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Overreaching and licencse
Land law (LAW 1016-0906)
University of Hertfordshire
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What is overreaching? Overreaching is a device which operates at the time of disposition to detach a beneficial interest under trust from the legal estate over which it exists. The disponee therefore takes free of the beneficial interest; it cannot bind him. This has the result that the beneficial interest reattaches itself to the money received from the disponee. The trustees hold this money on trust going forward. Overreaching: A Diagram Law of Property Act 1925 Overreaching is a statutory doctrine: the rules which establish when it occurs are contained in the Law of Property Act 1925 s and s. The effect of these sections taken together, dictate that beneficial interests under trust will be overreached on a disposition provided that the money arising from the disposition is paid to no fewer than two trustees (legal owners). The “restriction” A restriction is an entry in the Land Register “regulating the circumstances in which a disposition of a registered estate or charge may be the subject of an entry in the register.”(LRA 2002 s(1)) In other words, a restriction is a condition which must be satisfied before a disposition can be registered. Thus means is can be used as a device to ensure that beneficial interests are overreached on disposition by stipulating that money arising from the disposition must be paid to two trustees before the disposition can be registered. If the beneficial interest is not overreached, in what circumstances will it bind a disponee? The rules determining when a pre-existing right in rem will bind a disponee of a registered estate in land are contained in LRA 2002 s and s (as we have seen above). The “basic rule” in s establishes that a disponee is bound by all pre-existing rights in rem, while under the rule in s establishes that a disponee is bound by pre-existing rights in rem which are either (i) registered; or (ii) fall within Schedule 3 LRA 2002 s; Schedule 3 Under the LRA 2002, beneficial interests under trust cannot be registered against the land they burden (LRA 2002 s(a)(i)). Therefore the only way a beneficial interest under trust will bind is if it falls within one of the paragraphs of Schedule 3. The only paragraph which a beneficial interest under trust can possibly fall within is paragraph 2. Thus the bindingness of a beneficial interest under trust hinges on whether the beneficiary is in actual occupation of the burdened land. The Three Fundamental Operating Principles of Registered Land The Mirror Principle The mirror principle encapsulates the idea that the register should reflect the totality of the rights and interests concerning a title of registered land. Thus, inspection of the register should reveal the identity of the owner, the nature of his ownership, any limitations on his ownership and any rights enjoyed by other persons over that land that are adverse to the owners. The point is simply that, if the register reflects that full character of the land any purchaser and any third party can rest assured that they are fully protected: the purchaser knows what he is buying and the person with an interest in the land knows that it will be protected. However, not fully operation in the system of registered land even under the LRA 2002. This is mainly due to the existence of a category of rights that affect the land and which bind any transferee of it (including a purchaser) without ever being entered on any register. These are the “unregistered interests which override” – found in Schedule 1 and 3 to the LRA 2002 – which although much reduced in scope by 2002 Act (when compared with the 1925 Act) nevertheless detract from the integrity of the register as a “mirror” of the legal status of the land. The imperatives of the LRA 2002 are to ensure that as much as possible about the land is registered and, for those rights that are not registrable under the act, to ensure that they are capable of discovery by a normal inspection of the land. In fact, the register will never be a truly perfect mirror, as not everything can be expected to be entered on a register. For example, informally created rights where no property professional has been involved are unlikely ever to be registered by the parties, and short-term rights (e. a one-year lease) or rights fundamental to the efficient use of land (e. rights benefiting the general public) are either too transient or too important to be subject to a registration requirement. The Curtain Principle The curtain principle encapsulates the idea that certain equitable interests in land should be hidden behind the “curtain” of a special type of trust. Thus, if a person wishes to buy registered land that is subject to a trust of land, the purchaser need be concerned only with the legal title to the land, which is held by the trustees and reflected on the title register. The Insurance Principle The insurance principle was one of the most ambitious of the motives underlying the LRA 1925 and it continues to underpin the operation of the 2002 Act. It encapsulates the idea that, if a title is duly registered, it is guaranteed by the State. This guarantee is supported by a system of statutory indemnity (i. monetary compensation) for any purchaser who suffers loss by reason of the conclusive nature of the register. The State insures against deficiencies, inaccuracies or other mistakes in the register. The point to be grasped here is that any registration system that guarantees title effectively will need to provide a system of compensation