Enforcement of 3rd party rights against a purchaser - Unregistered Flashcards Preview

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Flashcards in Enforcement of 3rd party rights against a purchaser - Unregistered Deck (27)
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Mercer v Liverpool, St Helen’s and South Lancs Railway Co [1902]

Legal Rights pre-1926

legal rights bind the whole world (except puisne mortgages)


Puisne Mortgage

  • Legal mortgage over a legal estate not protected by deposit of title deeds, usually because land is subject to prior legal mortgage and first mortgagee (lender) has title deeds to property for security.


Equitable rights pre-1926

  • bind everyone except ‘Equity’s Darling’
    •  a bona fide purchaser for value of a legal estate without notice
    • ‘Purchaser’ includes lender and buyer


3 categories of Equitable Interest

  • Equitable interests subject to protection under Land Charges Act (LCA) 1972 - most commercial equitable interests
  • Equitable interests subject to overreaching - most family equitable interests
  • Equitable interests that don’t fall into above – subject to doctrine of notice


Interests not subject to Protection under LCA 1972

  • Legal (apart from puisne mortgages)
  • Overreachable – family equitable interests
  • Interests still subject to doctrine of notice


Effect of entry of a Land Charge and Protection under LCA 1972

S198 LPA 1925 - Registration at Plymouth constitutes Actual Notice of the interest. Purchaser will see the interest and be bound by it.


Effect of Non-Protection of an Interest

S24 LCA 1972

Non-protection of an interest will make it VOID against certain categories of purchaser


Interests protected under Class C

LCA 1972 s2(4)

  • C (i) – LCA 1972, s2(4)(i) - puisne mortgage (2nd or subsequent legal mortgage) – alerts a purchaser to fact there is a 2nd or subsequent legal mortgage outstanding at the property. Know if has to be paid off to take the land free from the mortgage.
  • C (iii) – LCA 1972, s2(4)(iii) - equitable mortgage – created if the person only has an equitable estate. Such a charge frequently arises where failure to comply with common law formalities, e.g. there was no deed as required by LPA 1925, s52(1)
  • C (iv) – LCA 1972, s2(4)(iv) - estate contract – can be deliberately created contracts but can also cover failed legal estates and interests if comply with S2 LP(MP(A)


Interests protected under Class D

LCA 1972 s2(5)

  • D (ii) - LCA 1972, s2(5)(ii) – negative covenant affecting the land – e.g. covenant not to use land as business premises, not to build a second storey
  • D (iii) - LCA 1972, s2(5)(iii) – equitable easements – equitable interest will generally arise when not created formally, i.e. by deed OR created formally but not for a duration equivalent to a freehold or leasehold term.


Interests protected under Class F

LCA 1972 s2(7)

  • F - LCA 1972, s2(7) – spouses’ right to occupation – protects spouse’s right to occupy home under FLA 1996 if land is unregistered.
  • Does not protect an interest in land
  • Merely a statutory right of occupation


Incorrect Entry

LCA 1972 s3(1)

Land charge must be entered against the correct name(s) of the estate owner(s) at the time of the creation of the land charge.


Standard Property Investment plc v British Plastics Federation [1985]

Incorrect Entry

Correct name to be entered on the land charge register is version of the name as it appears in title deeds


Diligent Finance Co Ltd v Alleyne [1972]

Incorrect Entry

If land charge is entered against the incorrect name, the protection is nulled.

Registered against Erskine Alleyne, not Erskine Owen Alleyne which allowed later mortgagee to take free from spouse’s right of occupation.


Effect of Non-Entry of a Land Charge


S4(5) LCA 1972

Failure to Enter Land Charge

  • Failure to enter C(i) & C(iii) land charge means your interest is void against purchaser for value of any estate or interest


S4(5) LCA 1972

Failure to Enter Land Charge

  • S.4(6) LCA 1972 - Class C(iv) D(ii) and D(iii) land charges are void against a purchaser of a legal estate for money or money’s worth if they are not registered before sale
  • If you buy an equitable estate, will still be bound
  • If you’re a volunteer, you’re always going to be bound.


Midland Bank v Green [1981]

Failure to Enter a Land Charge

Failure to enter an equitable interest at the Land Registry will void the interest against a purchaser of legal estate for money or money's worth

Farmer granted son option to buy unregistered farm for £22k – equitable interest under S1(3) LPA. Therefore, doesn’t bind the world and so should have entered it as a C4 land charge at Plymouth. He did not and he then fell out with his Dad who then didn’t want to be bound by the option. Lawyers advised him to sell the farm to his wife, which he did for £500. 

  • Mother was a purchaser for money (£500). Court don’t look at the adequacy of that payment.


Hollington Bros. v Rhodes [1951]

Failure to Enter a Land Charge

Equitable lease was not protected by C(iv) so purchaser took free of equitable lease


Merer v Fisher [2003]

Failure to Enter a Land Charge

volunteer will always be bound, even if the equitable interest has not been registered.

Right of pre-emption had not been protected. Legal estate was gifted so new owner was a volunteer, and therefore, bound by the interest.


S4(8) LCA 1972

Failure to Enter a Land Charge

Failure to enter F land charge means your interest is void against purchaser for value of any estate or interest


When does Doctrine of Notice apply?

  • Pre-1926 Equitable Interests
  • Beneficial Interests behind 1-trustee trust, e.g. a wife’s equitable interest in the house where the legal title is in her husband’s sole name and is consequently incapable of being overreached.
    • Interest remains in the land and is binding if purchaser has NOTICE of it


Doctrine of Notice

  • Equitable interests are enforceable against anyone except ‘Equity’s Darling’ – a bona fide purchaser for value of a legal estate without notice of the equitable interest.


Actual notice

Where purchaser had been told or was aware of the notice


Constructive notice

S199(1)(ii) LPA 1925

  • Purchaser is bound by what you would have known had you done what was expected – enquiries, searches, inspections


Hunt v Luck [1902]

Constructive Notice

Purchaser must make necessary, relevant, enquiries, searches and inspections.

Presence of a tenant on the land placed purchaser under constructive notice of the tenant’s leasehold interest.


Imputed notice


Implied notice; notice deemed to have, e.g. if agent knows something and doesn’t tell you, you’re bound by it


Kingsnorth Finance Co Ltd v Tizard [1986]

Implied Notice

If purchaser's agent has constructive notice, they will be held to have imputed notice.

Husband and wife contributed to house but only husband named on deeds. Fell out and Mrs Tizard moved out. Went home every day to take kids to school, cooked, lived there when he was away on business.

Husband applied to Kingsnorth for a loan and declared himself as single. Surveyor came to inspect and Mr Tizard arranged for when Mrs Tizard wasn’t there. On inspections saw kids etc and asked about mother.

Husband went bankrupt and Kingsnorth came to claim property. Mrs Tizard refused. Bank were held to have imputed notice via the surveyor. Therefore, weren't equity's darling.