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Land Law

CONTENTS PAGES

CHAPTER 1 OUTCOMES 2 INTRODUCTION TO LAND LAW 3-8 ESTATES AND INTERESTS IN LAND 9-18 REGISTERED AND UNREGISTERED LAND 19-25 CHAPTER 2 OUTCOMES 26 CO-OWNERSHIP 37-36 EASEMENTS 36-49 COVENANTS 50-61 CHAPTER 3 OUTCOMES 62 MORTGAGES 63-69 RESIDENTIAL TENANCIES 70-77 LAND AND LITIGATION 78-106

Chapter 1 Learning outcomes After studying this chapter you should understand the following main points:

þ the distinction between proprietary and personal interests and its relevance to land; þ freehold and leasehold estates and legal and equitable interests in land; þ legal and equitable formalities for the creation and disposition of estates and interests in land; and þ priority of interests in registered land.

1.1 Introduction to Land Law

1. Introduction

Land law is the rules that govern the land and anything attached to it (such as trees or buildings) or anything in it (for example, treasure or oil). Land Law focuses upon the uses and supply of land, how an owner may use their land or dispose of it. It also looks at how others may use land and how interests in land may be developed through usage. There are different interests that a person may have in land and the law seeks to resolve conflicts about those interests through statute, common law and equity. Key areas of court action relate to disputes over ownership of land, rights across land, rights in relation to the use of land and boundaries between neighbouring land.

2. Property

Land is property but the queston then arises as to what property is. English law divides all property into:

þ real property (realty); and þ personal property (personalty).

The only realty (real property) is a freehold interest in land. Leasehold land is classed as personalty (personal property). For all practical purposes, the Law of Property Act 1925 treats both land interests as similar; if the holder is deprived of the land, he can recover the land, the law will not assume that compensation in the form of money is sufficient.

Apart from leasehold land there are two other types of personal property:

þ choses in possession; and þ choses in action.

Choses in possession consist of all tangible property except land, whilst choses in action consist of intangible property, intellectual property for example. Personal property may also be known as chattels. Chattels can be subdivided into chattels real and chattels personal.

The major distinction between real property and personal property is in respect of the contractual requirements for their sale or purchase. Contracts for the transfer of either personal or real property must meet the normal contractual requirements of offer and acceptance, consideration and an intention to enter into legal relations. A contract for personal property can be made orally, but a contract for the transfer of land must comply the formalities of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. These formalities require the agreement to be in writing, contain all the terms and be signed by both parties (or there must be an exchange of duplicates). The agreement is void if these requirements are not met. The transfer of an estate or interest in land usually has to be by deed in accordance with section 52 of the Law of Property Act 1925.

There must be the following three elements to make up a land transaction:

© Association of Costs Lawyers Training 2020 3 Sale "subject to contract": The buyer and seller make representations and an informal agreement is reached as to the terms of sale. Exchange of contract: This is when an agreement becomes legally enforceable. The agreements are signed and the parties are bound to complete the property transaction. If either side defaults, legal action could be taken. At this stage the buyer does not have full property rights, but he does hold an interest in it. The party is not the legal owner and does not yet have the right of possession. Completion: This happens when property is transferred from one party to another. This must be by deed (section 52 of the Law of Property Act 1925).

If an owner of real property had been dispossessed of his land he could issue proceedings for the return of that land. This type of court action would be known as a “real action” or an action in rem. This action could not be used to recover personal property – an action in damages is the appropriate action here. Such a court action would be known as a “personal action” or an action in personam.

3. Land

3.1 The statutory definition

Section 205(1)(ix) of the Law of Property Act 1925 provides that land is formed of hereditaments. Hereditaments are rights capable of passing to heirs by way of inheritance. Some of these hereditaments are corporeal which means they are made up of physical land and its attachments. Corporeal hereditaments include land held under any tenure, any mines, minerals and any buildings or parts of buildings. Some hereditaments are incorporeal. This means that they are rights and not things. Easements and profits are types of incorporeal hereditaments.

3.2 The common law definition

The common law definition of land stipulates that land includes the land surface, mines and minerals underneath, buildings on land and things attached to buildings, airspace above land and intangible rights attached to land such as easements.

