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Contents...

1

Pre-Contract Searches and Enquiries.............................................................. 6

6

Adverse Possession......................................................................................................... 38

7

Law Society Practice Note on Vulnerable Clients................................. 40

1.2.1 - Generally, a representation arises in several situations, including:....................... 8

8

Update on Towns and Village Greens............................................................. 42

1.2.2 - Fraud Act 2006............................................................................................................. 8

R (on the application of Newhaven Port and Properties Ltd) v East Sussex County

1.2.3 - Thorp v Abbotts [2015] EWHC 2142 (Ch).................................................................. 8

Council [2015] UKSC 7............................................................................................................ 42

The Court’s Stance on Question 3.1 of the SPIF.................................................................. 10

Implied Licence?.................................................................................................................... 42

The Court’s Observations on Question 3.2 of the SPIF........................................................ 10

Incompatible Statutory Function.......................................................................................... 43

1.1 - Local Search: Background to the Chesterton Case.................................................. 6

1.1.1 - Chesterton Commercial (Oxon) Ltd v Oxfordshire County Council [2015]

1.2 - Misrepresentation: Background Note to Thorp v Abbotts......................................... 8

2

9

Latest Cases on Remortgages................................................................................ 12

Notices to Complete...................................................................................................... 44

2.1 - Extent of Professional Undertaking: Aldermore Bank plc v Rana [2015]

Background Note to Hakimzay............................................................................................. 44

2.2 - Duty to Report to Lender: E.Surv Ltd v Goldsmith Williams Solicitors [2015]

Hakimzay Ltd v Swailes [2015] EWHC B14 (Ch)................................................................... 44

EWCA 1147.............................................................................................................................. 14

The Contribution Sought........................................................................................................ 14

10 Some Key Recent Changes to Lenders’ Handbook............................ 46

Relevant Provisions of the Lenders’ Handbook................................................................... 14

10.1 - Valuation....................................................................................................................... 46

2.3 - Undertaking to Procure Execution of Legal Charge: LSC Finance Ltd v

10.2 - Planning......................................................................................................................... 46

Abensons Law Ltd (t/a Abensons Solicitors) [2015] EWHC 1163 (Ch)............................... 18

10.3 - Restrictive Covenants.................................................................................................. 47

Application for permission to appeal to the Court of Appeal is to be heard by 2

10.4 - Leasehold Property...................................................................................................... 47

February 2016.......................................................................................................................... 18

10.5 - Insurance....................................................................................................................... 47

Scope of Solicitor’s Undertaking........................................................................................... 18

10.7 - Easements..................................................................................................................... 48

Duty of Care in Tort Owed?................................................................................................... 20

3

11 Update on Property Taxes.......................................................................................... 50

The Latest on Rights of Way....................................................................................... 22

11.1 - Rent-a-Room Relief...................................................................................................... 50

3.1 - Miscellaneous Issues: Bradley v Heslin [2014] EWHC 3267 (Ch)................................. 22

11.2 - The Finance Bill 2015 and Buy-to-Let Landlords........................................................ 50

3.2 - Background to Page v Convoy Investments Ltd........................................................ 22

11.3 - Other Government Announcements........................................................................ 50

3.2.1 - The Sisters of the Sacred Heart of Mary Ltd and others v Kingston Borough

11.4 - The 2015 Autumn Statement and Changes to Property Taxation.......................... 51

Council [2007] EWHC 563 (Ch)............................................................................................. 22

3.2.2 - Avon Estates Ltd v Evans and another [2013] EWHC 1635 (Ch)............................ 24

12 Update on Long Residential Leases................................................................... 54

3.2.3 - Page v Convoy Investments Ltd [2015] EWCA Civ 1061......................................... 26

Issue 1: The Installation of Electronic Gates......................................................................... 26

LRA/123/2012.......................................................................................................................... 54

Issue 2: The Dispute over the Exception and Reservation of Boundary Structure........... 27

Extent of the Demised Premises: Castle Rock 2002 Management Limited v

3.3 - Background Note to the Hoyl Case & Estoppel......................................................... 27

Jeffery [2014] UKUT 0400 (LC), LRX/29/2013......................................................................... 54

3.3.3 - Hoyl Group Ltd v Cromer Town Council [2015] EWCA Civ 782.............................. 28

The Main Issue in this Case..................................................................................................... 55

3.4 - Property Boundaries (Resolution of Disputes) Bill........................................................ 30

12.3 - Breach of Carpeting Covenant: Forest House Estates Ltd v Al-Harthi [2013]

(a) Application of this Act to existing proceedings............................................................ 30

UKUT 0479 (LC), LRX/148/2012............................................................................................... 56

(b) Procedure where a boundary dispute has arisen but no court proceedings

The Tribunal’s Determination................................................................................................. 56

have been commenced between adjoining owners of land.......................................... 30

(c) Section 5............................................................................................................................ 30

Right of entry........................................................................................................................... 31

Permitted User: Burchell v Raj Properties Limited [2013] UKUT 0443 (LC),

4

The Latest on Boundary Agreements............................................................... 32

4.1 Background Note for Nata lee Ltd v Abid..................................................................... 32

4.1.1 - Neilson v Poole (1969) 20 P&CR 909.......................................................................... 32

4.1.4 - Nata lee Ltd v Abid [2014] EWCA 1562.................................................................... 33

5

Distinguishing the Legal Estate and the Beneficial Interest........... 34

5.1 - Background to the O’Kelly Case.................................................................................. 24

5.1.4 - O’Kelly v Davies [2014] EWCA Civ 1606.................................................................... 34

5.2 - Background to Bagum v Hafiz...................................................................................... 35

5.2.1 - Bagum v Hafiz [2015] EWCA Civ 801......................................................................... 36

The Facts.................................................................................................................................. 36

Was the Judge Correct?....................................................................................................... 37

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Section 1 Pre-Contract Searches and Enquiries

1.1

Local Search: Background to the Chesterton Case

Contrast Gooden v Northamptonshire County Council [2001] EWCA Civ 1744, where the Court of Appeal found that the local authority had not been negligent when it stated in a local search that a footway was maintainable at public expense.

This was disastrous for the purchaser who had bought land for development in reliance upon that answer. The footway was in fact privately owned and the development land did not have a right of way over it.

The Court of Appeal clarified that the fact that the reply was incorrect and did not accord with other information in the Council’s possession did not mean that it was negligently given.

1.1.1

Chesterton Commercial (Oxon) Ltd v Oxfordshire County Council [2015]

EWHC 2020 (Ch)

This case concerned the duty of the local authority when responding to a question in a local search.

The Claimant had acquired land, which included car parking spaces, for the purpose of carrying a residential development thereon. In doing so, it had relied on the local search, which in error indicated that the said spaces were not maintainable as a highway.

The Court in this case made the following findings –

•

The Defendant owed the Claimant a duty of care at common law with

respect to its reply to enquiries for the purpose of the decision which the

Claimant made to acquire the Properties.

•

It was negligent of the Defendant council to give an unequivocal reply

that the land that Chesterton had earmarked for development was not

highway maintainable at public expense. On the facts, it simply should

have said that the matter was under investigation, as it had been for some

time in order to establish whether that was indeed the case.

The result of the search amounted to a statement by the Defendant that

•

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the car parking spaces were not part of the highway and not

maintainable at public expense but were private land.

Given that the Defendant was not told that the Claimant was buying to

•

redevelop and sell, any measure of loss which would have imported a loss

of development profit was too remote to be recoverable.

1.2

Misrepresentation: Background Note to Thorp v Abbotts

1.2.1

Generally, a representation arises in several situations, including:

•

During a conversation between seller and buyer,

•

In correspondence through the parties’ solicitors,

•

Statements made by the seller’s agent, with or without the latter’s actual

authority, or

•

1.2.2

In replies to pre-contract enquiries.

Fraud Act 2006

The Act introduces the offences of fraud by false representation, fraud by failing to disclose information, and fraud by abuse of position.

Fraud by false representation consists of a person:

(a) dishonestly making a false representation; with

(b) intention, by making the representation, either (i) to make a gain for

himself or another, or (ii) to cause loss to another or to expose another to a

risk of loss.

