Hey there! Sign in to join this conversationNew here? Join for free

Land law question on options to purchase registered land? Watch

Announcements
    • Thread Starter
    Offline

    10
    ReputationRep:
    Hi guys
    So I'm so confused with land law in general but this one question has me beyond confused.
    In this situation David sold his registered freehold to Sam. In 1999, in consideration of £1, he gave his brother an option to purchase the property. This agreement was reduced to signed writing and was due to last for 20 years. His brother did not register this right to purchase. Baring in mind this is 1999, I know it's got something to do with the 2002 land registration act. Can someone please explain this to me? Thank you any guidance will be welcome
    Offline

    11
    ReputationRep:
    (Original post by maya060911)
    Hi guys
    So I'm so confused with land law in general but this one question has me beyond confused.
    In this situation David sold his registered freehold to Sam. In 1999, in consideration of £1, he gave his brother an option to purchase the property. This agreement was reduced to signed writing and was due to last for 20 years. His brother did not register this right to purchase. Baring in mind this is 1999, I know it's got something to do with the 2002 land registration act. Can someone please explain this to me? Thank you any guidance will be welcome
    Please could I have the whole problem question that you are trying to understand?
    • Thread Starter
    Offline

    10
    ReputationRep:
    (Original post by TheLawLlama)
    Please could I have the whole problem question that you are trying to understand?
    Yes I will copy it below. This is an extract which I am using to practice for my resit exam, would be grateful if you could lay down the law for me. Particularly confused about these
    1. Last week David sold and transferred the registered freehold title to his mansion house to Sam for £10 million, exchange and completion happening in one day. David had formerly owned the property for some 35 years. During his time as the registered proprietor he granted to his neighbours, friends and family certain rights and interests, viz:- (i) In 1999 in consideration of £1, he gave his brother Donald an option to purchase the property on giving one calendar month’s written notice for £3 million. This agreement was reduced to signed writing and was expressed to last for some 20 years; (ii) In 2002 by a written agreement and in consideration of £50 per annum, he gave his neighbour Bertram, the right to park his motorcycle on the property for 40 years;(iii) In 2004 by deed he granted his other neighbour Sheila the right to walk across the back gardens of the property, so as to take a short cut to the local shops; (iiii) In 2007 by a signed written agreement he gave his sister Mary the right to live for free in the attic flat situated at the property; (v) In 2014 he moved his friend Joseph into the property and told him that he was to have a 25% share of the property. As a result of this Joseph moved in and spent all his savings (£60,000) refurbishing the kitchen of the property. Neither Donald, Bertram, Sheila, Mary nor Joseph have attempted to protect their rights by registration. In 2008 Mary granted her friend Debbie a weekly tenancy of the attic flat at a rent of £500 per month. Advise Donald, Bertram Sheila, Mary, Debbie and Joseph as to the nature of their rights in the property and as to the extent to which their rights are binding (if at all) on Sam.
    Offline

    11
    ReputationRep:
    (Original post by maya060911)
    Yes I will copy it below. This is an extract which I am using to practice for my resit exam, would be grateful if you could lay down the law for me. Particularly confused about these
    1. Last week David sold and transferred the registered freehold title to his mansion house to Sam for £10 million, exchange and completion happening in one day. David had formerly owned the property for some 35 years. During his time as the registered proprietor he granted to his neighbours, friends and family certain rights and interests, viz:- (i) In 1999 in consideration of £1, he gave his brother Donald an option to purchase the property on giving one calendar month’s written notice for £3 million. This agreement was reduced to signed writing and was expressed to last for some 20 years; (ii) In 2002 by a written agreement and in consideration of £50 per annum, he gave his neighbour Bertram, the right to park his motorcycle on the property for 40 years;(iii) In 2004 by deed he granted his other neighbour Sheila the right to walk across the back gardens of the property, so as to take a short cut to the local shops; (iiii) In 2007 by a signed written agreement he gave his sister Mary the right to live for free in the attic flat situated at the property; (v) In 2014 he moved his friend Joseph into the property and told him that he was to have a 25% share of the property. As a result of this Joseph moved in and spent all his savings (£60,000) refurbishing the kitchen of the property. Neither Donald, Bertram, Sheila, Mary nor Joseph have attempted to protect their rights by registration. In 2008 Mary granted her friend Debbie a weekly tenancy of the attic flat at a rent of £500 per month. Advise Donald, Bertram Sheila, Mary, Debbie and Joseph as to the nature of their rights in the property and as to the extent to which their rights are binding (if at all) on Sam.
    Sorry I made a really silly mistake – I stupidly missed out the phrase “registered freehold”, so my answer approached the question as if it was unregistered land…. Let me start again, haha! It turns out a discussion of the Land Registration Act 2002 is required. It shows how one misread word can affect your whole answer

    Llama
    Offline

    11
    ReputationRep:
    An option to purchase is an equitable right in rem as it does not fall within the list of the Law of Property Act 1925 section 1. The formality for the valid conferral of an equitable right in rem is different to the formality requirement for the valid conferral of a legal right in rem. The Law of Property Act s53(1) tells us equitable rights in rem must be created by signed writing – if it is not created by signed writing you have failed to confer a right in rem. This is clearly seen: the “agreement was reduced to signed writing”.

    Under the Land Registration Act 1925 (LRA 1925) all third party rights in registered land, other than registered charges and overriding interests, took effect in equity as minor interests and would be overridden by a registered disposition made for valuable consideration. Such minor interests were protected by registration of a notice, caution, inhibition, or restriction as appropriate on the charges register, until the coming into force of the LRA 2002. Now only notices or restrictions may be entered. Note, the LRA 2002 does not use the term ‘minor interests’ any more.

    So, Donald, in 1999, could have entered a notice on the charges register to protect his ‘minor interest’ i.e. protect his option to purchase. Today the process is similar: the LRA 2002 employs the same logic as that found in the LRA 1925 and so there is a general instance that third-party property interests should be entered on the register against the estate they burden. So ever since the LRA 2002 came into effect, even if Donald did not protect his option prior to that Act, he could still have registered the right in rem on the charges register as a Notice. We know this as all rights in rem can be registered against the estate they burden apart from those explicitly exempted (section 33 LRA 2002 says, for example, beneficial interests under trust or short leaseholds cannot be registered in this way). Failure to make such an entry may mean that the property right loses its priority against the registered proprietor, unless the right falls fortuitously within Schedules 1 or 3 and so qualifies as an overriding interest.

    Under section 29(1) LRA 2002 it says “If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of the registration”. In other words, this basically says if the transfer of the legal estate to Sam is made valuable consideration (which it is, for £10 million) and you complete that disposition by registering the new owner of the freehold (Sam) as a proprietor, then this will take priority over any pre-existing interest/rights in rem whose priority is not protected.

    Essentially, all we need to do is work out whether the priority of a pre-existing right in rem has been protected i.e. whether Donald’s option to purchase is protected. If it has, then the new interest holder is going to be bound by it; If it hasn’t been protected then the new interest holder will take free of it. Section 29(2) LRA 2002 says the priority of an interest (a right in rem) is protected if the interest is a registered charge or the subject of a notice in the register, or falls within the paragraphs of section 3.

    As the option to purchase was not registered on the charges register and does not fall within schedule 3 as an overriding interest the option to purchase does not bind Sam. So Donald will not be able to exercise the option to purchase.

    Llama
 
 
 
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • Poll
    Break up or unrequited love?
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

    Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

    Quick reply
    Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.