So, the common law definition means land includes the subsoil and minerals - the landowner usually owns items buried underneath his land, unless the true owner of those items is known. There are two common law presumptions from the definition of land:

þ he who owns land owns everything extending to the heavens and to the depth of the earth; and þ whatever is attached to the ground becomes part of it

These presumptions are, however, limited. Land includes all the airspace above the land and all the ground below it, at least in theory, down to the centre of the earth. In Kelsen v Imperial Tobacco Co Ltd [1957] 2 QB 344 a sign protruding over a neighbour’s airspace was held to be a trespass. In Bernstein v Skyviews (1978) QB 479, Lord Bernstein failed to prevent aerial photographs of his house being taken by an aircraft from a reasonable height above © Association of Costs Lawyers Training 2020 4 the ground. The court held that an estate owner had no greater right than any member of the public to altitudes above that “necessary for the ordinary and reasonable enjoyment of the land.” Furthermore, section 76 of the Civil Aviation Act 1982 provides that no action in trespass lies against aircraft flying over the estate at a reasonable height. This will, however, depend on the use of the land and the height of any buildings on it. In Anchor v Brewhouse Developments v Barkley House (Docklands) Developments (1987) 2 EGLR 173 the jib of a crane trespassed in the airspace above the claimant's property. An injunction was granted to prevent this happening again.

There are also limitations on ownership of land beneath the ground. At common law, gold and silver belong to the Crown and, by statute, oil and natural gas also vest in the Crown. The law recognises that mines and minerals, certain water-courses and "treasure trove" (now “treasure” governed by the Treasure Act 1996) are not part of an estate. Statutory powers for utility and transport organisations to lay pipes, wires and tunnels and rights to coal and oil further mitigate the notion that the estate runs to the depths of the earth.

3.3 Fixtures and Fittings

An important distinction is made between “fixtures” and “fittings”. A fixture is, in terms of property, realty. Therefore, unless expressly excluded, a fixture will be sold with the land because it is land. By virtue of section 62 of the Law of Property Act 1925, a fixture will be included as part of a conveyance of land which is where land is given by one party to another, conferring all of the rights and obligations over that land according. Fittings are personalty, i.e the personal effects of their owner, and can be sold separately to the land or removed by their owner.

The original test that was devised by the courts to distinguish fixtures (land) and fittings (chattels) was the "degree of annexation test", i.e the extent to which the item has been attached or annexed to the property. Problems arose with this test because of "temporary" or "lean to" buildings. Other things attached to land were seen as land as long as they were firmly attached, thus if a one-ton statue was bolted down it was land and if it was not bolted down then it was a chattel. The problem was recognised by the courts and they addressed the issues with consideration of whether things on the land formed a part of an "architectural scheme of decor". A tapestry nailed to the wall which was in keeping with a theme of decoration was land (Leigh v Taylor [1902] AC 157) whilst one simply nailed to the wall so it could be seen was not (Re Whaley [1908] 1 Ch 615). However, the narrow application of the idea of a “scheme of decor” is of limited use in the context of modern home ownership. Therefore, a more modern test was developed.

© Association of Costs Lawyers Training 2020 5 The more modern test, originally devised in Hellawell v Eastwood (1851)155 E.R. 554, was a two stage test and required the courts to ask what was the "purpose of annexation". This asks why the object has been attached – was it for its own purpose or for the enhancement of the land? So, applying this test, the court must consider:

þ the degree of annexation: the extent to which the item has been attached or annexed to the property; and þ the purpose of annexation: the purpose for which the item was attached to the property.

This application of the outcome of this test can be seen by comparing the case Holland v Hodgson (1872) LR 7 CP 328 with the case of Berkeley v Poulett [1977] 261 EG 91). In Holland v Hodgson (1872) LR 7 CP 328 the owner of a mill purchased some looms for use in his mill, they were attached to the stone floor by nails driven into wooden beams and could easily be removed. The owner then mortgaged the mill and failed to keep up the payments and the mill was repossessed. The question for the court was whether the looms were fixtures forming part of the land or whether they remained chattels. The court held that the looms had become fixtures and thus formed part of the land mortgaged. In Berkeley v Poulett [1977] 261 EG 91 Lord Poulett sold his estate at auction to Effold Ltd who had agreed to sell part of the estate, consisting of Hinton House, to Mr Berkley should they succeed in purchasing the house at auction. Mr Berkley planned to open the house as a tourist attraction and wanted to keep as many of the original features of the property. The completion of the sale was delayed and during the period of delay Lord Poulett sold several items including paintings which were set into oak panelling, a large marble statue which weighed half a tonne and rested on its own weight on a stone plinth on the lawn and a large sundial also resting on its own weight. Mr Berkley claimed those items were fixtures and title had passed to him under the contract of sale. The items were held to be chattels.

Looking at limb one of the test, it is clear that the greater the degree of attachment or annexing is to the property the more likely the item is considered to be a fixture. In TSB Bank plc v Botham (1996) 7 P & C R D 1 Botham invited the court to distinguish fixtures and fittings on the basis of permanence and lasting improvement and relevance or utility and ease of removal. In this case, kitchen and bathroom units were considered fixtures, whereas white- goods and gas fires, given their limited annexation and short working lives, were considered fittings. Similarly, unless recessed (“built in”), light fittings were to be considered fittings. Another way of expressing this point, as was made clear in Elitestone Ltd v Morris [1997], is that the physical object is a fixture if it merges with the land. As per the case of Elitestone v Morris [1997] 1 WLR 687, a common-sense approach should be taken to the application of the degree and purpose tests. In this case, a free-standing wooden bungalow was held to be a fixture, not least because it would be destroyed if any attempt was made to remove it.

