to buy the property and if the other accepts. In Scotland if you make an offer to buy property it becomes binding but in England, until a contract is concluded offer and acceptance means nothing Gazumping is when someone pulls out of the sale of a property, often when property is booming so sellers can accept higher offers Gazundering often happens when the property market is falling and buyer does not want to pay the asking price, which is legitimate because until the contract is signed, no parties are bound A solution suggested to this solution was under 2004 Labour government – home information packs. Sellers provide certain information about a property but this scheme failed to convince mortgage lenders that information would be reliable so the buyer still had to spend money doing surveys. The amount of information that sellers need to provide has been cut back Before signing a contract people may be interested in what fixtures and fittings are going to be removed because they all belong to the seller who has no enforceable legal obligation and this is only relevant after the contract has been signed. Refer to Taylor v Hamer ‘Subject to contract’ agreements:

The intended effect is to make clear that there is no binding agreement and parties can negotiate, unless and until that condition is waived. This is designed to show that parties do not intend to create any binding legal obligations. BUT parties can sometimes intend to create binding legal obligations despite this. Taylor v Burton [2015] EWCA 142 – in legal proceedings, parties drew up a draft form of order indicated that they did intend to be bound. On this facts this failed but it demonstrated that in some limited cases parties can intend to be bound ‘Lock out’ agreements: Pitt v PHH Asset Management Ltd [1994] 1 WLR 327 – s2 sets out requirements for contractual formalities so such agreements do not have to meet the same requirements as the contract. An informal, oral agreement can be enforceable even though it doesn’t comply with the formalities a contract has to comply with. The seller would have to agree so it would be in their interest to make this kind of agreement 2. Conclusions of Contracts The needed formalities – certainty, simplicity, fraud, publicity, protection of parties from unintended consequences Property rights affect third parties so they need to be able to find out who owns land S2 of the Law of Property (Miscellaneous Provisions) Act 1989 1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each. (2) The terms may be incorporated in a document either by being set out in it or by reference to some other document. (3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract. In writing, incorporating all the terms in one document, signed by all parties (or identical copies signed and exchanged) Importance of writing: Old law: part performance Evidential vs constitutive function Writing could be evidence of a contract but without out there could be no contract Contract could exist without writing so if performed, despite without writing, it can be enforceable from doctrine or part performance BUT under s2 this is gone. Need to comply with the three key requirements otherwise there is no contact What should you put in a contract? Details of who the Parties are – buyer and seller Fay v Miller, Wilkins and Co [1941] – no dispute as to the identity of parties but able to make a reasonable identification so naming is the most helpful but if no dispute then naming isn’t particularly magic Details of the Property being sold – if some dispute over it being sold. Often lots of uncertainties about the boundaries of land Chadwick v Abbotswood Properties Ltd [2004] – what would the reasonable person think he/ she is buying?

Details of Price of the property – use of valuation mechanism Brown v Gold [1972] Ch 5 If making a contract it needs to comply with s2 and include details of parties, property and price What kind of agreements does s2 apply to? Wright v Robert Leonard Developments Ltd [1994] EGCS 69 – sale of a flat and clause about furniture and fittings wasn’t included in main contract. One hand was found it fell under s2 so for a valid contract this crucial term should have been included but also allowed parties a way out because it was such a big mistake so parties were entitled to rectification – a legal opportunity to change the document and rectify it to be properly express Loubatieres v Mornington Estates (UK) [2004] EHCW 825 (Ch) – agreement to execute a written document complying with the Act. Getting round the Act is a way of subverting the requirements of s2 so other agreements should also be in writing Collateral contracts: an agreement that is separate from the main one, so the terms do not have to be incorporated in the document Record v Bell [1991] – held to be collateral so need not be in the main one If you have an informal agreement or one that does not comply with s2 but part is performed: Tootal Clothing Ltd v Guinea Properties Management Ltd (1992) – if parts relating to land had been carried out it would be find but has been heavily criticised and rejected Other agreements outside of s2: Spiro v Glencrown [1991] – notice exercising option to purchase Joyce v Rigolli [2004] – Agreement confirming boundaries does not require a contact because not a transfer of land Rollerteam Ltd v Riley [2016] – settlement agreement involving executions of declaration of trust Lecture 2: Chain of correspondence: A letter offering to buy land and another letter accepting those terms cannot be put together to make a contract because they are not in the same document and they are not identical Commissioner for the New Towns v Cooper (GB) [1995] Ch 259 – exchanges of faxes. Unless identical documents setting out the terms, it will not work McCausland v Duncan Lawrie Ltd [1996] 4 All ER 995 – exchange of letters varying contract. Letters were not setting out all the terms; they must all be in one which are signed by both parties or two copies made and each sign. An exchange of different documents is not enough

