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NATURE OF LAND, EASEMENTS - Coggle Diagram
NATURE OF LAND
MORTGAGES
LEGAL AND EQUITABLE MORTGAGES
Legal Mortgages = legal interest in land
The formalities are:
- Deed = clear that it is intended to be a deed + validly executed + delivered
- Registration = not registered > not take effect as a legal mortgage
Equitable Mortgages - 2 types:
1. Mortgages of equitable interests = borrower holds equitable interest in land so mortgage of that interest > equitable in nature
2. Defective legal mortgages = not granted by a valid deed / not registered > regarded as an equitable mortgage if in writing, contains all the agreed terms + is signed by both = mortgagor and mortgagee
Discharge of Mortgages = Once mortgage repaid in full > mortgage entries at Land registry must be cancelled using DS1 form over whole of land / DS3 over part
EQUITY OF REDEMPTIONBorrower can repay loan any time after legal date for redemption passed1. Equitable right to redeem supplements legal right to redeem2. No postponement or prevention of redemption
- Courts will not allow a clause which prevents redemption BUT may allow a lender to postpone the date
- Leasehold > less likely to allow postponement as it depreciates in value
- Freehold > more likely to allow postponement as it rarely depreciates in value
3. No collateral advantages
Option for lender to purchase mortgaged property
- IF granted at same time as mortgage = invalid
- IF granted in subsequent transaction = may be upheld
- IF mortgage + option = granted on same day, but completely separate = can be upheld.
- Lenders are entitled only to the repayment of capital advanced plus interest > any additional value extracted from borrowermay be struck out
4. No unconscionable terms
Will be struck down if more than simply ‘unfair’ or ‘unreasonable’ - Has the term been imposed in a "morally reprehensible” manner = is there equality of bargaining power?
- YES = void > not be enforceable on borrower BUT remainder of agreement remain in force (e.g. high interest rate)
UNDUE INFLUENCEIf party is granting mortgage NOT for their benefit > lender must ensure that they receive independent advice from solicitor to:
- Explain documents / Point out the risks / Emphasise a choice / Send certificate to Bank
IF DONE = Bank’s interest in land under mortgage has priority over the husband and wife’s freehold interest.
PRIORITY OF MORTGAGES OVER REGISTERED LANDLegal mortgages
Must be registered + take effect as a registered charge > priority between registered charges depends on order in which they are registeredEquitable mortgage
- Priority depends on order of creation
**- Can be protected by the entry of a notice > if so = will take priority over a subsequent legal mortgage**
- IF NOT protected = not prioritised
Lenders can alter position that would apply according to priority rules by entering into a deed of priority / intercreditor deed which is registered at the Land RegistryRights of any person living at mortgaged property with mortgagor are postponed to interests of the mortgagee.
RIGHTS OF THE LENDER
Available to lender if mortgagor fails to make payments
- Remedy is a matter for particular lender BUT under a duty to act fairly and reasonably
- Equitable mortgagee has right to bring a debt action / apply for foreclosure / appoint a receiver > other remedies require court order
- Legal lender has right to bring a debt action / repossess property / sell it / appoint a receiver / foreclose
1. Debt actionPersonal action against borrower > lender has a proprietary right + can enforce it against property itself
- Often used in addition to 1 of other remedies
- Limitation period: if mortgage has been created by deed = 12 years + for recovery of interest = 6 years
2. Right to possessLender may take possession of mortgaged property to sell with vacant possession OR manage the property and derive an income from itLimits on right to possess for residential mortgages:
- Criminal Law Act 1977 = criminal offence to use / threaten violence to gain entry to property
- Pre-Action Protocol 2008 = steps court expects lender to take before resorting to possession (last resort) like discussing debt
- Common law jurisdiction to postpone
- Statutory jurisdiction to postpone IF: Possession proceedings started + mortgaged property must be fully / partly residential + borrower able to pay ‘any sums due’ (areas + interest) within a reasonable period (compared to end of term) + Subject to such conditions ‘as the court thinks fit’
3. Right to sell
If there is surplus = forwarded to the borrower BUT if there is a shortfall = borrower may be sued personally by the lender
The power of sale must exist, have arisen and become exercisable.
Does it exist?
- Express: Mortgage documents will include express power of sale + how + when power will be exercised
- Implied, or statutory: when the mortgage money has become due
When does it arise?
- When the mortgage money has become due OR if mortgage is interest-only mortgage > at legal redemption date
When is it exercisable?
- IF right to sell has been expressly conferred > wording will set out in what circumstances it can be exercised
- IF implied exercisable only when at least 1 of the criteria is met > Notice requiring payment of whole loan has been served by lender + borrower has defaulted / Interest is unpaid and arrears for at least 2 months / breach of another mortgage provision
Lender’s duties when exercising the right to sell
- After sale lender is trustee of surplus proceeds of sale + must hand them to person next entitled
- Balance its own interests against interests of borrower.
4. ReceiverManager of mortgaged property if lender does not wish to take possession or to sell- Function is to get income from land + apply it towards outstanding mortgage debt
- Lender is not liable for them
5. ForeclosureLender takes mortgaged property in satisfaction of debt = freehold will vest in lender + borrower will lose all rights to property
- Lengthy and complex + lender cannot pursue the borrower for any surplus debt
Rights in land
Right which relates to land can either be proprietary or personal in nature
Distinction between proprietary + personal rights is important for:
- remedy available to someone who is deprived of their right
- enforceability of it against third parties (new owner of the land burdened by the right)
PROPRIETARY RIGHTS IN LAND Enforced by an action in rem = use or possession of the land can be recovered so holder of = right does not have to settle for damages
- Capable of being enforced against 3P
Rights that have proprietary status depend on 1. Fixed list
- freehold estate
- leasehold estate
- easement
- mortgage
- restrictive covenant
- estate contract
- beneficial interest in a trust of land
2. Nature of a right
For right to have proprietary status must also satisfy certain substantive (definitional) characteristics > differ depending upon right in question
- An obvious characteristic of proprietary rights is their invisibility
3. Creation of a right
IF characteristics are insufficient > formalities are examined
- Proprietary rights are subject to strict requirements as to formalities for their acquisition/creation.