Following the decision in Duppa v Mayo (1669) 1 Wms Saund 282 it is accepted that fructus naturales (naturally growing plants) form land, but that fructus industriales (cultivated plants) do not. The distinction is drawn by human cultivation. Therefore, for example, "wild" mushrooms which are deliberately grown are not land.

© Association of Costs Lawyers Training 2020 6 With respect to this limb of the test, the authority suggests that an object is a chattel if it rests upon the land merely by the force of its own weight. So, between two cases, where the objects are the same or of a similar type, yet they are set down in different methods, there will be a different result. Here is a summary of some of the cases illustrating this:

Holland v Hodgson (1872) The spinning looms were bolted to the floor of a L.R. 7 C.P. 328 mill and so were held to be fixtures. Leigh v Taylor [1902] AC 157 A tapestry nailed to the wall was a fitting. Hulme v Brigham [1943] K.B. Heavy printing machinery that were unattached 152 to the floor were held to be chattels. Botham v TSB Bank plc The cooker and fridge in a kitchen were fittings. [1996] EWCA Civ 549 Elitestone Ltd v Morris [1997] A wooden house resting on concrete pillars was a 1 WLR 687 fixture. Chelsea Yacht & Boat Co v A houseboat moored with cables and with Pope [2000] 1 WLR 1941 connection to utilities was not a fixture.

It does not follow that every item bolted down is intended to be a fixture and a lack of the necessary intention would mean the item was not a fixture under limb two of the test. This can be seen in the case Potton Developments Ltd v Thompson [1998] NPC 49, ChD. The claimants in this case were distributors for a company which produced individual units designed to be used by public houses or hotels that wished to expand their letting facilities. The units contained a bedroom with an en suite bathroom. They were placed on large concrete bases and were affixed by a relatively small bracket, the user then had to attach electricity and plumbing to the box. This case concerned the leases of several units in Shropshire upon which the lease payments were not made.

Upon the claimant attempting to recover the losses for the lease payments they were notified that the public house was being placed for sale with the boxes included in the sale. The claimant argued that the boxes were chattels and could not form part of the sale. It was held that it was never intended, despite the outside appearance of the boxes, that they should be permanent, and they were therefore chattels.

Intention will usually be gauged by inference and from the communication between the parties. Intention must be made known between the parties, in Dixon v Fisher(1843) 5 D 775 Lord Cockburn observed that no person ‘can make his property real [ie belonging to the land] or personal [belonging to himself] by merely thinking it so.’

4. A contract for the sale of land

A contract for the sale of land, or of any interest in land, must comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 otherwise it will be void. This section requires the contract to:

þ be in writing; þ contain (or incorporate) all of the terms expressly agreed by the parties, and þ be signed by or on behalf of the parties

In Marlbray Ltd v Laditi [2016] All ER (D) 202, a joint contract for the purchase of land was held to be void against one of the parties but nevertheless valid against the other party both at common law and under Section 2 of the Law of Property (Miscellaneous Provisions) © Association of Costs Lawyers Training 2020 7 Act 1989. The judgment is helpful in clarifying the analysis of a joint contract and the circumstances in which it will be upheld as enforceable as against only one of the contracting parties. An objective analysis of whether it was the common intention of the parties that the execution of the contract by one party was, expressly or impliedly, conditional upon another party likewise signing the contract is required. The judgment also clarifies the law under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in circumstances where one of two proposed purchasers under a contract of sale has not given authority for the signature to the contract. There was no direct authority on this point, but the Court of Appeal confirmed that, in these circumstances, section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989 distinguishes between a “document” and “the contract” and all that is required is that one signed document should incorporate all the terms of the several contract between the two parties who did consent to the transaction.

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 applies to any contract for the sale or other disposition of an interest in land and can therefore affect agreements where the land sale is incidental to the main purpose of the agreement.

