Real Property Law Notes PART I: THE CREATION AND ACQUISITION OF PROPERTY INTERESTS IN LAND... 3 1 An Introduction to Real Property Law... 3 2 An Introduction to the Torrens System of Land Title... 3 2.1 Indefeasibility of title... 3 3 The Creation and Acquisition of Legal Property Interests Registration... 4 3.1 The land transfer process... 4 3.2 Formal requirements for passing legal interests in land... 4 4. The Creation and Acquisition of Equitable Property Interests The Proprietary Effect of Contracts for the Grant of an Interest in Land... 5 4.1 Requirements for a contract to be specifically enforceable... 5 4.2 A contract has proprietary effect if it is specifically enforceable... 8 4.3 Gifts... 10 5 The Creation and Acquisition of Equitable Property Interests Trusts... 12 5.1 Formalities... 12 5.2 Resulting trusts... 12 5.3 Constructive trusts... 15 5.3A Common intention constructive trusts... 15 5.3B Failed joint endeavour constructive trusts... 17 6 The Creation and Acquisition of Equitable Property Interests Estoppel... 20 6.1 Estoppel remedies... 24 6.2 The interest generated by an estoppel claim... 25 PART II: THE CONTENT OF PROPERTY RIGHTS IN LAND... 26 7. Leasehold Estates... 26 7.1 The grant of exclusive possession lies at the heart of the lease... 26 7.2 A lease must be for a certain duration... 29 7.3 Registered and unregistered leases (and the problem of unregisterable leases)... 32 7.4 Rights and duties of landlord and tenant... 32 7.5 Consumer protection... 34 7.6 Subletting and assignment of leases... 35 7.7 Termination of Leases... 39 1
8. Mortgage... 44 8.1 Rights and duties of mortgagor and mortgagee... 46 8.2 Remedies... 46 8.3 The registered mortgagee s power of sale... 47 9. Easements... 49 9.1 Characteristics... 49 9.2 Creation... 50 9.3 Extinguishment... 51 9.4 Profits à prendre... 52 PART III: PRIORITY OF REAL PROPERTY INTERESTS... 53 10. Registration and Indefeasibility of Title... 53 10.1 Priority between two registered interests... 53 10.2 Priority between registered and unregistered Interests: The Indefeasibility Principle... 53 10.3 Extent of indefeasibility: protection of individual terms in registered documents.. 53 10.4 Exceptions to indefeasibility: section 42 paramount interests... 55 10.5 Exceptions to Indefeasibility: Fraud... 56 10.5.6 In personam claims against the registered proprietor... 60 10.5.7 Volunteers... 62 10.8 Exceptions to Indefeasibility: Overriding Legislation... 62 10.9 Torrens Compensation Provisions... 63 11. Priority disputes between two unregistered interests... 63 11.1 Caveats... 63 11.2 Priority Notices... 64 11.3 Unregistered interests... 64 11.3A Priority between two full equitable interests... 65 11.3B Priority between other unregistered interests: Mere Equities and Legal Unregistered Interests... 66 PART IV: CO-OWNERSHIP... 67 12. Co-ownership: A Type of Interest Defined by Who Holds the Interest... 67 12.1 Legal v Equitable Ownership... 67 12.2 Situation of equitable tenants in common... 67 2
Part I: The Creation and Acquisition of Property Interests in Land 1 An Introduction to Real Property Law What do we study when we study Real Property Law? There are lots of laws that affect land, its acquisition and its use. In this subject we are concerned with property rights in land. We focus on three broad themes: the quite specific ways property rights in land are acquired or passed on (Part I); the limited types of rights in land that are recognised as proprietary rights (Part II); and the particular rules our land law system has for resolving disputes between competing inconsistent claims to land (Part III) Then there s a final, 4th part that addresses the particular issues that arise from co-ownership of property rights in land. 2 An Introduction to the Torrens System of Land Title The Torrens system of land titles dominates all Australian jurisdictions. Until the introduction of this statutory system in the mid-19th century, title was regulated by the general law of property. Very little general law land remains in Victoria today and that which does is progressively being brought under the operation of the Transfer of Land Act 1958 ( TLA ), the Victorian Torrens statute. Accordingly, in this subject we will confine ourselves to the law affecting Torrens title land, so you need to know the basics of the system from the very start. The Torrens system sets up a regime whereby title to property interests in land is acquired by registration. It is the act of registration that confers title on the registered interest holder. The state maintains and guarantees the Register of Titles. 2.1 Indefeasibility of title Indefeasible = cannot be defeated. Once registered, an innocent purchaser: Gets good title despite irregularities in the transaction (positive guarantee). Has title unencumbered by older un-registered interests (negative guarantee). Gets priority over subsequent registered interests attached to the same estate (s 34(1) TLA). Section 42(1) TLA embodies that the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Resgister but absolutely free from all other encumbrances whatsoever. However, there are some exceptions that we will see in Part III. 3
Immediate indefeasibility prevails in Victoria. It means that the innocent purchaser obtains indefeasible title once he registers the transfer regardless of the fact that the document was invalid. He becomes immediately indefeasible. Creation of Interests in Land 1. Legal Interests: a) Formal and organised creation (topic 3) b) Informal and disorganised creation Adverse possession Prescriptive easements (topic 9) 2. Equitable Interests: a) The effect of specifically enforceable contracts (topic 4) b) Formal and organised creation Express Trusts c) Informal and disorganised creation Resulting Trusts (topic 5) Constructive Trusts (topic 5) Estoppel (topic 6) 3 The Creation and Acquisition of Legal Property Interests Registration In this part of the programme, we look at the ways in which legal property rights may be transferred from one party to another. 3.1 The land transfer process Transactions involving the sale of proprietary interests in land are usually more complex than those involved in the sale of goods. The process also often takes place over a period of time and certain formalities have to be complied with before title passes at law. 3.2 Formal requirements for passing legal interests in land Under the Torrens system a legal interest in land is procured by registration of an instrument of transfer. Is the act of registration that gives the purchaser legal title to the property. TLA s 40: Subject to this Act no instrument until registered as in this Act provided shall be effectual to create vary extinguish or pass any estate or interest or encumbrance in on or over any land under the operation of this Act, but upon registration the estate or interest or encumbrance shall be created varied extinguished or pass in the manner and subject to the covenants and conditions specified in the instrument or by this Act prescribed or declared to be implied in instruments of a like nature. 4