4. Protection of a right
it is enforceable against a third party
INTERESTS IN LAND Proprietary rights of more limited use = ‘interests in land’Legal Interests
- Mortgages
- Easements
- Rights of entry = right for a landlord to re-enter leased premises + end leasehold estate in event of tenant default or other event OR rentcharge owner’s right to hold the land if money owed in not paid
Equitable interests
- Restrictive covenants
- Estate contracts = contractual right to a legal estate > Equity will order specific performance of a contract to create / transfer a legal estate
- Interests in a trust of land = Trustee hold legal title > Beneficiaries hold equitable title
- Easements granted for an uncertain term
LAND CONTRACTS parties will enter into a contract to buy/sell the land.Formalities
- must be in writing
- must contain all the expressly agreed terms
- must be signed by both parties
Proprietary effect of the contract
- Pass equitable interest in land to buyer > estate contract.
Application
A land contract will be used in a variety of situations
- sale contract
- agreement for Lease
- Option Agreement = gives party right, during option period, to serve notice they wish to buy land
- Right of pre-emption = gives party right of first refusal if land owner decides to sell their landRemedies for breach of a land contract
- Damages = available as of right
- Specific Performance = at discretion of court
- Injunction = at discretion of court
PERSONAL RIGHTS IN LAND
Only enforced by a personal action for damages if the right is breached.
- Use (or occupation) of the right cannot be recovered
- ONLY BINDS original parties to right NOT 3P
REGISTRATION
Principles
Mirror Principle = register reflects all benefits of + burdens property is subject to
Curtain Principle = register records ownership of legal estate in property = legal title NOT beneficial
Insurance Principle = accuracy of the register is guaranteed by the state so if there is error > anyone who has suffered loss will be compensated
Trigger events causing unregistered land to be registered or updating register of registered land:
- Transfer of freehold estate by sale / gift / court order
- Lease with term < 7 years
- Transfer of lease of unregistered land with < 7 years left
- Disposition of lease / freehold with < 7 years left
- Grant of lease effective < 3 months after date of grant
- 1st legal mortgage of free/leasehold with < 7 years left
ESTATES IN LAND
Estate in land = proprietary right of possession
- There are 2 recognised legal estates: freehold and leasehold
Same piece of land may simultaneously be subject to a freehold, a lease and a sub-lease > hierarchy:
- Freehold
- Leasehold
- Sublease
All physical land in this country is owned by Crown > people owe right to possess the land
1. The freehold estateThe highest estate in land is fee simple absolute in possession = freehold estate
- fee = capable of being inherited
- simple = can be inherited by any heir + distant relatives
- absolute = estate is not liable to end prematurely, > not subject to a condition
- possession = fee simple owner has a current right to use and enjoyment of property > Physical possession is not necessary
Commonhold = type of freehold created out of a freehold registered estate
- alternative to a long lease + no overall landlord BUT freehold owner
2. The leasehold estateFreehold owner grants a lesser estate of a certain duration for term of years absolute = leasehold estate / leaseLeases can be short; weekly, monthly or yearly, or can be hundreds of years long.
- More than 1 can be available on alnd
LAND DEFINITION
Buyer of land gets everything that falls within the legal definition of land
- surface, buildings or parts of buildings on the land, other corporeal hereditaments (fixtures) ; and other incorporeal hereditaments (benefit of any proprietary rights).Airspace
- The upper airspace = owner’s rights restricted to such height as is necessary for ordinary use / enjoyment of land and
- The lower airspace = such height as is necessary for the reasonable enjoyment of the particular piece of land.The ground below = included except:
- minerals / treasure / coal
Fixture or chattel test 1. Degree of annexation test - 1st test applied
- more firmly object is fixed to land > more likely it is a fixture2. Purpose of annexation test - 2nd test considers why object is attached to the land/building + takes priority over the degree test.
- If permanent to improve land = fixture
- Of temporary + only to be enjoyed = chattel
EASEMENTS
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Easement = proprietary right to use land which belongs to somebody else
- Grantee receives benefit of easement + their land is benefitted = dominant tenement.
- Grantor grants easement + their land is burdened = servient tenement
Legal easements = fulfils the requirements as to duration > equivalent to estate in fee simple absolute in possession (forever) / term of years absolute (set amount of years) so free / leasehold
Equitable easements = not granted for the equivalent of a freehold or leasehold estate
Positive = allow holder to use servient land of another in a particular way
Negative = prevent servient land owner from doing something on their land by giving dominant land owner right to receive something such as right to light / right to air / right of support
There are 2 types
- Grants = exists where C sells or leases part of C’s land to D + gives to D an easement over the land which C has retained
- Reservations = exists where C sells or leases part of C’s land to D + retains a right over the land sold or leased to D
Easements distinguished from other rights
Quasi-Easements
- IF landowners use paths on their own land > not enjoying easements BUT could become easements if ever the land was divided
Public Rights
- Exercised by the general public NOT by individual granted
Licenses
- NOT proprietary right in land > merely confers a personal right which cannot be enforced against 3P
Profits a prendre
- Confer on holder right to take anything from land whereas easements do not
Restrictive covenants
- Restrict what is be done on the servient land.
REMEDIES
1. Prohibitory injunction to prevent interference with the enjoyment of the easement
2. Damages in lieu of injunction or in addition to it
3. Mandatory injunction to remove obstruction