4.1 Enclosed and incorporated

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires that the written contract must include all of the terms expressly agreed by the parties. The terms must either be set out in full in the contract document, or incorporated by reference to some other document in which they are set out. As can be seen from Francis v F. Berndes [2012] All ER (D) 05, the Court of Appeal has adopted a restrictive approach and held that, where a plan of the property to be sold, signed by the prospective buyer, was enclosed with a letter signed by the seller which referred to “the land shown on the enclosed plan”, the two documents could not be read together so as to construct a contract complying with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The plan was incorporated by reference into the letter, but the letter was not signed by the purchaser and so did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

4.2 Varying the contract

A contract document can be varied after signature, but before the contract comes into force. This can be done by a simple amendment by, or with the authority of, the signatory, provided that the variation is incorporated into the final contract. Once the contract has been concluded, variation gives rise to a new contract which must itself comply with section 2 of Law of Property (Miscellaneous Provisions) Act 1989. McCausland v Duncan Lawrie [1996] 4 All ER 995 confirms that in order to create a valid new contract which incorporates the variation, there must be a single document, or an exchange of documents, which sets out the variation and incorporates the other terms of the agreement; it must be signed by both parties. It is sufficient for the variation agreement to set out the variation and refer to the previous contract for the other terms.

1. Introduction

An estate in land is basically the legal and beneficial rights and interests a person has over land and property. At common law, there were originally two freehold estates - fee simple and the life estate. A third freehold estate was later added by statute - the fee tail. Now, two legal estates in land can exist under section 1(1) of the Law of Property Act 1925. These are:

þ a fee simple absolute in possession - more commonly known as a freehold estate; and þ a term of years absolute - more commonly known as a leasehold.

Freehold is essentially the ownership of the property and land on which it stands. Leasehold is a method of owning property for a fixed term but not the land on which it stands. Possession of the property will be subject to the payment of an annual ground rent. When the lease expires, ownership of the property reverts back to the freeholder.

Estates are traditionally defined in terms of duration. The duration of a freehold estate is not known from the outset with any certainty. Its theoretical duration is known but not when the event will occur which will cause the estate to end.

It is necessary to be able to differentiate between these two legal estates and explain the terminology used. It must be appreciated that these legal estates can coexist simultaneously in respect of the same plot of land. The largest estate is the fee simple (freehold) and from this estate other estates are carved.

The two legal estates are the largest and most important of the rights to land which are recognised by law, as opposed to those operating in equity. There are, however, lesser rights which are accepted in law. These lesser interests are called “legal interests or charges”.

2. Fee simple absolute in possession (freehold)

This is the primary estate in land and it is the greatest right an owner can have over land. The land is granted from the Crown in perpetuity and it is a right which endures forever. The holder can transfer the right during his lifetime or by their will on death. The fee simple is the larger of the two legal estates in that it is of greater duration. The technical name describes the characteristics of the estate as it existed before 1st January 1926. A number of statutes passed by parliament came into force on this date and considerable changes were made to the law relating to property. As a result, some of the characteristics off the fee simple estate were changed but the old name continues to be used. The following is therefore a brief explanation as to what the words mean under the ‘old’ law.

2.1 “Fee simple”

This phrase causes some difficulty because of the changes made by the 1925 legislation. The word “fee” denoted an inheritable interest in land. The word “simple” means that the

© Association of Costs Lawyers Training 2020 9 estate could be inherited by the “general heirs”. The estate would last as long as there were heirs to inherit. If a man died without making a will (intestate), any fee simple estate which he had owned would pass to his heir - a single individual who was identified according to complicated rules. If the deceased had children, the heir would be his eldest son. If the eldest son died before his father but had himself left a son, he would be his grandfather’s heir. If there were no sons to inherit then any daughters inherited the estate jointly. If the deceased had no descendants at all then his heir would be one of his blood relations – initially to be found among his brothers or sisters (or their descendants) or, more remotely, among his uncles, aunts or cousins. At a later stage, one of the deceased’s ancestors, such as his father or grandfather, might be entitled to inherit. Therefore, the estate could pass to a fairly distant relation, as long as he or she was the closest living relative of the deceased.

However, the 1925 legislation abolished the old concept of the heir and introduced new statutory rules of inheritance. These still apply, albeit with modifications. So, after 1925 a fee simple cannot be defined by calling it an estate “inheritable by heirs general”. However, the fee simple is an estate which can endure indefinitely, provided there are persons entitled to take the property under the provisions of a will of the previous owner or under the statutory rules relating to intestacy.

2.2 “Absolute”

The word “absolute” gives rise to further complications. The word indicates that the fee simple should not be subject to any restriction effecting its duration so that it may not exist as long as there are persons entitled to inherit. So, if a man was to try to give his son a fee simple estate “until he qualifies as a solicitor” the gift cannot be of a fee simple estate. This is because the estate will not necessarily last forever because it will end earlier should the son ever become a solicitor. This sort of agreement is called a “determinable fee”.