Signatures: Firstpost Homes v Johnson [1995] 1 WLR 1567 – printed or signed name of an addressee can be enough There is not a strict legal definition of a signature Green v Ireland [2011] EWHC 1305 An email is different because it can all appear in the same document so if both parties have signed it, it can be a valid contract A letter offering to buy land and one back accepting is different but in an email, communication can all be potentially seen together Third parties: Jelson v Derby City Council [1999] 3 ELGR 91 – held that 3rd parties should have to sign it Agents may also sign on someone’s behalf but the fact that someone is a solicitor will not automatically entitle them to do so, they need to be given authority, as evidenced in McLaughlin v Duffhill [2009] EWCA Civ 162 Rabiu v Marlbray Ltd [2016] EWCA Civ 476 Man told he would get a great bargain by buying room and renting out to make money on it so signs agreement on behalf of himself and his wife as the purchaser but wife was not bound; but he was

Effects of conclusion of contract: Walsh v Lonsdale (1882) ChD 9 If you conclude a specifically enforceable contract, the magic of equity means it looks on the contract as already being performed, so it looks at what should have been done The buyer, by virtue of equitable doctrine, will be as good Enforceable contract for grant of proprietary interest will give rise to equitable proprietary right This is a key role for specific performance Philosophical argument: “Since contracts relating to land must (by one means or another) eventuate in performance, equity views the contractual purchaser as having acquired, as at the date of the contract itself, certain substantial rights of a proprietary character. Thus, from the moment of specifically enforceable contractual commitment, the purchaser of a land interest acquires not merely a contractual right against the vendor but also a proprietary right in the vendor’s land, a right which is necessarily equitable.” Gray and Gray, Elements of Land Law (5th edn, 2009) para 8.1.55. The seller is regarded as holding the property on trust for the buyer and this is only after the conclusion of contracts – the conveyance has not happened yet Re North East Property Buyers Conflict between someone who signed up to a debt rescue scheme whereby home was transferred to 3rd party and involved conflict between former homeowner who had a a lease and people who bought it was granted a mortgage over it. The mortgage took

priority. Until transaction had been completed by conveyance, the purchaser could not grant any proprietary interest which would grant interest that could bind the mortgage to the homeowner Former homeowner would get a proprietary interest from current one but this would not take place until after It involves distinction between contract and conveyance Priority of interests – purchaser could not create overriding proprietary interest before completion. N Hopkins, “Priorities and sale and lease back: a wrong question, much ado about nothing and a story of tails and dogs: Southern Pacific Mortgages Ltd v Scott [2014] UKSC 52; [2014] 3 W.L.R. 1163” (2015) Conv. 245

Passing of risk: Purchasers bare the risk associated with the property and when contract is concluded, although estate hasn’t passed to purchaser, risk of damage goes to purchaser This follows Lysaght v Edwards (1876) 2 Ch D 499 Contractual reallocation of risk – previous Standard Conditions of Sale

Failed contracts: If you’ve failed one, you cannot pull out provisions which don’t relate to land – the contract stands or falls as a whole and if failed to comply with s3 requirements, no part should be enforceable - cannot resurrect provisions not relating to land A contract relating to land and for it to be permissible means it MUST comply with s2, unless it is collateral Keay v Morris Homes (West Midlands) Ltd [2012] EWCA Civ 900 Usually purchaser who has transferred money on the basis of an oral agreement will be able to recover it. This is based in obligations and unjust enrichment. Sometimes the rules of this mean that you cannot get your money back. In Sharma v Simposh Ltd [2011] EWCA Civ 1383, the oral agreement had been executed which was a defence to an action for restitution. Some performance had been made so no action of restitution was available

The intervention of equity: This allows a possible escape if you have created an agreement Historical background: Part performance – contract without written agreement but cannot be enforced Previous law required written evidence in order for the contract to be enforced, but in theory a contract could exist without writing If one party allowed the other to act on the unenforceable agreement, equity would step in to allow specific performance of the contract It can sometimes permit the award of an equitable proprietary right to the claimant Proprietary Estoppel: Separate doctrine whereby if there is unfairness, equity can step in Crabb v Arun District Council [1962] Ch 179