“Representation” means any representation as to fact or law, including a representation as to the state of mind of the person making the representation or of any other person.

Furthermore, a representation may be express or implied.

1.2.3

Thorp v Abbotts [2015] EWHC 2142 (Ch)

The alleged misrepresentations consisted of negative answers to the following questions in the 2007 version of the Seller’s Property Information Form (“SPIF”).

“3.1 Has the seller either sent or received any communication or notices

which in any way affect the property (for example from or to neighbours,

the council or a government department)? If yes, please supply a copy.

3.2 Has the seller had any negotiations or discussions with any neighbour

or any local or other authority affecting the property in any way? If yes,

please give details.”

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This note considers the court’s interpretation of these questions on the SPIF. However, it does not examine the detailed facts of the case (which are set out at paragraphs 2 to 40) or the manner in which the court’s interpretation of the form was applied to those facts (in paragraphs 61 to 69 of that judgment).

The Court’s Stance on Question 3.1 of the SPIF

(i)

Question 3.1 seeks to identify the point at which such future possibilities

should be disclosed as that at which a “notice or communication” has

been given which “affects the property”. Both suggest a degree of

certainty of intention to do something sufficient to give some formal

warning of it to the owner of a property that will be affected.

In the case of a notice the delivery of the notice may itself produce an

(ii)

effect on the property (such as increasing the rent payable). But in most

cases (whether of matters best described as notices or communications) it

will be a notification of something that will or may happen in future which

will affect the property only if and when it happens. In such cases for the

communication itself to “affect” the property must mean that it is a step

taken towards implementing some act or intention which will have an

effect on the property, and one which indicates a present real likelihood

that the event will happen.

(iii) This in turn means that it must be a notice or communication from

someone (not necessarily a neighbour) who is proposing to take some

action, or from some regulatory body responsible for authorising or

permitting that action.

The Court’s Observations on Question 3.2 of the SPIF The Court held that –

(i)

The references to “neighbours” in the form (and more specifically

in question 3.2) relate to owners of property that is either immediately

adjoining the property being sold or has some shared service or right with

it or is so close that something done on their property may affect the use

and occupation of the sale property.

(ii)

The reference to “negotiations or discussions” with a neighbour or local or

other authority affecting the property is aimed at circumstances in which

there is some proposal or intention to do something that would affect the

property, and the negotiations or discussions are with either the person

whose proposal or intention it is or an authority in a position to authorise or

permit it to happen.

10

(iii) Whether a communication or discussion about some possible future event

itself “affects” the property also depends both on the nature of the future

event and on the degree of probability that it will occur, assessed at the

time of the representation.

(iv) “Affecting the property” requires that the possible future event will if it

happens have some effect on the property itself, or the use or enjoyment

of it.

A possible effect on its value would not be enough on its own.

[Note: A decision as to whether to allow an appeal to the Court of Appeal is expected to be made in April 2016.

Moreover, the 3rd edition of the SPIF combines elements of 3.1 and 3.2 in the following question:

“Have any notices or correspondence been received or sent (e.g.

from or to a neighbour, council or government department), or any

negotiations or discussions taken place, which affect the property or a

property nearby? If Yes, please give details”.]

11

Section 2 Latest Cases on Remortgages

2.1.

Extent of Professional Undertaking: Aldermore Bank plc v Rana [2015]

EWCA Civ 1210

The Defendant (Mr Rana) applied to the claimant bank for a remortgage on three properties. The remortgage was to occur simultaneously with the transfer of the properties to the Defendant by his sister.

The bank instructed Kuits in accordance with the CML Lenders’ Handbook. The Defendant instructed Austin Law (AL) to act for him.

AL gave undertakings to Kuits to “act as your agents on completion” in accordance with the latter’s specific instructions and to procure the discharge of the existing charges in favour of Clydesdale Bank. However, AL misappropriated more than £2 million of the mortgage advance.

The Law Society Compensation Fund paid £1.796m to the Bank, but there was still a shortfall of £368,000 which the Bank sought to recover from the Defendant, together with interest.

Clause 5.8 (now clause 5.12.1) of the CML Handbook stated that

“On completion, we require a fully enforceable first charge by way of

legal mortgage over the property executed by all owners of the legal

estate. All existing charges must be redeemed on or before completion,

unless we agree that an existing charge may be postponed to rank after

our mortgage. Our standard deed or form of postponement must be

used.”

Clause 10.3 of the CML Handbook (which is broadly replicated in the current clauses 10.4 and 10.7) read –

“You are only authorised to release the loan when you hold sufficient funds

to complete the purchase of the property and pay all stamp duties and

registration fees to perfect the security as a first legal mortgage or, if you

do not have them, you accept responsibility to pay them yourself. You

must hold the loan on trust for us until completion. If completion is

delayed, you must return it to us when and how we tell you (see part 2).”

12

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The Court of Appeal held that

•

Under the terms on which Kuits sent the mortgage monies to Austin Law,

the borrower’s solicitors held the mortgage advance on trust for the Bank

as Kuits’ agents until the mortgage transaction was completed.

Austin Law did not receive the Bank’s mortgage advance as Mr Rana’s

•

solicitors.

•

It was impossible to construe Kuit’s instructions as giving Austin Law

authority to release any of the mortgage advance other than for the

purpose of redeeming the Clydesdale charges.

Moreover, clause 5.8 of the CML Handbook required all existing charges

•

to be redeemed on or before completion, so that the claimant bank

would obtain a first legal charge. There was nothing in the terms of the

contract or the instructions to the solicitors to displace this obligation in the

present case.

2.2

Duty to Report to Lender: E.Surv Ltd v Goldsmith Williams Solicitors [2015]

EWCA 1147 The Contribution Sought The claimant surveyors valued a property at £725,000 and The Mortgage Business, in reliance on this valuation, approved a loan of £580,000 by way of remortgage that had been sought by the owner of the property. The mortgage offer was issued on 26 January 2006 and the remortgage was completed on 13 February 2006.

The property’s owner had apparently informed the surveyors that he had bought the property six years earlier for £600,000. However, the said owner had been the registered proprietor for less than 6 months, having bought the property in September 2005 for £390,000. This information had not been brought to the lender’s attention pre-completion, as required by the Lenders’ Handbook.

The surveyors had already paid £200,000 in settlement of the lender’s claim against them in respect of the negligent over-valuation.

They in turn sought contribution, under the Civil Liability (Contribution) Act 1978, from the defendant solicitors.

Relevant Provisions of the Lenders’ Handbook Clauses 1.3 and 5.1.2 of the Handbook reads as follows –

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“1.3 The Lenders’ Handbook does not affect any responsibilities you have

to us under the general law or any practice rule or guidance issued by

your professional body from time to time.

“5.1.2 If any matter comes to the attention of the fee earner dealing with

the transaction which you should reasonably expect us to consider

important in deciding whether or not to lend to the borrower (such as

whether the borrower has given misleading information to us or the

information which you might reasonably expect to have been given to us

is no longer true) and you are unable to disclose that information to

us because of a conflict of interest, you must cease to act for us and

return our Instructions stating that you consider a conflict of interest has

arisen.”

[Note: Clause 5.1.2 is broadly replicated by clause 5.3.1 (as at 30 November 2015), though the current version of the clause is stated to be inapplicable in cases where the conveyancer is acting in accordance with Part 3 – ‘Separate Representation Standard Instructions’.]

The Court of Appeal held

•

The Bowerman duty is neither excluded by, nor is inconsistent with, the

terms of the Solicitors’ retainer, as contained in the CML’s Handbook.

•

Clause 1.3 of the Handbook is inconsistent with its provisions being a

comprehensive and exclusive statement of the solicitors’ responsibilities.

•

Clause 5.1.2 does not require the solicitor instructed on the terms of the

CML Handbook to carry out any work that was outside the scope of his

instructions. It was only if, while carrying out that work, he came into

possession of non-confidential information that a reasonably competent

solicitor would realise adversely affected the title to the mortgage

property or the value of the security that he was under a duty to report it

to the lender.