for those persons who suffer loss by reason of the application of the system. A register of land titles, especially one that is designed to be absolutely conclusive for most purposes, will always generate cases in which loss is caused to innocent parties simply because of the way the system works. Licenses Types of Licences The Bare Licence The Bare Licence is perhaps, the most common form of permission that a landowner gives to another person to use his land. In essence it is permission to enter upon the land, given voluntarily by the owner, who receives nothing in return. Typically such licences allow the licensee to carry on some limited activity on the licensor’s land, as where permission is given to allow a neighbours children to play in a garden. The Bare licence can be given in any shape or form, and many are oral or implied from the landowner’s lack of objection to the activity taking place. The bare licence only last for as long as the licensor wishes and can be terminated by giving reasonable notice to the licensee. Robson v Hallet 1967 Licences Coupled with an Interest (or Grant) The Licences coupled with an interest is a range of licences covering different activities that are grouped together because the licences are needed in order to enjoy the benefit of the grant. For example a landowner may grant a person a “profit a prendre” over their woodland, but in order to enjoy this grant they must be able to enter the woodland and stay there. Contractual Licences The Contractual licences are, in nature, similar to bare license with the important difference that contractual licences are granted to the licensee in return for consideration. Contractual licences are not proprietary rights, but governed by the ordinary rules of law of contract, as such like most contracts do not need to be created with any particular formality. Examples include a music festive ticket, or an occupation licence for a room in a house. As they are contracts about the use of land and not the disposition of an interest in land they do not need to meet the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Remedies for the contractual licence are found within the law of contract for both licensor and licensee, which they may rely on for the normal remedies for breach of contract in the event of a failure to carry out the terms of the licence. It is also now clear that with other contracts, an injunction of specific performance can be obtained. A proprietary Estoppel Licence An estoppel licence may arise out of a successful plea of proprietary estoppel. This arises from a plea made by a person claiming that they have an interest in land or a right to use land for a purpose. A licence may be granted to the claimant as in Binions v Evans [1972] Ch. 359 in order for justice between the parties. Personal Rights Is a contractual licence an “interest in land” so that it may bind a purchaser of land in the normal way according to established principles? Over a number of years from the 1960s onwards the courts seemed to be developing the notion that a contractual licence were proprietary rights, however this wasn’t the case, other rights in rem (e. leases, life interests, and easements) where merely being miss-identified as contractual licences. The view that licences where not proprietary in nature was finally made clear in Lloyd v Dugdale [2001] EWCA Civ 1754 Mummery LJ in Lloyd v Dugdale [2001] EWCA Civ 1754, who stated “Notwithstanding some previous authority suggesting the contrary, a contractual licence is not to be treated as creating a proprietary interest in land so as to bind third parties who acquire the land with notice of it.” The effect of Licences on Third Parties Even if contractual licences are not interests in land, can they take effect against a purchaser of the licensors land for any other reason? Licences cannot bind third parties who purchase the licensor’s land, however licences can take effect against the purchaser if it is possible to impose a constructive trust on that purchaser, Re Sharpe [1980] 1 W.L. 219. This can only happen in very limited circumstances and is personal to the individual whose conscience is bound, and would not effect a second or third purchaser. The revocation of a Licence It is clear that there are many situations where licenses can be granted, especially given they can be implicit and oral. Without this, there would be many situations where a person – be it the postman, doorto-door sellers, or even neighbours – would be trespassing on your land. However, this is not to say there is no limit to the grant of a bare licence, and if this is explicit then there is an expectation that licensees adhere to this. However, more often than not, duration is not specified such as when you allow a friend to come into your home. This does not mean they can stay permanently. Because the bare licence is without consideration, it can be revoked at any time. However, this is subject to ‘reasonable delay’ and giving people enough time to vacate the premises so they are not trespassing. It is noted that the law is in confusion over this. In the case of contractual licences, the situation is similar, but more certain. There will often be explicit duration of the licence in your contract, and termination of it with reasonable notice which will be in the implied or express terms of the contract itself. Unlike a bare licence, if one party attempts to terminate the licence prematurely, the normal rules of contract apply – namely, damages for a repudiated contract or requesting specific performance.
Overreaching and licencse
Module: Land law (LAW 1016-0906)
University: University of Hertfordshire