Council led someone to believe they would have a right of way but then changed their mind. Parties relied on having this access right so suffered detriment from the misleading statements, meaning this doctrine could act as a doctrine of the Court The elements of an estoppel-based claim: Representation (by other party) Reliance (you relied on this) Detriment (it caused you this) If they went back on their word, this would be unfair The balance between fairness and formalities and s2: Judges are negotiating a balance between fairness and statutes; this is why equity exists to mitigate the hardships caused by the legal rules Yaxley v Gotts [2000] 1 All ER 711; Conv 245-254 Self employed builder sees property on the market to do it up and convert into flats and make money on them but he doesn’t have any money. Negotiated with friend (Gotts) who bought property and Yaxley will renovate it so in compensation he will get ownership of the grounds. This was not put into writing in compliance with s2 and Gotts’ son bought the property and he did not have any binding agreement with the son as he did not make an agreement with him. On the face of it, Yaxley has no right in the property. Spent over a year renovating and once it could be rented out he managed the flats without payment for 5 years on behalf of Gotts. He did not have any legal rights in the land at this point and asked the Gotts to transfer him the ground floor flat but they said no and expelled him from property. He sued and court held that he should get a proprietary interest. The 3 judges all agreed and he was awarded a 99-year lease of the ground floor flat but the three reasonings were different. Walker LJ did not like using proprietary estoppel because he believed that we should follow what Parliament’s intention was. He believed that both proprietary estoppel and constructive trust are based on unconscionable conduct (Gissing v Gissing and Grant v Edwards.) Sometimes unfair to leave someone with only a claim to money and you need to award them an interest in land so he believed that constructive trusts were the only way to do this and he said: “allow a limited exception, expressly contemplated by Parliament, for those cases in which a supposed bargain has been so fully performed by one side, and the general circumstances of the matter are such, that it would be inequitable to disregard the claimant’s expectations, and insufficient to grant him no more than a restitutionary remedy.” Clarke LJ agreed with this analysis but the applicability of estoppel will depend on the facts of each case. He said: “estoppel may not be invoked to render valid a transaction which the legislature, on grounds of general public policy, has enacted is to be invalid or void.” Bedlam LJ held that it was unconscionable to deny Yaxley an interest in the property. Law Commission reports show that s 2 was not intended to affect the availability of proprietary estoppel. Grant v Edwards: must have a belief that s/he will obtain an interest in the property, must have acted to his/her detriment in reliance on this belief. Equity will act on the conscience of the owner and he said:

“It is not inherent in a social policy of simplifying conveyancing that fraud should be allowed to prevail.” First 2 said we should stick to statute as much as possible, but last was happy to say that if statute would allow to act in an unfair manner This case created on-going confusion between PE and when constructive trusts can come into it General debates about EP and CT’s overlapping and whether its wise to apply them: Rowing back from assimilation? Lord Walker in Stack v Dowden [2007] UKHL 17 was unhappy about this 1. What are the three key stages of a sale of land? Formal negotiations 2. Give an example of a device that might be used to avoid “gazumping”? 3. Give three basic requirements for a valid contract under s 2 LP (Misc. Prov.) Act 1989? 4. What is the effect of conclusion of a valid contract under s 2?

Lecture 3: If parties don’t comply with the rules and formalities there are rules – should the law enforce formalities or should it take a more fairness-based approach? Elements of an estoppel based claim: proprietary estoppel Representation (assurance) Reliance Detriment REPRESENTATION: Estoppel as a defence: Lester v Woodgate [2010] EWCA Civ 199 – D being sued for interfering with an easement (preventing carrying out right of way) and estoppel can be a defence to this claim that is being brought against someone It can therefore protect you from having claims against you Because it is an equitable doctrine judges always have discretion as to what the appropriate remedy should be and this can be based upon the grant of a proprietary interest/ right to the party who established they need representation Yaxley v Gotts [2000] – although disagreement between the judges, they all agreed Yaxley should acquire a 99 year lease on one of the flats. Thus, estoppel is being used as a sword to allow Yaxley to acquire the proprietary interest he wants. The way a judge looks at this is not at what Yaxley expected to get, but the detriment and loss he actually suffered Remedies available:

You can gain a proprietary right but you will not be entitled to more than was initially assured and there must be proportionality between expectation and detriment – putting £10k of work into a £1mil property will not mean you gain the whole thing From Yaxley, there was tension in the law between s.2 and formality requirements Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55 The management company owned a plot of land in Mayfair and it is a block of flats at the moment but Cobbe proposed terraced houses being built instead because would be very valuable due to location. The parties concluded an oral agreement and Cobbe was going to pay a certain fee upfront (£12mil) to develop the land and when it is developed and properties are sold off, he would give any profits about £24mil to the management company to allow them to have a substantial share The property deal was argued to not be beneficial enough for her and the company so she waited until the day after the planning consent was granted and then demanded more money than she previously agreed. Cobbe was in difficult position so instead of giving them more money he tried to sue the company on the basis alleging estoppel or constructive trust that he should get a right in the land, trying to enforce an informal oral agreement Held: judges did not favour Cobbe’s claim and by the proprietary claim regarding an interest in the land. Lord Scott said negotiations were still ongoing at the point at which the company pulled out, so the terms were not clear and the parties had no agreement exactly determining terms. This was not enough to make a proprietary claim and Cobbe arguing it’s not fair was not enough. There was insufficient certainty as to the interest expected, and Cobbe should have known this as an experienced property development; he knew the agreement was not legally binding Estoppel should not be used to make enforceable agreements that are void according to statute just because of the estoppel doctrine. Many academics weren’t happy with this and because of s.2 there was not much scope for estoppel Difference between a proprietary claim and...