2.3 “In possession”

The final words in the legal term for a freehold estate are “in possession”. The estate owner does not have to be in physical possession of the land itself in order to have a legal estate. “In possession” means that the estate must be current rather than being one which is to give the owner the right to use the land at some time in the future. An example is where the property is let to a tenant, in which case the tenant will be in physical possession of the land whilst the landlord has the right to receive the rent payable under the lease. In this case the landlord still has a legal estate because section 205 (1)(xix) of the Law of Property Act 1925 provides that:

““Possession” includes receipt of rents and profits or the right to receive the same, if any.”

Before 1926, there were lesser types of legal estates but section 1(3) of the Law of Property Act 1925 provides that interests which do not satisfy the requirements, prescribed under the Act, for a legal estate are to take effect as equitable interests. This means that although arrangements of this sort can still be made they now have to operate by means of a trust. In such a case, the legal fee simple is held by trustees on trust for those entitled to the equitable interests.

Section 1 of the Law of Property Act 1925 recognises a term of years absolute (leasehold) as one of the two estates in land capable of existing at law. Section 52 of the Law of Property Act 1925 requires, subject to certain exceptions, that a lease must be created by deed to be legal and thus comply with section 1 of the Law of Property (Miscellaneous Provisions) Act 1989. This means the document creating the lease must make it clear on its face that it is intended to be a deed and it must be validly executed as a deed. An expressly created equitable lease may exist. An expressly created equitable lease must be in writing and compliant with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. This means it must contain all of the terms within that one document.

An unregistered legal lease, assuming that it did not trigger compulsory registration on its creation of subsequent assignment or charge, binds the world. Therefore, a purchaser of the freehold cannot take possession of the land free of the lease. An unregistered equitable lease should be registered as a C(IV) Land Charge if a third party is not to take free on purchase of the superior estate (section 4(6) of the Land Charges Act 1972). Conversely, as an equitable lease is not a conveyance of a legal estate, it cannot take free of prior interests not registered as land charges on creation or assignment.

In registered land, a lease of seven years or less will override if legal (subject to exceptions). A longer lease should be registered (section 4 of the Land Registration Act 2002); if not, it takes effect in equity only (section 7 of the Land Registration Act 2002) and will only override if the tenant makes out actual occupation (Schedules 1 and 3 of the Land Registration Act 2002). An equitable lease can be protected by notice.

An equitable lease may be created “deliberately”. It may arise following a non- completed contract for lease or it may result from flaws in the execution of a deed of lease (assuming there is still compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989).

However, between the original parties to that equitable lease, its terms are enforceable pursuant to privity of contract. The only disadvantage to an equitable lease in comparison to a legal lease is that the original parties’ remedies (including an order for specific performance of a contract for lease) are at the discretion of the court, and not as of right.

Greater disadvantage arises in respect of equitable leases where third parties become involved in the estate. In unregistered land, a legal lease binds the world, whereas an equitable lease is vulnerable to third parties if it is not registered as a Land Charge. In registered land, a properly protected legal lease (by registration or overriding status) is all but invulnerable to third parties. An equitable lease of registered land, if not noted on the register, cannot override in its own right - it is dependent on the tenant being in “actual occupation” and that occupation being known to the third party, or being “obvious on a reasonably careful inspection” by the third party.

Furthermore, an equitable lease is not a conveyance for the purposes of section 62 of the Law of Property Act 1925, and an assignment of such will not automatically pass appurtenant rights.

© Association of Costs Lawyers Training 2020 11 It is necessary to distinguish a lease from a licence. A lease is an estate in land, whereas a licence is a mere permission to occupy. A tenant can “exclude the world”, including the landlord, but a licensee cannot do so. Furthermore, a licensee cannot benefit from the various statutory protections (including the right to a further tenancy on effluxion of the current one) afforded to both commercial and residential tenants.

In order to be recognised as a lease as opposed to a licence, three “certainties” are required:

þ certainty of term; þ exclusive possession; and þ certainty of rent.

3.1 Certainty of term

The term must be certain both as to commencement of possession and as to determination of the term from the date of grant. In Lace v Chantler (1944) KB 368 Court of Appeal a term stated to determine on the cessation of the Second World War was not certain as to determination, as, at the date of the lease, it was not possible to know when the war would end.

3.2 Exclusive Possession

Exclusive possession requires that the tenant has the right to exclude the world, including the landlord, from the estate (Street v Mountford (1985) UKHL 4). The identification of exclusive possession has troubled the courts in the past.

The courts have recognised for some time that landlords draft “sham” agreements in order to avoid any suggestion that a lease has been granted. In Aslan v Murphy (1990) 1 WLR 767, the agreement for the occupation of a very small room required the occupier to vacate for an hour a day and to share the premises if required. This was held to be a sham. In such cases, the courts have closely scrutinised the label attached to the agreement. In Addiscombe Gardens Ltd v Crabbe (1958) 1 QB 513 the court confirmed that the existence of exclusive possession was a matter of construction of the agreement, not of nomenclature or label.