The examples given in parenthesis in clause 5.1.2 were not exhaustive of

•

the conveyancer’s reporting duty.

The Solicitors in this case had breached the Bowerman duty, as a

•

reasonably competent solicitor would have realised that the date and

price paid for the property in September 2005 strongly suggested that the

valuation was greatly excessive.

However, the surveyors failed to prove that the lender would have

•

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the purchase price and date of purchase of the property, which was not

materially different from the information given to them by the borrower.

Therefore, the Solicitors won the appeal on the issue of causation.

2.3

Undertaking to Procure Execution of Legal Charge: LSC Finance Ltd v

Abensons Law Ltd (t/a Abensons Solicitors) [2015] EWHC 1163 (Ch)

Application for permission to appeal to the Court of Appeal is to be heard by 2 February 2016.

LSC is a commercial lender that provided a loan in the sum of £169,000 to one of Abensons’ purported clients, known as Mrs Gail Ann Boddice, and which was intended to be secured by (1) a legal mortgage over a residential buy-tolet property in Congleton, which was to be executed by the sole proprietor, Mrs Boddice, and (2) a personal guarantee from Mrs Bodice’s husband, Richard Boddice.

In March 2013, the property was transferred from Mr and Mrs Boddice into Mrs Boddice’s sole name in March 2013.

The said loan was released by LSC to Abensons on 1 July, and transferred by Abensons into a joint account at Barclays in the names of Mr and Mrs Boddice on 2 July 2013. However, the envisaged security was not effected, apparently because of a mortgage fraud perpetrated, most probably, by Mr Boddice. The charge which was executed by an imposter impersonating Mrs Boddice. There was no suggestion that Abensons were knowingly involved in any way in setting up the mortgage fraud.

The purported signature of Mrs Boddice on the charge document had not been witnessed by the solicitor or at the solicitor’s offices.

Scope of Solicitor’s Undertaking The High Court found that –

(i)

On the true construction of the undertaking, Abensons undertook that

they would hold an original, validly executed security by Mrs Boddice, and

not by merely by someone purporting to be Mrs Boddice.

The risk of imposture was one which Abensons assumed, rather than it

(ii)

falling upon LSC as the lender.

(iii) Once the undertaking was construed in that way, it was clear that

Abensons should also be taken to have been warranting that they

were duly authorised to act, not simply for a person purporting to be Mrs

Boddice, but warranting that they were actually acting for the Mrs

18

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Boddice who was the registered proprietor of the property being offered

by way of security.

(iv) For those reasons, the claims for breach of undertaking and breach of

warranty of authority against Abensons were made out.

Duty of Care in Tort Owed?

The High Court further held that –

(i)

Abensons had owed a duty of care in tort towards LSC and had

breached that duty.

LSC, through their solicitors, clearly and reasonably relied on the

(ii)

Abensons’ undertakings in releasing the monies to Abensons for onward

release to Abensons’ perceived client.

(iii) In those circumstances, Abensons assumed responsibility for the accuracy

of the undertaking.

(iv) The said duty of care was clearly breached in relation to Abensons’ failure

properly to verify the execution of the sole legal charge from Mrs Boddice.

20

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Section 3 The Latest on Rights of Way

3.1

Miscellaneous Issues: Bradley v Heslin [2014] EWHC 3267 (Ch)

The High Court in this case

•

Ruled that the right to hang and close a gate over the land forming a driveway is a right capable of being an easement that accommodates a

dominant tenement.

•

Acknowledged that the construction of gates across a driveway is

capable of being a substantial interference with the rights of those

entitled to use it.

In order to claim a prescriptive easement, the user does not have to be

•

continuous throughout the relevant 20-year period. Relying on White v

Taylor (No2) [1969] 1 Ch 160 at 192 per Buckley J cited in Polo Woods

Foundation v Shelton-Agar [2009] EWHC 1361, the Court held that regular

intermittent user would suffice provided that such intermittent user had

“such character, degree and frequency as to indicate the assertion of a

continuous right, and of a right of the measure of that claimed.”

3.2

Background to Page v Convoy Investments Ltd

3.2.1

The Sisters of the Sacred Heart of Mary Ltd and others v Kingston Borough

Council [2007] EWHC 563 (Ch),

In this case, the Claimants enjoyed the benefit of a statutory right of way over a private road in the following terms:

“The owner and the occupier of any premises fronting or abutting on any

of the said roads ... and any other person with his permission shall for the

purpose of going to or departing from such premises have the right of

using with or without vehicles such of the said roads as may be convenient

for that purpose but save as aforesaid the said roads shall remain private

roads and no person except with the consent of the Council shall have

any right of way or passage thereon or thereover...”

22

23

Under the relevant statute (which is not considered in this note), the

Council had power to “maintain repair cleanse and scavenge the said

roads in such manner and to such extent and erect and maintain gates

stiles or posts thereon in such positions as they may from time to time

determine...”

The Council proposed to control entry to the private road by an unmanned code-operated barrier. The purpose of this measure would have been to prevent unauthorised vehicle drivers using the road as through-routes or shortcuts to and from adjacent busy public roads, especially during periods of traffic congestion.

The High Court agreed with the Claimants that the proposal would have substantially interfered with their right of way, primarily because such a barrier would have stopped or impeded large categories of authorised visitors who were unaware of the code or could not readily ascertain it, with consequent inconvenience, disruption and prejudice to both the Claimants and those visitors. Therefore, they were granted an injunction preventing erection of the code-operated barrier.

Interestingly, there had been no objection to the creation of a manned barrier.

3.2.2

Avon Estates Ltd v Evans and another [2013] EWHC 1635 (Ch)

In this case, David Cooke J rejected the contention that the T marks on the plan attached to a 1955 conveyance indicated that the boundary feature, in this case a hedge, was intended to be owned by the owners of the land on the site on which the T marks appeared.

He also said

“[31] In my judgment, there is no single meaning or default meaning

established by the evidence or authority that can be attached to T

marks where a meaning cannot be ascertained by reference to the body

of the conveyance or other admissible material. It may well be that the

parties to the 1955 conveyance subjectively intended some meaning to

be attached, but if they did, given the range of possibilities as to what

it might be and the absence of any evidence to enable the court to

identify what their intention might have been, that intention has not been

carried into effect.”

24

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3.2.3

Page v Convoy Investments Ltd [2015] EWCA Civ 1061

Issue 1: The Installation of Electronic Gates In September 2000, Mr Page had acquired a plot of farm land (‘lot 1’) at auction, with the benefit of a right of way in the following terms (as far as material)

“13.2

The Property is transferred together with the benefit of a right of

way for agricultural purposes only with or without agricultural vehicles of all

descriptions at all times over and along so much of the roadway coloured

brown on the annexed plan as is necessary in the exercise of such right for

the purpose of gaining access to and egress from the Property from and

to Swithland Road …” [which was the public highway]

The roadway was marked on the plan with brown colouring and at the time of the grant it was metalled. The Court made findings about the physical extent of the metalled roadway as it had stood at the date of grant (which are beyond the scope of this note).

The Court of Appeal considered whether the installation of electronic gates after the grant of this right of way constituted a substantial interference with Mr Page’s exercise of that right. The Court of Appeal determined that Mr Page was entitled to require that the gates be kept open.

Sir Timothy Lloyd, with whom King and Tomlinson LLJ agreed, said that

“46. I can see that, if a right of way in such terms as those of clause 13.2

in the present case were granted over a roadway which, at the time, was

capable of being, and was from time to time, closed by manually

operated gates, it might not be open to the grantee of the easement

to assert that the existence and normal use of those gates constituted a

substantial interference with his right of way. That, however, is not the

present case. At the time of the conveyance there were no practicable

gates. If the servient owner chose to install or reinstate manually operated

gates, the issue would be whether those gates, as constructed and used,

would themselves constitute a substantial interference with the exercise of

the right of way. It may be that they would not have done.

