Summary
Summary Formalities for the Creation of Property Rights
- Module
- Year 1 Property Law
- Institution
- The University Of York (UOY)
Notes summary on the property law topic of formalities for the Creation of Property Rights
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Formalities for the Creation of Property RightsFormalities:
The formalities required for creating a valid contract for the sale (or other ‘disposition’) of an
interest in land are set out in s. 2 of the Law of Property Act (Miscellaneous Provisions) Act 1989. In
summary, the main elements of the formalities required of contracts regarding land (which are not
requirements for contracts in other contexts) are: in writing, incorporating all of the agreed terms,
and signed by (or on behalf of) each party. We have seen how the effect of exchange of contracts
can create an equitable interest for the purchaser (generally known as an ‘estate contract’), whilst
the seller remains legal owner until the transaction is ‘completed’ and title formally transferred.
Under s. 52 of the Law of Property Act 1925, transfers (sometimes referred to as ‘conveyances’) of
legal estates in land must be by way of “Deed”, subject to exceptions specified in the section.
We have seen that there are very limited exceptions to the formal requirements for creation and
disposition of legal interests in land. We also know that equity does not ‘do’ formalities in the same
way as the common law. That is not to say that equity does not require any formalities. The extent
to which this is the case depends upon the nature of the interest and the way in which it is created;
the establishment of express trusts over land has certain requirements, whilst the creation of
interests under trusts which arise through operation of the law (rather than explicitly) requires no
particular formalities. The creation of equitable interests which do not involve trusts can require
certain formalities. In some cases there is an intuitive logic – for instance a ‘long’ lease which is not
created by deed, but which complies with s. 2 of the Law of Property Act (Miscellaneous Provisions)
Act 1989 will fail as a legal lease, but be enforceable as an equitable lease. Others are not so
immediately obvious – for example a Restrictive Covenant (which we will look at later in the module)
can only exist as an equitable interest, but must be created expressly and by Deed. Transfers of
equitable interests must be in writing and signed by the parties (s. 53(1)(c) of the Law of Property
Act 1925).
Introduction to Land Registration:
English law has traditionally recognised the physical reality of possession as providing the foundation
of legal title to property. With land, this physical proof of title was combined with documentary
evidence of ownership over time, and transfers, in the form of ‘title deeds’. These documents were
also used to record rights and interests, such as leases, which had been granted.
As documentary evidence developed as the superior form of proof the flaws in such a system
became more apparent. The property law legislation of 1925 introduced the slow spread of
compulsory land registration and reformed some aspects of unregistered land.
The system of Land Registration shifts the responsibility for recording ownership of land and of
interests relating to such property to the state in the form of the Land Registry. The objectives
underlying this system potentially create a tension in that they seek to maximise utility by making
land easy to transfer (in contrast with the previous system), but also capable of various uses,
through fragmenting ownership and facilitating third party rights. The complexity of the latter
potentially frustrates achievement of the former. The balance is struck by seeking to provide
information to potential purchasers, whilst also protecting interests of all parties, through a state-
guaranteed system of registers.
, An important point to note is that the Land Registry registers record Title to land, against which
lesser interests are recorded. Titles which are capable of registration include freehold (obviously),
but also many longer leases. This means that it is the title (or estate) which is registered, rather than
the land itself, so there may be separate titles registered for the freehold and longer leases on a
single piece of land (referring to each other).
There are still some areas of unregistered land, but these are gradually being brought onto the Land
Register, so for most purposes you will only need to consider the rules applying to registered land.
Principles of Land Registration:
Three principles underpin the land registration system:
1. The Mirror Principle – that the register should be a mirror of estates and interests affecting
land
2. The Curtain Principle – that equitable interests under (and the details of) trusts should be
kept off the title
3. The Indemnity Principle – that the state will provide compensation for losses suffered due
to errors on the register
The provision of registers, with recording of third party interests affecting land, would ideally provide
a watertight system, reflecting every right relating to the land in question. As we shall see later, that
is not quite the case. For the time being, we shall focus on the way in which interests are registered
and the effect of this.
The incentive for the holder of a third party interest to register this is that it will become binding
upon a purchaser of land. If not protected by registration, in many cases a purchaser will take free of
the interest (and so be able to ‘exclude’ that interest from his/her property. When considering the
effect of registration, we usually talk of it ‘binding’ a purchaser.
Registration of Interests:
Third party rights which can be registered (and so be sure of binding) are:
1. ‘Registrable dispositions’, such as the creation of a mortgage, a legal easement, and a legal
lease for over 7 years (s. 27 Land Registration Act 2002); and
2. Interests which affect a registered estate’, such as estate contracts and the interests of
beneficiaries under a trust of land.
3. You should know that there are a third category of interests which can bind a purchaser, but
which do not need to be registered, called ‘overriding interests' which are protected under
Schedule 3, para 3 LRA 2002. You will cover these rights in more detail later in the course.
Different rights are registered or protected differently on the register.
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