The intention of the parties was originally considered to be the key (Somma v Hazelhurst (1978) 1 WLR 1014). This meant that only a sham agreement would be closely scrutinised. However, the reality was that a landlord’s intention would often be to grant a licence and the landlord often drafted the agreement – the reality would be that a potential occupier could “take it or leave it”.

Following the decision in Street, it was recognised that basing the matter on the intention of the parties (where the landlord’s intention would inevitably prevail) would allow “a coach and horses” to be driven through the various pieces of legislation which protected tenants, but not licensees. Street confirmed that the agreement and surrounding circumstances should be considered to determine whether there was exclusive possession.

© Association of Costs Lawyers Training 2020 12 This approach is clearly illustrated in the contrasting decisions in the joined appeals in Antoniades v Villiers and AG Securities v Vaughan (1988) UKHL 8. In the first case a cohabiting couple signed so-called “licences” for the “shared” occupation of a bed-sit which permitted the landlord to share the occupation. This was held to be a sham and the claimants were tenants. In the second case, occupiers of a four-bedroomed flat each had a licence agreement. Each agreement had been signed on different dates, for different rents, and required the occupier to share with the others. This was held to be a licence as there was no genuine joint tenancy.

Even where there is exclusive possession, the law may find that the occupier is a mere licensee (such as a service occupier, lodger, a purchaser taking occupation prior to completion or pursuant to family arrangements or act of generosity). In these instances, it appears that the parties’ respective intentions are subject to being interpreted by the reality of the situation and a fixed subjective intention by the landlord to grant a licence will be of little weight in determining whether a lease exists.

However, the more recent case of National Car Parks Ltd v Trinity Development Company (Banbury) Ltd (2001) EWCA Civ 1686 suggests that the courts may be a little more accepting of subjective intentions; at least where the agreement is made between commercial parties of broadly equal bargaining power who have taken legal advice before entering the agreement.

3.3 Certainty of rent

If the “lease” requires periodic payments by way of rent, certainty of rent requires that the amount falling due must be certain on the date it is payable. This is only the case if the lease requires payment of periodic rent. It is possible to create a lease without such periodic rent (Prudential Assurance v London Residuary Body (1992) 2 AC 386 House of Lords), although the law of contract will require some consideration for the grant if the agreement is to be enforceable. Consideration could be, for example, a premium paid at the commencement of the lease.

4. Commonhold

Commonhold is a way of holding a freehold estate where that estate forms a part of a matrix of interdependent properties. An example is a block of flats where each flat is dependant on the others for support and containing common parts used by all flat owners. It was introduced by the Commonhold and Leasehold Reform Act 2002 with a view to providing a means of enforcing positive covenants against successors of the original covenantor, whilst retaining freehold ownership as opposed to the grant of a long lease; a wasting asset.

A commonhold can be designated by a developer or with the consent of all of the owners of “units” in interdependent properties. Such a designation means, inter alia, that purchasers of units are automatically bound by both positive and restrictive covenants. A commonhold unit cannot, however, be forfeited on breach by the unit owner, rendering the enforcement of such covenants potentially problematic.

© Association of Costs Lawyers Training 2020 13 The commonhold regime goes some way to providing for the enforceability of positive covenants in freehold land, albeit only where properties are interdependent. , The regime has not proved popular with mortgagees, who have been reticent to lend, and with purchasers, who face limits on their ability to let units, combined with the need to ensure that the Commonhold Association overseeing the development operates and remains solvent.

5. Legal interests

þ legal easements and profits; þ legal rentcharges; þ charges by way of legal mortgage; þ charges arising under statute; and þ rights of re-entry.

5.1 Legal easements, rights or privileges

Section 1(2)(a) of the Law of Property Act 1925 covers legal easements and profits. Easesments are, essentially, rights attached to one piece of land, either entitling its occupants to do something on another’s property, or preventing the owner of that other property from interfering with the passage of some benefit to the first piece of land. An example is the right to walk over your neighbour’s land or the right to prevent the neighbour building so as to block the passage of light to your windows. In each case there is a piece of land which benefits from the easement and a piece of land which is burdened by it. There are many types of easement including rights to storage or drainage and the right to water.

There are also profits a prendre under Section 1(2)(a) of the Law of Property Act are profits a prendre. These are rights to take something from land which belongs to another estate owner, for example a right to cut wood on another’s property.