47. If, instead, the servient owner chooses to install electronic gates the

question should be the same, and should start from the same point: a

comparison between the position with the given gates installed and in

operation, and the previous position without gates in place. …”

26

Issue 2: The Dispute over the Exception and Reservation of Boundary Structure The sale of the lot 1 to Mr Page was subject to an exception and reservation in the following terms (as far as material):

“13.4 There is excepted and reserved out of the Property … the whole

of the boundary structure shown on the annexed plan and marked “T”

outwards on the north-western boundary of the Property (so far as the

same is co-extensive with the said adjoining land) …”

However, no T mark appeared on the relevant part of the plan.

It was not in dispute that a conveyance is to be construed as a whole and in the light of all relevant surrounding circumstances, including the physical condition of the relevant land at the time.

The Court of Appeal held that –

•

The omission of the T mark was a deficiency resulting from an error which

could be corrected as a matter of construction. There was equally no

doubt how that error should be corrected.

Therefore, the boundary structure referred to in clause 13.4 was a white

•

fence, as it existed in September 2000.

An old aerial photograph (taken before 2000) showed the position of the white fence, and that there was an opening which was used by vehicles getting access between the barn (that formed part of the land retained by the Transferor in 2000) and the field that later became lot 1.

Mr Page removed part of the fence soon after his purchase, so that vehicles getting access to lot 1 did not have to drive far beyond the entrance. The Court of Appeal held that the terms of clause 13.4 did not entitle Mr Page to take down any part of the fence in 2000 so as to open up a new access to his field.

Therefore, Convoy (the successor in title to the Transferor) was entitled to require Mr Page to reinstate the gap in the fence which he made near the entrance, or to reinstate it itself, so that he could not have access to his field at that point.

3.3

Background Note to the Hoyl Case & Estoppel

3.3.1 In Taylors Fashions Ltd v Liverpool Victoria Trustees Co. Ltd [1981] 1 All ER 897 Oliver LJ defined a proprietary estoppel arising from a common expectation by reference to the following principle:

27

“if A under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a court of equity will compel B to give effect to such expectation.”

In Stack v Dowden [2007] UKHL 17, Lord Walker of Gestingthorpe held that a proprietary estoppel has to be satisfied by “the minimum award necessary to do justice” See also Yeoman’s Row Management Ltd v Cobbe [2008] UKHL 55.

3.3.2 In Joyce v Epsom and Ewell Borough Council [2012] EWCA Civ 1398, the Court of Appeal ruled that the equity of the situation required that a Mr Holborn had (and in consequence the Claimant as his successor had) a right of way over an access strip; and it would have been unconscionable for the Council to resile from its encouragement and assurance to that effect given at the time and on which Mr Holborn had relied to his detriment. The successful claim was founded on proprietary estoppel. However, such right of way was limited to serving a single house on the property.

3.3.3

Hoyl Group Ltd v Cromer Town Council [2015] EWCA Civ 782

The issue in the appeal was whether the claimant/respondent Hoyl Group Limited (“Hoyl”) was entitled to a right of way over land owned by the appellant, Cromer Town Council (“Cromer”) arising by virtue of on the equitable doctrine of proprietary estoppel.

In 2006, Hoyl agreed to take a 21-year lease of an upper floor (not the ground floor) as an office.

Shortly afterwards the parties also agreed that Cromer would grant Hoyl a 99 year lease of the basement which Hoyl would then convert into a residential apartment.

The lease was granted on 24 August 2007.

At the date of the lease (presumably the lease granted for 99 years) the basement rooms could be accessed by an internal door reached via an internal staircase from the hall of the building. This was referred to as “the internal access”, which would have entailed going in through the main public entrance on the ground floor.

By October 2007, Hoyl had reconsidered its plans for conversion of the basement, so that under its “Plan B”, the garden access would provide the main entry and the car park access would provide the emergency fire exit. On 2 October 2007, Cromer had given Hoyl temporary permission to gain access to the basement rooms via the internal access.

28

Cromer by Licence for Alterations granted in 2008 had approved plan B. However, the only right of way granted by the lease was to the front, up the drive to the car park. Therefore, it did not grant a right of way over the “garden access” (which would have comprised access across the garden and out through the ‘entrance’ gate in the wall near the north east corner of the garden).

In August 2012 Hoyl surrendered its lease of the upper floor. In September 2012 it blocked up the internal access. In late 2012 Hoyl placed the flat on the market and found a purchaser. The purchaser was, however, concerned that no formal right of way had been granted by the lease via the garden access.

The county court judge had held that Hoyl was entitled to use right of way, namely the garden access, relying on the equitable doctrine of proprietary estoppel.

The Court of Appeal –

(1)

Accepted that it was necessary for Hoyl to show that they believed that

they had or would have a right of way via the garden access.

(2)

Refused to interfere with the judge’s findings that Hoyl had such a belief;

and was encouraged so to believe by the combined effects of the overt

acts by Cromer, coupled with its silence on the issue of what was to

happen when the internal door was closed.

Considered that authority had established that a proprietary estoppel

(3)

does not have to fit neatly into the pure acquiescence-based pigeon hole

or the assurance one. Therefore, if silence and inactivity could themselves

be the necessary assurance, they were surely not to be ignored altogether

in a case which had elements of encouragement as well.

Found that the judge had been correct to conclude that two matters

(4)

constituted detrimental reliance: the construction of the flat in

accordance with Plan B and the blocking up of the internal door.

These acts of detrimental reliance were done in the belief that Hoyl had a

right of way through the garden. They were activities which Cromer knew

about and encouraged, as the judge found.

Accordingly, it was unconscionable for Cromer to approve and

(5)

encourage the construction according to Plan B, which both parties

recognised was only consistent with a right of way through the garden,

and then to refuse to recognise it when Hoyl called upon them to do so.

29

3.4

Property Boundaries (Resolution of Disputes) Bill

The Property Boundaries (Resolution of Disputes) Bill describes itself as

“A BILL TO

Make provision for the resolution of disputes concerning the location or

placement of the boundaries and private rights of way relating to the title

of an estate in land; and for connected purposes.”

This note summarises key aspects of the Bill

(a) Application of this Act to existing proceedings

The effect of sections 1, 2 and 5 is that where lands of different freehold owners adjoin and a dispute has arisen between the owners as to the location of the exact line of the boundary between the lands or the location and extent of a private right of way; then all existing claims and proceedings in respect of the claim that are of the type listed in sub-clauses (a), (b) or (c), shall be stayed automatically and shall be determined in accordance with section 5.

(b) Procedure where a boundary dispute has arisen but no court proceedings

have been commenced between adjoining owners of land

Where an owner of freehold land (“the owner of land”) wishes to establish the position of a boundary or the location and extent of a private right of way he must follow the procedure set out in section 3. This procedure consists of –

(i)

The owner of land serving notice under section 3(2) on the adjoining

owner or user of the private right of way (“the adjoining owner”)

accompanied by a plan identifying, inter alia, the exact line of the

boundary or extent of the private right of way claimed; and

If within the period of 14 days the adjoining owner objects to the claim or

(ii)

fails to respond, the dispute shall be determined in accordance with

section 5.

(c) Section 5

Section 5 requires the dispute to be resolved through

a)

(b) three surveyors, two of whom act separately for each party and the third

one surveyor appointed by the parties (an “agreed surveyor”); or

who is chosen by those two surveyors.

The agreed surveyor or (as the case may be) the three surveyors or any two of them shall settle by award 30

(a) the precise location of the boundary or location and extent of the private

right of way which shall be shown on a dimensioned plan in a form

acceptable to the Land Registry;

(b) the extent to which any building, structure or other erection constructed

on the land of one owner extends beyond the boundary onto, over or

under the land of the other; and

(c) the costs of making the award.

The award shall be conclusive and shall not except as provided by this section be questioned in any court.

Either of the parties to the dispute may, within the period of 28 days beginning with the day on which an award made under this section is served on him, appeal to the Technology and Construction Court against the award.

Right of entry Section 7 prescribes the procedure to be followed by a surveyor appointed or selected under section 5 or his authorised agent to enter the land for the purpose of carrying out the objective for which he is appointed or selected.

Section 8 requires the Secretary of State by regulations to approve a Code of Practice (“the Code�), which specifies best practice in the preparation of plans and other documents specified in this Act and the form and manner in which notice must be served under section 3(2). Parties to any disputes to which this Act applies must comply with the provisions of the Code.