4. The Creation and Acquisition of Equitable Property Interests The Proprietary Effect of Contracts for the Grant of an Interest in Land While the formalities discussed above, at 3.2, must be complied with to pass a legal interest in land, the act of entering into a contract for the sale of land might itself have a proprietary effect in equity. A common situation is where someone signs a contract of sale to buy a house, but settlement of the sale and, after that, registration of title, will not occur until some time in the future. In this situation, the courts have had to consider at what point in this series of dealings the purchaser acquires an equitable proprietary interest in the land. 4.1 Requirements for a contract to be specifically enforceable According to statute, where a contract relates to land it must be in writing and signed by the person against whom the action is brought or by some person by the party lawfully authorised. 1 In Victoria, this is provided for by s 126 of the Instruments Act 1958 (Vic): An action must not be brought to charge a person... upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note. Doctrine of part performance (Oral) contractual agreement + acts referable to agreement = part performance According to the doctrine of part performance, a contract for sale of land which fails to meet the requirement for written signed contracts (e.g. an oral contract, etc.) will raise an equitable title if it has been partly performed. Therefore, it is an exception to the formalities established by s 126 of the Instruments Act. In order for a contract regarding interests in land to be enforceable, it needs to be either; Enforceable at law by meeting the s 126 requirements, or Enforceable in equity by being sufficiently part performed by the party seeking the remedy. If a contract meets either of those two conditions then it is enforceable. Thus, if one party breaches or chooses not to perform, the other can seek a remedy. 1 Victoria, alone of the states, specifically requires any agent signing the agreement to be authorised in writing to do so. 5
Doctrine of part performance test McBride v Sandland (strict test) Facts: Father is the landlord of his daughter, who is a yearly tenant. Sandland is in possession of the land and claims that McBride agreed to grant her an option to purchase the land at a later date. Sandland and her husband farm the land and make repairs on top of paying rent. Sandland asks her father to transfer the land but he refuses. Sandland claims that the acts constitute part performance and are referable to the oral agreement to grant an option. Issue: Decision: Reasons: Is the option enforceable? The court found in favour of McBride, the option is not enforceable. The promise did not give rise to a contract as alleged by Sandland and there were no acts of part performance. A party cannot use unequivocal acts in the context of a domestic or familial relationship so as to turn them into legal categories. When determining whether part performance applies, the court examines whether the acts relied on are unequivocally referable to the contract alleged: The plaintiff must demonstrate a nexus between their actions and the contract they are seeking to enforce. It is a strict requirement Acts which of themselves, without any reference to evidence of the oral contract, point to a contract consistent with what the plaintiff is alleging. Acts either required or authorised by the contract. Process for determining whether the test is met: 1. Show the acts on their own are unequivocally referrable to some sort of contractual agreement. If successful then; 2. The court will go back and attempt to ascertain the terms of the oral contract. NOTE: there must be a valid contract on foot e.g. consideration, agreement etc. 6
Example failure to meet strict test: Ogilvie v Ryan: Agreement between O and R that if R moves into his house and looks after him for the rest of his life the house would be R s for as long as she lived. R moved in and looked after O. O died and in his will he left all his property to his son, and not R. R claimed she had partly performed an oral contract to the effect that she would get the house in return for looking after O. Were these sufficient acts of part performance? R was unsuccessful. R s actions of changing house and providing unpaid care were not unequivocally referable to a promise to give her an interest in land. There were other possible explanations for what she had done. You could not definitely say it had to do with a contract. Examples of acts considered part performance Some acts which are generally considered good examples of part performance: 1. In the case of a lease: improvements to the property by the lessor at the request of the lessee (Rawlinson v Ames): 2. In the case of a contract to sale land, either a) Payment of the purchase price and making improvements (Pejovic v Malinic). b) Taking possession of land (Regent v Millett). Examples of acts not considered part performance Some acts are generally considered insufficient to constitute part performance: 1. For contracts for sale of land, mere payment of purchase money is insufficient (Britain v Rossiter). 2. The making of an application for a planning permission is insufficient (New Hart Builders v Brindley). Specific performance as a contractual remedy When an enforceable contract to pass an interest in land is breached, the most common remedy is an order that the contract be performed: this is called the remedy of specific performance and a contract that qualifies for this remedy is called specifically enforceable. Specific performance of a contract is an equitable remedy. As such it is a discretionary remedy. There are a number of equitable principles that are relevant to the grant of equitable remedies that are not discussed in detail in this subject. It involves compelling the breaching party to do what they promised to do within the contract (or not do what they promised) 7