5.2 Rentcharges

Section 1(2)(b) of the Law of Property Act 1925 covers rentcharges. These do not refer to rent which is payable under a lease, but to another arrangement whereby land is charged with the payment to someone of an annual or periodic sum. If money is not paid, the person with the benefit of the rentcharge is entitled to enter upon the land in order to enforce payment. At one time, and in certain parts of the country, it was rare for an estate in fee simple to be sold for a single payment of money. Instead, the vendor took a lump sum plus a rentcharge securing an annual payment. However the Rentcharges Act 1977 prevented the creation of any new rentcharges of this type. It provided that any existing ones were to end 60 years after the Act came into force and it gave the estate owner of the charged land the right to redeem the rentcharge earlier on the payment of compensation.

The 1977 Act did not, however, abolish rentcharges altogether and they may still be created for certain purposes. For example, it is still possible to leave a property to a person subject to a rentcharge obliging him to make a periodical payment to your widow or widower, or to some other member of your family, in order to provide for the maintenance of such a person.

It is also still possible to create “estate rentcharges” which are used to ensure that the estate owner of the charged land makes a payment towards the upkeep of facilities on other land. An example of this type is the rentcharge obliging the estate owner to pay an annual sum towards the maintenance of a road on his neighbour’s property. These rentcharges are a means of providing for the enforcement of positive covenants in freehold land.

For a rentcharge to be a legal interest in land it must last for the same period as one of the two legal estates; that is, either in perpetuity or for a fixed period.

5.3 Charge by way of mortgage

Section 1(2)(c) of the Law of Property Act covers legal mortgages. A mortgage is the means whereby an estate in land is charged with the repayment of a debt or the performance of some other obligation e.g. where the borrower provides security for a loan by granting a mortgage to the lender. The mortgagee obtains an estate or interest in the mortgaged property by virtue of this arrangement. If the borrower fails to repay the loan, the mortgagee may take the mortgagor’s property and sell it to satisfy the debt.

The charge by way of legal mortgage is one of the three types of mortgage recognised by Sections 85 – 87 of the Law of Property Act 1925. The other two are not mentioned in section 1(2) of the Law of Property Act 1925 because they are created in a manner which gives the mortgagee a legal estate in the mortgaged property (in fact a lease) and are therefore legal by virtue of section 1(1) of the Law of Property Act 1925.

5.4 Any other similar charge on land which is not created by an instrument

Section 1(2)(d) of the Law of Property Act 1925 covers Any other similar charge on land which is not created by an instrument is covered by Section 1(2)(d) of the Law of Property Act.The wording of this section is rather peculiar and is due to the repeal of the first four words, which originally referred to “land tax” and “tithe rentcharge”. The charges in this category are all created by statue and are rarely encountered.

5.5 Rights of entry

Section 1(2)(e) of the Law of Property Act 1925 includes rights of entry included in leases or annexed to rentcharges. It is usual to include a clause in a lease which allows the landlord to recover, or “re-enter” the property should the tenant be in breach of any of his obligations under the lease. This right is a legal right in itself under s.1 (2)(e) and is regarded as an interest in land. A similar right is usually included in a rentcharge so that the owner of the rentcharge may enter and recover the land should the owner of the charged estate fail to pay the sums due. © Association of Costs Lawyers Training 2020 15 6. Equitable interests

All other interests are equitable under section 1(3) of the Law of Property Act 1925. A person holding an equitable interest in land does not own the legal title to the land, but he does possess a beneficiary interest in the land, i.e. an entitlement to the benefit of the land. An example of an equitable interest in land is the case of a trust. This is a relationship whereby one person (the trustee) holds land for the benefit of another person (the beneficiary). Here, the trustee holds a legal interest and the beneficiary holds an equitable interest.

Some equitable interests in land to take effect in law must be registered as a land charge or they will be lost. In addition, an equitable interest must be registered as a land charge if it is to be for commercial purposes. If it is for family purposes, the equitable interest must be “overreached”. This can be seen in the case of Bull v Bull (1955) 1 QB 234. In this case, a mother and son both contributed to the purchase of a house, but only the son’s name was on the deed of the property. After his marriage, he tried to evict his mother from the house. The Court of Appeal held this was not possible as the mother could not be turned out due to the family interests involved. Moreover, she had contributed to the purchase of the property which gave her an equitable interest in land.

Equity is not as formal as common law. The creation of an equitable interest in land is not required to be stated by deed. It is possible for equitable interests to be recognised despite the absence of supporting documents.

7. Proprietary Estoppel

Proprietary estoppel is an equitable device by which a person with a legal estate in land is estopped from denying the interest of another. The basic requirements for such a claim derived from Wilmott v Barber (1880) 15 Ch D 96 and required that:

þ the claimant made a mistake as to his legal rights; þ the claimant expended money or did some act on the faith of that mistaken þ belief; þ the defendant was aware of the true position; þ the defendant was aware of the claimant’s mistake; and þ the defendant encouraged the claimant in making the expenditure of money or acts of reliance.