There are exceptions in case of land owned by Inns of Court or by the Crown: see sections 11 and 12.

This Act will extend to England and Wales.

31

Section 4 The Latest on Boundary Agreements

4.1

Background Note for Nata lee Ltd v Abid

4.1.1

Neilson v Poole (1969) 20 P&CR 909

According to the Court of Appeal in Joyce v Rigolli [2004] EWCA Civ 79, the leading authority on boundary agreements is Neilson v Poole (1969) 20 P & CR 909.

In the Neilson case, Megarry J distinguished between boundary agreements that constitute an exchange of land and those by which the parties merely intend to “demarcate” or “identify” an unclear boundary referred to in title documents. A boundary agreement is to be presumed to fall into the latter category. The latter class of agreements has as their purpose the identification of a boundary, not the conveyance of land. Accordingly, such agreements are contracts to convey or create a legal estate.

Megarry J further held that a boundary agreement that merely ‘demarcates’ is an agreement that is ancillary to the conveyance; it does not supersede it.

4.1.2 An agreement to demarcate an unclear boundary is binding on the parties and (apparently) on their successors in title without the need for a written agreement: Haycocks v Neville [2007] EWCA Civ 78.

The Court did not address the issue of whether successors in title would be bound by such an agreement if it had not been brought to their attention when or before they purchased.

4.1.3 Given that an agreement to clarify a boundary is not a contract to convey, the provisions in s 2(1) Law of Property (Miscellaneous Provisions) Act 1989 are not applicable to such an agreement: Joyce v Rigolli [2004] EWCA Civ 79.

(Simply stated, section 2(1) requires contracts for the disposition of an interest in land to be in writing, to contain all terms agreed between the parties, and for each part of the contract to be identical in all material respects.]

32

4.1.4

Nata lee Ltd v Abid [2014] EWCA 1562

The dispute arose out of the alleged variation of the boundary between two properties by virtue of an informal, oral agreement under which the claimants’ and defendants’ predecessors in title acquired a small, but significant, three-metre slice of the neighbouring land.

The two adjoining properties were referred to as “No. 99” and “No. 105”.

The boundary line between the two properties was originally created by a transfer of no. 105 out of common ownership dated 1963, by reference to a plan.

The Court of Appeal ruled:

1.

Taking Neilson and Rigolli together, there is a real difference between an

agreement, the purpose of which is to move a boundary so as to transfer

land from one neighbour to another, and an agreement the purpose

of which is to define a previously unclear or uncertain boundary, even if

that agreement may involve some conscious transfer of a trivial amount of

land. The former agreement would be subject to the formalities of section

2 Law of Property (Miscellaneous Provisions) Act 1989, whereas the latter

would not.

2.

The agreement in this case fell into the first of those two categories. The

reasons for this conclusion were -

(i)

The judge found that the agreement had been designed to vary

rather than demarcate the existing boundary.

The land thereby transferred by the agreement had not, in the

(ii)

context, been trivial.

(iii) There was no evidence that consideration for the agreement to

transfer the disputed land had been provided by the then owner

of no. 105. If none had been given, then the agreement would have

been without effect for that reason alone.

3.

“In a true boundary demarcation agreement, the consideration is

provided, each way, by the substitution of certainty for uncertainty as to

the boundary, and the relief of both neighbours from the risk of future

dispute.” Per Briggs LJ, with whom Underhill and Moore-Bick LLJ agreed.

4.1.5 HMLR’s Practice Guide 40, supplement 4, was updated in October 2015 order to clarify how the Registrar records boundary agreements in the property registers.

33

Section 5 Distinguishing the Legal Estate and the Beneficial Interest

5.1

Background to the O’Kelly Case

5.1.1 Constructive trusts and resulting trusts are exempt from the provisions of s 2 Law of Property (Miscellaneous Provisions) Act 1989, which regulates the form of contracts for the sale or other disposition of an interest in land. So such trusts can arise even if there is no written documentation embodying its terms.

5.1.2 Traditionally, a constructive trust arose if (i) there was an agreement, arrangement or understanding reached between the parties prior to acquisition (or exceptionally thereafter) that the property was to be shared beneficially; and (ii) the party claiming a beneficial interest acted to their detriment in reliance on the agreement, arrangement or understanding (Lloyds Bank v Rosset [1991] 1 AC 107 HL).

Further reference should be made to Stack v Dowden [2007] UKHL 17 in relation to the law which applies where the legal trustees are also the persons entitled to the beneficial interest under a constructive or resulting trust. Of particular importance in this case was the declaration of a rebuttable presumption that beneficial ownership reflects legal ownership. In a subsequent case, Fowler v Barron [2008] Fam Law 636, CA, the Court of Appeal stressed that the amount of each party’s contribution is not necessarily a critical factor in determining whether the presumption has been rebutted.

The Supreme Court decision in Jones v Kernott [2011] UKSC 53 is also important to the determination of the existence and extent of any constructive trust.

5.1.3 In O’Kelly v Davies, two properties had been transferred by deed from joint transferors into the sole name of the transferee and the subsequent registrations of those transfers operated to vest in the transferee the legal estate to those properties.

However, the Court of Appeal had to determine whether the beneficial interests of the joint transferors therein had been affected by these dispositions.

5.1.4

O’Kelly v Davies [2014] EWCA Civ 1606

A property, ‘no. 42’, was originally purchased in joint names of the appellant and respondent in December 1987 and was their family home. In May 1991, they transferred no. 42 into the sole name of the appellant.

34

In October 2006, the appellant sold no.42 to the respondent, who subsequently let the property to tenants until it was eventually re-possessed.

Simultaneously with the October 2006 sale, the appellant purchased another property, ‘no.74’ from a third party. The parties then lived in no.74 until they separated at the end of 2011.

The Court’s Decision and Reasoning

•

The Court of Appeal upheld that judge’s finding that the appellant held

no.74 on a constructive trust for herself and the respondent in equal

shares. The constructive trust had arisen by virtue of a common intention

to share the beneficial interest in the property. Moreover, no. 74 had been

purchased in the appellant’s sole name because the parties had

intended that she should continue to claim benefits as though she was a

single mother living alone.

The Court of Appeal concurred with the judge that, although the 1991

•

transfer of no. 42 into the sole name of the appellant had, on its face,

been an absolute gift; the parties had nevertheless formed a common

intention as the shares in which the equitable interest was held. Moreover,

the purpose of the May 1991 transfer of equity of no.42 had been to

enable the appellant to make fraudulent benefit claims as a single mother

living alone.

•

The Court further held that although the unlawful purpose may have

explained their conduct, it was the conduct itself in this case that gave

rise to the constructive trust.

5.2

Background to Bagum v Hafiz

The following provisions of the Trusts of Land and Appointment of Trustees Act 1996 (‘TOLATA’) were particularly relevant Section 6, headed General Powers of Trustees, provides:

“(1) For the purpose of exercising their functions as trustees, the trustees

of land have in relation to the land subject to the trust all the powers of an

absolute owner. …

(5) In exercising the powers conferred by this Section, trustees shall have

regard to the rights of the beneficiaries.

(6) The powers conferred by this Section shall not be exercised in

35

contravention of, or of any order made in pursuance of, any other

enactment or any rule of law or equity.”

Section 14, headed Applications for Order, provides as follows:

“(1) Any person who is a trustee of land or has an interest in property

subject to a trust of land may make an application to the court for an

order under this section.

(2) On an application for an order under this section the court may

make any such order

(a) relating to the exercise by the trustees of any of their functions

(including an order relieving them of any obligation to obtain

the consent of, or to consult, any person in connection with the

exercise of any of their functions), or

(b) …”

Section 15 provides as follows:

“(1) The matters to which the court is to have regard in determining an

application for an order under section 14 include –

(a) the intentions of the person or persons (if any) who created the trust,

(b) the purposes for which the property subject to the trust is held,

(c) the welfare of any minor who occupies or might reasonably be

expected to occupy any land subject to the trust as his home, and

(d) the interests of any secured creditor or any beneficiary. …

Sub-section (3) provides, save for irrelevant exceptions, that the matters to which the court is to have regard:

“also include the circumstances and wishes of any beneficiaries of full age

and entitled to an interest in possession in property subject to the trust

or (in case of dispute) of the majority (according to the value of their

combined interests).”

