Archive for the ‘Proprietary interests’ Category

Whether a right to set aside a transaction bound third party mortgagee (England)

June 29, 2016

In Mortgage Express v Lambert ([2016] EWCA Civ 555, CA (Eng)) L agreed to sell her property to S and C. She had a right to set this transaction set aside on the grounds that it was an unconscionable bargain. S and C relied on bridging finance to complete the purchase but quickly re-mortgaged to Mortgage Express. The question was whether the charge in favour of Mortgage Express was subject to L’s right to have the sale to S and C set aside. The English Court of Appeal (Lewison LJ giving the only full judgment) looked at the question within the framework of the Land Registration Act 2002 and the Law of Property Act 1925. The right to have a transaction set aside is a mere equity ([16]). Section 116 of the Land Registration Act 2002 (‘LRA’) confirms that such rights are capable of binding third parties. While Mortgage Express’ charge was, in principle, not subject to unregistered interests (section 29 of the LRA), there was an exception for overriding interests and a mere equity could be such an interest (LRA, Schedule 3, para. 2). L’s claim failed principally because section 26 of the LRA defeats rights which would call into question the validity of a disponee’s title. Allowing the mere equity to be asserted against Mortgage Express would have this effect.  In addition, section 2 of the Law of Property Act 1925 provides that a conveyance by trustees to a purchaser of a legal estate overreaches any equitable interests. The mere equity was overreached by virtue of this provision.

Michael Lower

Agreement concerning distribution of proceeds of sale of land: a proprietary interest?

January 14, 2013

In Hughes v Central Stream Services Ltd ([2011] EWCA Civ 1720, CA (Eng)) CSS brought proceedings against D. The parties entered into a compromise agreement: CSS agreed to a stay of the proceedings and D entered into an agreement whereby he agreed to sell a property he owned and then to distribute the proceeds of sale in a way described in the agreement. CSS was to be second in line behind the mortgagee of the property. H were D’s solicitors and they later obtained a charging order which they then registered against the title to the property. The net proceeds of sale were not enough to meet the amount due to CSS and so, if CSS had a proprietary interest, there would be no funds to meet the debt owing by D to H. The English Court of Appeal decided that the agreement did not amount to an equitable charge but that it did give rise to an equitable (proprietary) interest in the property.

Ward LJ spoke of a:

‘general principle that if for valuable consideration the owner of property agrees to hold the property on terms which appropriate it for the benefit of another party, and the agreement is one which the court will enforce by an order for specific performance, the effect of the agreement is to create an equitable interest in the property in favour of the latter party.’ ([26])

The distinction between proprietary and non-proprietary interests in land

September 8, 2010

One way of describing the study of Hong Kong land law is to say that it looks at parcels of rights and duties such as the lease or the mortgage. These parcels are often said to be proprietary interests in land. A distinction is drawn between these proprietary interests and other sets of rights and interests in land that are said to be non-proprietary. A licence or permission to enter another’s land is an example of a non-proprietary interest in land. What does this mean?

At one level, to say that an interest is proprietary is to say that it is an item of property that you own. It is an asset. It is something that you have control over and that you can usually sell or give away. In National Provincial Bank Ltd v Ainsworth, Lord Wilberforce said that before a right or interest can be said to be proprietary it must be:

“definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.” ([1965] AC 1175 at 1247G – 1248A).

The idea of a proprietary interest, however, means more than this. One part of what we mean by a proprietary interest is that it somehow attaches to the land, follows the land despite any changes in ownership that might occur. So, for example, suppose that a landlord grants a lease of land and then sells his interest in the land (known as the reversion). The lease continues in existence despite the fact that there is a new landlord. The lease is not simply a personal relationship between the original landlord and the original tenant but is also a proprietary interest in land. By contrast, the licence (permission to be on another’s land) is purely personal. If the licensor sells his interest in the land, the new owner is not bound by the licence and can simply ignore it.