Principles of Property Law: Exam Notes Trimester 2, 2016
Concepts of Property 4 Property rights v Contractual rights 4 Recognition of New Property Types 5 Classification of Property 6 Doctrine of Fixtures 6 Tenant Fixtures 8 Fragmentation 8 Possessory Title 9 Adverse Possession 10 Adverse Possession 11 Running of Time 12 Special Cases 13 Torrens System 13 Tenure, Estates and Goods 14 Life Estates 15 Gifts of Goods 16 Land Transfer and Formalities 17 Regulation of Land Sales 17 Equitable and Legal Title 17 Leasehold Interests 19 Types of Leases 19 Essential Characteristics of a Lease 20 Types of License 20 Formal Requirements for Creating Leases 21 Leases + Adverse Possession 22 Leasehold Covenants 23 Express covenants 23 Implied covenants 23 Assignment of Leases 25 Original Tenant 25 Assignee of Tenancy 25 Reversioner Assignment 25 Touch and Concern Test 26 Consequences 26 Easements 27 Essential Characteristics 27 Creation 28 Scope 30 2 of 38
Enforceability 30 Removal or Change 30 Profits a Prendre 31 Creation 31 Enforceability 31 Variation and Removal 31 Restrictive Covenants 32 Elements 32 Creation 33 Removal and Variation 34 Consequences 35 Mortgages 36 Legal or Equitable Mortgage 36 Mortgagor Protection: NCC 36 Rights and Duties of Mortgagee 37 Upon Default 37 Notice Requirement 37 Conduct of Sale Requirement 38 3 of 38
Classification of Property Classification of Property Property (equitable and legal) Real (eg land (immovable)) Personal (eg goods (moveable)) Incorporeal (intangible rights, e.g. easement) Corporeal (tangible, eg land) Chattels real (eg leases) Chattels personal Tangible Intangible (Chose in possession, (Chose in action, eg furniture) eg shares; damages) Doctrine of Fixtures Land includes fixtures, where a fixture is a chattel so attached to the land as to become a part of the land Ownership of land entitles the landowner to ownership of the fixtures If land is sold, fixtures pass to the buyer with the land (whereas chattels only pass if expressly mentioned in the contract of sale) Where land is mortgaged, the mortgagee s security includes fixtures but not chattels Special legislative rules apply to fixtures installed by tenants (see below) On the owner s death, fixtures automatically pass to those entitled to the real estate, not to those entitled to the personal property How to assess if an article is a fixture or a chattel (objective tests): 1. Degree of annexation (how is the item physically attached to land?) 2. Object of annexation (for what purpose was the object attached to or placed on the land?) Note: Assess each article separately (See below) 6 of 38
Adverse Possession Adverse Possession Where a possessor has a possessory title, a legal estate in fee simple (inchoate), the possessor can only be lawfully ejected by a person with a better right to possession. The Limitation of Actions Act 1958 (Vic) ( LAA ) provides for many aspects of adverse possession. Random note: The law of adverse possession has been found consistent with the Charter of Human Rights (Vic). It seeks to resolve competing property rights by not favouring the rights of one over another and thus does not fail to protect an individual s property rights (Abbantangelo) To begin: Identify the issue, the land type (i.e. Torrens system land), discuss s 18 and s 18 Is the land under adverse possession? See page 10 Onus of proof is on the claimant Must satisfy both factual possession and animus possidendi Some land cannot be adversely possessed by statutory provision Assess running of time See page 11 12 When time begins How long the adverse possessor wait before claiming best title When time stops running Circumstances in which time can aggregate Consider any special cases See page 12 Death of land owner Tenant adversely possessing leased land 10 of 38
Tenure, Estates and Goods Tenure, Estates and Goods The Doctrine of Tenure Imported into Australia Holds that subjects of the Crown don t own land absolutely but hold land of the Crown Under the doctrine, we only have an estate or interest in the land The Doctrine of Estates An estate is a thing separate from the land itself The owner of an estate is not entitled to ownership of the land but to seisin (the right to possession at some time) The nature of the estate determines the extent and duration of the right to possession (e.g. life estate) Types of Estates Estates Freehold (Uncertain duration) Leasehold (Certain duration) Fee simple Fee tail Life Estate Fixed term Periodic At will At sufferance Note: Estates give ownership rights, such as the right to exclude others, whereas lesser rights are called interests (such as mortgages, easements or restrictive covenants) 1. Freehold v Leasehold estates 1.1. Freehold estates are of an uncertain duration (cannot define how long the estate will last for), whilst leasehold estates are generally of a certain duration (or is capable of being made certain) 2. Fee Simple 2.1. The largest estate possible 2.2. Fee means inheritable 2.3. Simple means not limited to a particular class of heirs (i.e. not limited to a particular, for example, gender, such as in a fee tail estate) 2.4. Gives rights to use, alienate and exclude 2.4.1. Can alienate inter vivos (during lifetime) or by testamentary disposition (via will) 3. Fee tail 3.1. Limits to a particular class of heirs 3.2. No longer allowed, and will be construed as a fee simple 14 of 38