5.2.1

Bagum v Hafiz [2015] EWCA Civ 801

The Facts The property in question comprised a four-bedroomed house, owned as tenants in common in three equal shares by the claimant, Mrs. Bagum, and her two sons, the defendants Mr. Hafiz and Mr. Hai. 36

The county court judge had concluded that she had no jurisdiction to make an order sought by Mrs. Bagum for the purchase by Mr. Hafiz of Mr. Hai’s one-third beneficial interest in the Property. However, she did make an order directing the trustees to sell the Property, upon terms that Mr. Hafiz should first have the opportunity to buy it for a price determined upon valuation evidence by the court, failing which (within six weeks of that determination) the Property should be sold on the open market, with liberty for all the beneficial owners to bid.

Was the Judge Correct?

The Court of Appeal upheld the judge’s order as having fallen squarely within her jurisdiction under section 14(2)(a) of TOLATA, for the following reasons –

1.

The court does not have power under section 14 of TOLATA to order or

direct that one beneficiary under a trust of land sell or transfer their

beneficial interest to another beneficiary.

2.

More generally, the clear object and effect of sections 14 and 15 is to

confer upon the court a substantially wider discretion, exercised upon

the basis of wider considerations, than might be enjoyed by the trustees

themselves, acting without either the consent of their beneficiaries or

an order of the court. All this departs from the general rule of equity which

requires the trustees single-mindedly to advance the interests of the

beneficiaries as a class, without preferring some of them over others.

None of this means that the court will act unfairly, unjustly or capriciously

3.

as between beneficiaries in giving directions to trustees under section

14(2). It simply demonstrates that, in exercising its powers in circumstances

where, necessarily, the beneficiaries will be in dispute with each other

about what should be done with the trust property, the court is not rigidly

constrained by those rules of equity which may, pursuant to section 6(6),

constrain the trustees themselves.

37

Section 6 Adverse Possession

The Court in Balevents Ltd v Sartori [2014] EWHC 1164 (Ch) outlined the general legal principles which apply in a case where the court is asked to determine whether a person has been in adverse possession of land.

These principles were stated as follows –

“(1) There is a presumption that the owner of land with a paper title is in

possession of the land.

If a person who does not have the benefit of this presumption wishes

(2)

to show that he is in possession of the land, the burden is on him to show

that he is in factual possession of the land and that he has the requisite

intention to possess the land.

(3) For a person to show that he is in factual possession of the land, he

must show that he has an appropriate degree of physical control of the

land, that his possession is exclusive and that he has dealt with the land

in question as an occupying owner might have been expected to deal

with it and no-one else has done so.

Whether a person has taken a sufficient degree of control of the land is

(4)

a matter of fact, depending on all the circumstances, in particular the

nature of the land and the manner in which such land is commonly

enjoyed.

(5) The person claiming to be in possession may be in possession through

his tenant or licensee, if that tenant or licensee has, on the facts,

sufficient control of the land to amount to factual possession.

The person seeking to show that he has had possession of land must

(6)

show that he had an intention for the time being to possess the land to

the exclusion of all other persons, including the owner with the paper

title.

(7)

The relevant intention is an intention to possess and need not be an

intention to own.

38

(8) The intention to possess must be manifested clearly so that it is apparent

that the person now claiming to have been in possession was not

merely a persistent trespasser.

If the acts relied on are equivocal then they will not demonstrate the

(9)

necessary intention.

(10) It is possible in some cases for a person in possession to add to his

own period of possession, the period of time during which his

predecessor was in possession; this applies in particular where the

predecessor relinquishes possession to a person who then takes

possession.�

See also paragraphs 80 to 85 which outline the procedures for registration of a title by adverse possession before and after the Land Registration Act 2002.

39

Section 7 Law Society Practice Note on Vulnerable Clients

On 2 July 2015, the Law Society published a practice note entitled ‘Meeting the needs of vulnerable clients’.

The following summary sets out parts of the practice note that are likely to be most relevant to conveyancers.

Section 4 is headed ‘Clients who may lack mental capacity’ and examines various issues, such as

•

What is capacity?

•

Mental Capacity Act 2005 - the statutory principles

•

Mental Capacity Act - the legal test for capacity to make decisions

•

Capacity to instruct a solicitor to carry out specific instructions

•

Capacity to make a lifetime gift.

At section 4.6, the Law Society cautions that

“It is for you to decide whether a client has capacity to instruct you and

whether you can accept and act on the client’s instructions. …

You must apply the relevant legal test in respect of each particular

transaction at the time the decision needs to be made.

…

If you are concerned about a client’s capacity, especially in relation to

a decision with serious consequences either for them or other people, it

is advisable to seek the opinion of an appropriately qualified professional.

Where possible, you should choose a professional who knows your client

and has expertise relevant to your client’s condition. …”

Section 4.6.2 contains further guidance on obtaining a medical or other expert opinion.

Section 4.7.1 provides guidance on the circumstances in which a solicitor can take instructions on behalf of a client who lacks capacity. More specific guidance is

40

provided at paragraph 5.3 when taking such instructions from an agent, such as an attorney or deputy.

Section 5.1 and 5.2 highlights the role of carers of vulnerable clients but also highlights that such carers would need formal authority to give instructions or make decisions about the vulnerable person’s property, financial or legal affairs. Such authority might have been conferred by the court or by the client (for example by way of appointment as donee under an EPA or LPA, a litigation friend or deputy).

Section 6.1.1 considers the issue of undue influence in the context of “significant lifetime gifts”, and stresses the importance on the individual affected having their own independent legal advice to circumstances where undue influence is presumed by virtue of

“a relationship of trust and confidence between the client and the

recipient of the gift, … and the proposed gift requires an explanation …”

41

Section 8 Update on Towns and Village Greens

Section 15 Commons Act 2006 sets out the circumstances in which land may be newly registered as a town or village green. For instance, registration may occur where “a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years.”

R (on the application of Newhaven Port and Properties Ltd) v East Sussex County Council [2015] UKSC 7 The Supreme Court decided that Newhaven Beach was not a town or village green.

The application to register the Beach as such had been supported by evidence that the Beach had been used by a significant number of local inhabitants as of right and for a period of at least 20 years down to April 2006.

Implied Licence?

The Supreme Court first had to determine whether an implied licence to use the foreshore of the harbour arose from the Byelaws such that the use was not ‘as of right’.

Lords Neuberger and Hodge, with whom Lady Hale and Lord Sumption agreed, observed at paragraph 23 that –

‘The provisions of s 15 of the 2006 Act only enable land to be registered as

a town or village green if it has been used for recreational and similar

purposes by inhabitants of the locality for more than twenty years “as of

right”. That expression is to be contrasted with “by right”, and generally

connotes user without any right, whether derived from custom and usage,

statute, prescription or express or implied permission of the owner.’

In this case, there was a public law right, derived from statute, for the public to go onto the land and to use it for recreational purposes, and therefore the recreational use of the land in question by inhabitants of the locality was “by right” and not “as of right”.

42

The Supreme Court also held that, given that a byelaw had effectively prohibited swimming in part of the harbour, it would be inconsistent then to reject the contention that the byelaw’s implied permission for swimming elsewhere in the harbour did not operate as a valid licence.

Incompatible Statutory Function By a majority of 4 to 1, the Supreme Court also held that s 15 of the 2006 Act did not enable registration of land as a town or village green if such registration was incompatible with some other statutory function to which the land was to be put.

In this case, there was an incompatibility between the 2006 Act and the statutory regime which conferred harbour powers on Newhaven Port and Properties Ltd (NPP) to operate a working harbour, which was to be open to the public for the shipping of goods etc on payment of rates, pursuant to s 33 of the 1847 Clauses Act.

43

Section 9 Notices to Complete

Background Note to Hakimzay

(a) The purpose of serving a notice to complete is to make time of the

essence of the contract. This is indeed the declared intention of the

Standard Conditions of Sale (SC 6), which follows the open law position

that until such notice is served, time is not of the essence. In other words,

the innocent party cannot rescind the contract on the grounds of the

other party’s failure to complete, unless he or she has duly given to that

other party a valid notice to complete. Indeed, this is also restated in SC

7.4 and 7.5.

(b) SC 6.8.2 stipulates that the notice to complete has to be of ten working

days in length, excluding the date on which it is given.

(c) Standard Condition 6.8.1 which provides that at any time after the time

applicable under condition 6.1.2 on completion date (the contractual

cut-off point), a party who is ready able and willing to complete may give

the other a notice to complete.

Hakimzay Ltd v Swailes [2015] EWHC B14 (Ch) The defendant entered into a contract for the sale of a residential property to the claimant with vacant possession. The contract incorporated the Standard Conditions of Sale, 5th Edition.

On exchange of contracts, the property was subject to a number of assured shorthold tenancies.

The defendant was unable to give vacant possession on the contractual completion date of 3 April 2014 as one of the tenants refused to vacate without a court order.

On 11 April, the claimant’s solicitors gave notice to complete. The claimant did not rescind the contract upon expiry of the notice on 29 April; though it was able, ready and willing to complete on that date.

The tenant vacated the property on 1 May, and on 2 May the claimant’s solicitors wrote requesting that completion takes place on that day.

44

In response, the defendant’s solicitors said that: “... My client wants his local contact to check for vacant possession, reasonable given the history of this matter.

Frustratingly, the agent has just gone abroad on holiday until next Sunday 11 May… I am instructed that he is going to contact [the specified letting agent’s office] on Monday 12 May. If you can kindly ask your client to expect this I hope to have further instructions immediately thereafter.”

On 6 May, the defendant’s Solicitors served a purported ‘Notice to Rescind’ on the claimant’s Solicitors.

The issue in the appeal was whether, after the expiry of the notice to complete on 29 April 2014, time remained of the essence of the contract, so that the failure of the claimant to complete on 2 May constituted a repudiatory breach of contract that entitled the defendant to terminate the contract.

The High Court held that the defendant was not entitled to serve his notice of rescission of the contract, which was accordingly ineffective to bring the contract to an end. Its main reasons for reaching this conclusion were that

(i)

Time does not remain of the essence of the contract for a reasonable

period after the expiration of the notice to complete if no new time has

been fixed.

Therefore, where one party allows the other party to seek to remedy

(ii)

his default after the notice to complete expired (as the claimant did in

this case), neither of them could simply pull the plug on the contract, so to

speak, without fixing a new date that was reasonable in the

circumstances.

(iii) In this case there had been no attempt to specify a further date,

performance by which should have been of the essence of the contract.

Finally, Judge Keyser QC, sitting as a Judge of the High Court, tentatively concluded that in order to specify a further date, performance by which should be of the essence of the contract, a new notice to complete under the contract would have been required. However, if that were not right then, having regard to the contractual provisions and the facts of the case, more than two clear working days’ notice by the defendant would have been required in any event.

45

Section 10 Some Key Recent Changes to Lenders’ Handbook

This part of the yearbook summarises some of the key amendments made recently to the CML Lenders’ Handbook.

10.1

Valuation

The relevant sections on valuation, as far as material, are ‘Check part 2 to see whether we send you a copy of the valuation report or if you must get it from the borrower. If you get a copy of the valuation report from the borrower, we do not expect you to check the content of that report matches the information we hold. For the avoidance of doubt, regardless of where the report is obtained from, you must carry out the checks detailed in sections 4.2 and 4.3”: Clause 4.1 Handbook, December 2014 onwards.

Paragraphs 4.2 and 4.3 require reasonable steps to be taken to verify –

(i)

That there are no discrepancies between the description of the property

as valued and the title and other documents which a reasonably

competent conveyancer should obtain; and

That the assumptions stated by the valuer about the title in the valuation

(ii)

and as stated in the mortgage offer are correct.

10.2

Planning

Clause 5.5.1 refers to breaches of conditions of a planning consent or building regulation approval, as well as any matter which would preclude the property from being used as a residential property.

The December 2014 amendments to the Handbook’s requirements as to planning issues are as follows

“If there is evidence of such a breach or matter but in your professional

judgment there is no reasonable prospect of enforcement action and,

following reasonable enquiries, you are satisfied that the title is good and

marketable and you can provide an unqualified certificate of title, we

will not insist on indemnity insurance and you may proceed.” [This

paragraph was added to 5.5.1 by the December 2014 amendments.]

46

‘If there is such evidence and all outstanding conditions will not be

satisfied by completion, where you are not able to provide an unqualified

certificate of title, you should report this to us in accordance with 2.3.”

5.5.2 Handbook, as amended in December 2014.

10.3

Restrictive Covenants

Paragraph 5.11.1 of the Handbook provides instructions on breaches of restrictive covenants.

“If there is evidence of a breach and, following reasonable enquiries, you

are satisfied that the title is good and marketable; you can provide an

unqualified certificate of title and the breach has continued for more than

20 years without challenge, then we will not insist on indemnity insurance”:

5.11.2 Handbook, as amended in, December 2014.

10.4

Leasehold Property

“Notice of the mortgage must be served on the landlord and any

management company immediately following completion, whether or

not the lease requires it. Please ensure that you can provide either suitable

evidence of the service of notice on the landlord or management

company or a receipt of notice. Check part 2 to see if a receipted copy

of the notice or evidence of service must be sent to us after completion.”

December 2014 update to clause 5.14.13 of the Handbook.

“Amendment to allow either evidence of service of notice on the

landlord or any management company or receipt of notice from the

landlord or management company introduced to recognise the practical

difficulties in obtaining a receipt of notice”: per CML Summary of

Amendments to the Lenders’ Handbook.

10.5

Insurance

Clause 6.14.1 of the Handbook now states that –

“You must make reasonable enquiries to satisfy yourself that buildings

insurance has been arranged for the property from no later than

completion. You should remind the borrower that they:

Must have buildings insurance in accordance with the requirements of the

mortgage contract no later than completion, and

Must maintain such buildings insurance throughout the mortgage term.”

47

The requirement to check part 2 to see if the lender has any further requirements in relation to buildings insurance has been removed with effect for certificates of title lodged from 30th November 2015.

10.6

Insolvency Considerations

With effect from December 2014, paragraph 5.16 of the Handbook reads “Where an entry is revealed that may relate to the borrower (or the mortgagor or guarantor):

•

You must be satisfied that the entry does not relate to the borrower (or

the mortgagor or guarantor) if you are able to do so from your own

knowledge or enquiries; or

If, after obtaining office copy entries or making other enquiries of the

•

Official Receiver, you are unable to satisfy yourself that the entry does not

relate to the borrower (or the mortgagor or guarantor) you must report this

to us (see part 2). We may as a consequence need to withdraw our

mortgage offer.”

Note: As a result of this amendment, the conveyancer is no longer required to certify that a bankruptcy entry does not relate to the borrower-client.

10.7

Easements

Paragraph 6.9.1 of the Handbook provides that

“You must take all reasonable steps to check that the property has the

benefit of all easements necessary for its full use and enjoyment. All such

rights must be enforceable by the borrower and the borrower’s successors

in title. If they are not check part 2 for our requirements.”

Following the December 2014 amendment, clause 6.9.2 now reads –

“If the borrower owns adjoining land over which the borrower requires

access to the property or in respect of which services are provided to

the property, this land must also be mortgaged to us unless all relevant

easements are granted in the title of the land to be mortgaged to us and

those rights are and remain enforceable in accordance with section

6.9.1.”

48

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thesolicitorsgroup.com

Section 11 Update on Property Taxes

11.1

Rent-a-Room Relief

Rent-a-room relief is available on income from the use of furnished accommodation in an individual’s only or main residence, up to the individual’s total rent-a-room limit. This tax-free limit, originally set at £4,250, will be increased to £7500 with effect from the tax year 2016-17 and subsequent tax years. This change was made by the Income Tax (Limit for Rent-a-Room Relief) Order 2015, SI 2015/1539.