Land Transfer and Formalities Land Transfer and Formalities There are two land systems in Victoria, and so two methods of creating interests in land: 1. General law land (no longer used) 1.1. Legal title passes on the execution of a deed* of conveyance (Property Law Act, s 52(1)) 1.2. Note that s 52(2) outlines exceptions where no deed is required for legal interest to pass 1.3. * A deed is defined in ss 73 and 73A: signed, sealed and delivered 1.4. Any land sold now must be transferred to the Torrens system land 2. Torrens system land 2.1. Legal title passes upon registration of an instrument of transfer 2.1.1. i.e. takes the place of the deed under the general law land system 2.2. s 40(1), Transfer of Land Act: a 2.3. s 40(2), TLA: Gives instruments the same efficacy as if under seal and validates it Regulation of Land Sales Land sales are regulated by the Sale of Land Act 1962 (Vic): s 31: Purchaser has 3 day cooling off period if a sale (exception: auctions) s 32: A vendor s statement must be disclosed prior to signing of sale contract ss 32A L: includes the items required in the statement s 32K: Purchaser can rescind the contract if false information is provided in s 32 s 34: Where dwelling house is destroyed or damaged so as to be unfit for occupation before Purchaser is entitled to legal possession, they may rescind the contract within 14 days of notice of damage * s 35: Prudent purchasers should take out their own insurance, however if the vendor has insurance they will be covered by it * * s 36: Vendor can restore land before purchaser takes possession and ss 34-35 will therefore not apply Equitable and Legal Title Although above are the formalities for passing legal title at the time of settlement, there may be equitable title which has passed Usually, there is a lapse of 30, 60 or 90 days between auction/sale and settlement At this stage, the contract of sale (i.e. not the deed or transfer) sets in motion the process Where there is a contract for sale of real estate, although that contract is ineffective itself to transfer legal title, it may transfer equitable title See next page to determine if there is equitable interest 17 of 38
Leasehold Interests Leasehold Interests A lease is an estate in land which gives a right to exclusive possession for a certain duration. Assignment = transfer of whole right to another Determines = lease ends Leasehold reversion = right to transfer of exclusive possession back to lessor START BY CONFIRMING WHETHER IT IS A LEGAL LEASE (SEE BELOW) Types of Leases 1. Fixed term 1.1. A lease of a certain maximum duration 1.2. Lease automatically ceases when the time period has expired 1.3. Duration can be certain even where there has been an earlier uncertain possibility of determination (e.g. last for 40 years, determinable by either party with one years notice) 1.4. Always created expressly, either oral or written 2. Periodic tenancy 2.1. Continues indefinitely from one fixed period to another (e.g. weeks or years) 2.2. The period of the rent determines the period of the lease 2.2.1. Therefore only need 1 period of notice to terminate lease 2.2.1.1. Exception: where the period of rent is 1 year, only need 6 months notice 2.3. Determined by proper notice 2.4. Four modes of creation (either express or implied) 2.4.1. Written agreement 2.4.2. Oral agreement 2.4.3. Where there is an invalid fixed term lease 2.4.4. After expiry of a filter term lease 3. Tenancy at will 3.1. Consent to occupy is given by the lessor 3.2. There is no rent payable by tenant 3.3. Can be determined at any time by either lessor or lessee 3.4. Deemed determined after 1 year (i.e. therefore deemed an adverse possessor after 1 year) 3.5. Arises expressly (uncommon) or impliedly ( holding over or early possession ) 4. Tenancy at sufferance 4.1. Tenant wrongfully holds over without express consent (or dissent) of the lessor and pays no rent 4.2. Can be terminated at any time without notice 4.3. Created only by implication 4.3.1. Tenant remains in possession after fixed term lease ends without paying rent 4.3.2. Life tenant pur autre vie for life of A reminds in possession after A dies 4.4. Note: Could also be here that time begins running for adverse possession 19 of 38
Leases: Assignments Assignment of Leases 1. Assignment by the tenant to third party (assignee) 2. Assignment by the landlord (leasehold reversion) 3. Sublease by the tenant to third party (subtenant) Note: This section only applies to legal leases (see above) Original Tenant Whether the original tenant is still bound (and can still enforce) the covenants of a lease will depend on the wording of the covenant in the lease between landlord and original tenant: If tenant covenants on behalf of himself and successors in title = bound If tenant covenants are expressed to continue only while tenant continues as tenant = not bound Note: Wording does not affect assignee s liability, landlord can simply sue either but not recover from both Assignee of Tenancy Where registered proprietor leases to A, and A then assigns to B (the assignee). Certain leasehold covenants will bind the tenant s assignee if (Spencer s Case): 1. There is privity of estate between landlord and assignee (Spencer s Case); and 2. Those covenants touch and concern land (Swift; Gumland Holdings) see below for test If satisfied: Passing of the burden: Landlord can sue the assignee