11.2

The Finance Bill 2015 and Buy-to-Let Landlords

The Finance Bill 2015 restricts the deduction of finance costs related to let residential properties and instead provides for a tax reduction for such costs by reference to the basic rate of income tax. The restriction and tax reduction will have effect for costs incurred on or after 6 April 2017.

The maximum relief that can be obtained under the new rules will be the basic rate value (currently 20%) of the total finance costs on loans referable to let residential properties. However, the restriction on deducting finance costs when calculating the profits of each residential property business will be phased in between 2017 and 2021.

The new rules will affect buy-to-let residential landlords who are higher rate taxpayers. See further clause 24 of the Bill.

11.3

Other Government Announcements

Moreover, in 2015, the Conservative Government announced that –

(i)

From 6 April 2017, it intends to bring all UK residential property held directly

or indirectly by foreign domiciled persons into charge for inheritance tax

(IHT) purposes, even when the property is owned through an indirect

structure such as an offshore company or partnership.

From April 2017, anyone who has been resident in the UK for more than

(ii)

15 out of the past 20 tax years will be treated as deemed UK domiciled for

all tax purposes, including for inheritance tax purposes. In addition, those

who had a domicile in the UK at the date of their birth will revert to having

50

a UK domicile for tax purposes whenever they are resident in the UK,

even if under general law they have acquired a domicile in another

country. See further HMRC Guidance, ‘Technical briefing on foreign

domiciled persons changes announced at Summer Budget 2015’,

published 8 July 2015.

(iii) In April 2016, the 10% wear and tear allowance that landlords of fully

furnished residential properties can currently elect for wear and tear on

furnishings (without necessarily incurring any cost) will be replaced with a

relief that enables all landlords of residential dwelling houses to deduct

the costs they actually incur on replacing furnishings in the property.

11.4

The 2015 Autumn Statement and Changes to Property Taxation

In the 2015 Autumn Statement, the Government made the following announcements –

(i)

From 1 April 2016, purchaser of additional residential properties, such as

buy-to-let dwellings and second homes, will be subject to a 3% surcharge

on the rate of SDLT that applies to the purchase of a first home. The

surcharge will affect purchases above £40,000. The government will

consult on whether to exempt corporates and funds owning more than 15

residential properties from the surcharge.

From April 2017, the SDLT filing and payment windows for land transactions

(ii)

will be reduced from 30 days to 14 days.

(iii) From April 2019, where CGT is payable on the disposal of residential

property, payment on account of the tax due will have to be made

within 30 days of completion of the disposal. This will mark a significant

change from the current position, whereby any CGT owing on such a

disposal is payable by 31 January following the end of the tax year in

which the disposal occurred. However, payment on account will not be

required under the new system if the disponor is entitled to claim Private

Residence Relief. Nevertheless, it remains to be seen whether

conveyancers acting for the taxpayer will be responsible under the new

system for making the payment on account.

(iv) With effect from 1 April 2016, the reliefs available from the Annual Tax

on Enveloped Dwellings (ATED) and 15% rate of Stamp Duty Land Tax

will be made available to equity release schemes (home reversion plans),

property development activities and properties occupied by employees.

51

(v)

Modifications are to be made to the rules that, with effect from 6 April

2015, made non-UK residents disposing of UK residential property

potentially liable for payment of CGT.

(vi) The Finance Bill 2016 will introduce changes to the SDLT treatment of

Co-ownership Authorised Contractual Schemes (CoACs) investing in

property, so that SDLT does not arise on the transactions in units. There will

be a defined seeding period of 18 months, a 3-year clawback mechanism

and a portfolio test of 100 residential properties and ÂŁ100 million value or

10 non-residential properties and ÂŁ100 million value.

52

53

Section 12 Update on Long Residential Leases

12.1

Permitted User: Burchell v Raj Properties Limited [2013] UKUT 0443 (LC),

LRA/123/2012 The long lease in question included a covenant by the Lessee with the Lessor:

“To use the flat as a private dwelling for the lessee and his family and for

no other purpose”.

The Upper Tribunal ruled that the natural and ordinary meaning of the said Lessee covenant was the literal meaning, namely that only the Lessee i.e. the person in whom the Lease is vested for the time being, and his family, may use the Flat and that their use must be as a private dwelling.

The context in Martin Rodger QC, the Deputy President, reached this conclusion included

•

The fact that the Lease was one of five similar leases of flats in the Building

completed in a relatively short period in the middle of 1988.

The landlord had covenanted that the remaining flats in the Building

•

would be let on substantially the same terms.

The Flat itself did not lend itself naturally to occupation by more than one

•

person or two living as a couple.

If the draftsman had intended to signify that the Flat could be used as a

•

dwelling for any lawful occupier, he could have employed the expression

“owners tenants and occupiers” to describe such persons.

12.2

Extent of the Demised Premises: Castle Rock 2002 Management Limited v

Jeffery [2014] UKUT 0400 (LC), LRX/29/2013

Castle Rock comprised 11 apartments on four floors: 3 on each of the ground, first and second floors and 2 apartments on the third floor. The middle ground floor flat (flat 2) was originally constructed with a similar wooden-decked balcony with a balustrade containing a decked area. Flats 1 and 3 on the ground floor were originally constructed with a patio.

54

A dispute arose over works to the decked balcony at flat 2 and to the patio of flat 3.

The foregoing works were called “the patio works”.

The Main Issue in this Case The main issue was whether the cost of the patio works could be included within the service charge. This in turn depended on whether these works were works to demised parts of the building (which were therefore the responsibility of individual tenants) rather than to common parts (which were the responsibility of the appellant).

The Upper Tribunal determined that the patio works, as regards both flat 2 and flat 3, involved works to the common parts. Therefore, the cost of these works could properly be included in the service charge to be recoverable from the respondent.

The following factors were relevant to that determination

1)

The lease made clear that the expression the Building included the

balconies (although no reference was expressly made as to whether or

not the patios were so included).

The original lease or counterpart for flat 2 was not produced to the

2)

Tribunal. However, the red line on the plan of the original lease of another

flat in the building (flat 3) was shown as running slightly inside the black line

of the balustrade.

The eighth schedule excluded from the demise “all such parts of the

3)

Building as are below the floor surface.” There was no reason to read

these words as not applying to all such parts of the Building as were below

the floor surface of the balcony.

The lease of flat 3 indicated that the patio was part of the Property which

4)

was demised. However, the patio also formed part of the Building having

regard to the words within the definition of that expression namely “...

and any rendering, tiling or other fixtures and finishes upon the exterior

thereof...” The same reasoning process then applied as in relation to the

decked balcony of flat 2. The surface of the patio was part of the

demised Property but anything lying under that surface was excluded.

The works which were carried out to the balcony at flat 2 plainly involved

5)

works below the surface of the decked area of that flat.

The works to the patio at flat 3 plainly involved works which went below

6)

the surface of this patio of that flat.

55

12.3

Breach of Carpeting Covenant: Forest House Estates Ltd v Al-Harthi [2013]

UKUT 0479 (LC), LRX/148/2012

Forest House was a purpose-built block comprising 74 flats. Each of the flats was let on a long lease.

The covenant in question obliged the tenant “forthwith to provide and thereafter at all times to maintain throughout THE FLAT (with the exception of the kitchen and bathroom) good quality carpeting and underlay”.

In April 2012, the respondent removed the original carpeting but left in place the original underlay, laid additional underlay then laid wooden flooring on top, on which he positioned rugs covering some 95% of the floor. He denied that the said covenant had been breached on the grounds that the floor covering was much more effective than just underlay and carpets.

The Tribunal’s Determination This was a case brought by the landlord under section 168 Commonhold and Leasehold Reform Act 2002 seeking a determination that a breach of a covenant or condition in the lease has occurred.

The Upper Tribunal (Lands Chamber), unsurprisingly, determined that the flat did not have carpeting “throughout” from about April 2012 until after 3 August 2012. The tenant had therefore reached the relevant covenant.

Furthermore, the Upper Tribunal determined that it had not been open to the Leasehold Valuation Tribunal to consider the question of whether a breach had been remedied by the time of the tribunal’s inspection.

56

57