for breach of the covenant Passing of the benefit: Assignee can sue landlord for breach of covenant Reversioner Assignment Where registered proprietor leases to A, and registered proprietor then sells to X (leasehold reversion). But Certain leasehold covenants will bind new registered proprietor if: 1. s 141, PLA: The rent and the benefit of the lessee s covenants have reference to the subject matter (passing of the benefit); or That is, covenant must touch and concern (Davis v Town Properties) see below for test Use when landlord is trying to sue for benefit 2. s 142, PLA: The obligations of the lessor s covenants have reference to the subject matter of the lease (passing of the burden) That is, covenant must touch and concern (Davis v Town Properties) see below for test Use when tenant is trying to sue for burden of landlord 25 of 38
Easements Easements Servient tenement (ST): The party granting the benefit or suffering the burden Dominant tenement (DT): The party gaining the benefit of the easement Easement in gross : Benefits an individual or a legal entity Easement appurtenant : Benefits the DT and runs with the land Essential Characteristics (Discussed in Re Ellenborough Park unless otherwise noted below) Note: Whether there is an easement is solely decided on these facts, not on any terminology used by parties 1. There must be a dominant tenement (benefit of land) and a servient tenement (burden of land) 1.1. DT: There must be land that benefits (not profit but in terms of use) from the easement; and 1.2. ST: There must be land that is burdened by the easement 1.3. The instrument creating the easement need not expressly identify the dominant tenement, it needs only be capable of being objectively identified by the surrounding circumstances (e.g. this could be done by park signage) 2. The easement must accomodate the dominant tenement 2.1. The dominant tenement land must actually benefit from the easement itself 2.2. The easement must be reasonably necessary for the enjoyment of that land 2.3. Determined on the facts, considering the surrounding circumstances 2.4. Satisfied where there is a natural connection between the tenements, considering the location/ existence: DT and ST must be physically close enough to satisfy the relevant benefit and burden 2.5. It is not enough for the ST to be a convenient incident to the right the nexus between DT and ST must be real and intelligible (Clos Farming Estates v Easton) 2.6. If the DT does not need the right conferred then there is no easement. The need must relate to the land itself, not a benefit to the person in occupation (e.g. a business) (Copeland v Greenhalf) 2.7. The fact that people other than the DT owner/occupier benefit from the easement does not prevent it from existing 3. The dominant tenement and the servient tenement must not be owned and occupied by the same person 3.1. That is, a person cannot acquire rights against themselves 3.2. Note: must own and occupy, so if the land is leased/licensed out = no longer occupying 4. The right must be capable of forming the subject matter of a grant 4.1. Satisfied if the rights expressed as the subject of the easement are clearly expressed, that is: 1. Not too wide or too vague; and 2. Not inconsistent with the ST s rights of ownership/possession; and 3. Confer utility and benefit to the DT Eg. Right to wander on land at will; right to prospect; right to unrestricted airflow; rights of mere recreation = generally too vague 27 of 38
Mortgages Mortgages Mortgagor = borrower Mortgagee = bank Types of security debts: 1. Unsecured debt (chose in action): an intangible item of personal property If debt is unpaid, C can sue for debt, and if D has sufficient assets then C will fully recover 2. Secured debt: debt secured by asset such as land (often a mortgage) A property right (of the lender) allowing full recovery of debt Land commonly used as security as it is identifiable, permanent, and tends to hold its value Torrens system Mortgage The mortgagor does not transfer title to the mortgagee; mortgagor remains registered proprietor Mortgagee acquires a registered interest when the mortgage is logged and registered (TLA, s 74(2)) and is a registered proprietor of an interest in land Registered interest is in the nature of a charge (a statutory charge) Mortgagor can create subsequent registered mortgages Legal or Equitable Mortgage Under the Torrens system, a mortgage is legal when it has been registered If not registered, a mortgage may be equitable i.e. if there has been oral agreement and part performance or compliance with s 126 Instruments Act Second and subsequent registered mortgages are all legal Mortgagor Protection: NCC The National Credit Code found in Sch 1 of National Consumer Credit Protection Act 2009 (Cth) Only applies to: 1. Certain credit and credit contracts (NCC ss 3, 4) 2. Where the mortgagor is a natural person; and 3. Where the credit is wholly or predominately used for personal/domestic purposes or for purchase, renovation or improving of residential property for investment purposes or to refinance credit for that investment property (NCC, s 5) Cannot contract out of the NCC (s 191) NCC has standards for the form and content of credit contracts (i.e. in writing, signed, including certain information) (NCC, ss 14, 17, 42) Restricts how can acceleration clause can be enforced (NCC s 93) 36 of 38