Modern cases have tended to be less strict about the application of Wilmott, preferring to address issues of representation or assurance, reliance and detriment (Thorner v Major [2009] UKHL 18). Difficulties have arisen where the facts of a proprietary estoppel claim are based on a commercial agreement between the parties which does not comply with the statutory requirements for the creation or transfer of interests in land (section 2 of the Law of Property (Miscellaneous Provisions) Act 1989). Such difficulties did not arise prior to the 1989 Act as section 40 of the Law of Property Act 1925 recognised such contracts without them being in writing if they were evidenced by part performance (and such part performance was recognised by equity as a detrimental act).

© Association of Costs Lawyers Training 2020 16 Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires that contracts for the creation or transfer of an estate or interest in land must be in writing, contain or refer to all of the express terms and be signed by or on behalf of all parties to the transaction. Section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989 contains limited exceptions. These include:

þ certain short leases; þ contracts made at auction; and, most significantly þ “implied resulting and constructive trusts”.

Ironically, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 was designed to remove the uncertainties of its predecessor, section 40 Law of Property Act 1925. In Godden v Merthyr Tydfil Housing Association [1997] EWCA Civ 780 the claimant pleaded that the defendant was estopped from denying the validity of the informal agreement. The Court of Appeal, citing Halsbury’s Laws, demurred, and stated that:

"The doctrine of estoppel may not be invoked to render valid a transaction which the legislature has, on grounds of public policy, enacted is to be invalid."

In Yaxley v Gotts [2000] Ch 162 there was an informal agreement that Gotts would purchase land for redevelopment by Yaxley, in return for which Yaxley would receive two of the six flats constructed on the property. No point was taken on formality requirements at first instance and the claimant succeeded in his proprietary estoppel claim. On appeal, the court considered the formality requirements, but held that:

“If an estoppel would have the effect of enforcing a void contract and subverting Parliament’s purpose, it may have to yield to the statutory law which confronts it, except so far as the statute’s saving for a constructive trust provides a means of reconciliation of the apparent conflict.”

In this case, the pleading of an estoppel was held successful as it gave rise to a constructive trust. This has led to proprietary estoppel and constructive trusts seeming synonymous and being applied in unlikely situations – such as mortgages (Kinane v Mackie- Conteh [2005] EWCA Civ 45).

The House of Lords in Cobbe v Yeoman’s Roe [2008] UKHL 55 had some opportunity to review the relationship of estoppel and constructive trusts, but, as the claimant could not make out an estoppel on the facts (for want of certainty), the comments are obiter. Here, the Lords suggested that, in future, courts should be reticent to permit the use of equitable concepts such as estoppel and unconscionable conduct to evade formality requirements; such is required to provide certainty in commercial relations, positing that there was a distinction between proprietary estoppel and constructive trust cases and that a simple plea of estoppel would not be “rubber stamped” as a constructive trust.

It should be noted that some judges have been quick to distinguish Cobbe (see, for instance, Herbert v Doyle [2010] EWCA Civ 1095) and to permit the claim of estoppel to succeed notwithstanding the informality of the agreement. In a later House of Lords case, Thorner v Major [2009] UKHL 18, a proprietary estoppel case based on the claimant working his father’s cousin’s farm for no pay on the expectation of receiving it on the owner’s death, the Lords were at pains to distinguish the “classic farm and family” proprietary © Association of Costs Lawyers Training 2020 17 estoppel case, which has no “contractual connection” from the more commercial, contractual claims such as in Cobbe.

It can be said that the more recent decisions of the Lords/Supreme Court’s have sought, largely successfully, to resolve the uncertainty surrounding the application of the provisions of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and the exception for constructive trusts, by seeking first to identify whether the claim is found on some sort of putative contractual agreement, for which section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 bites, or whether it is founded on representation and detriment, in which case there is no agreement or putative contract which might offend the section.

1. Introduction

The Law of Property Act 1925 introduced, for the first time, a central register for land. Today, the Land Registry is the government run register of ownership of all the land and property in England and Wales, except for land and property that remains unregistered because it has not been sold or transferred (or otherwise dealt with) for very many years. The Act triggered a phased approach to registration, it was originally anticipated that all land would be registered by 1955 but that did not happen and we still have ‘registered’ and ‘unregistered’ land. The phased approach was managed with certain “trigger events”, such as the sale of the land, made registration compulsory in certain areas. In England it became compulsory to register land on the 1 December 1990 and, since this date, all land in England and Wales must be registered in order to transfer legal ownership. Today, by virtue of sections 6(4) and 7(1) of the Land Registration Act 2002, any transfer of land that fails to register the land is automatically void.

To take ownership of land, the purchaser needs to show “good root of title.” With registered land this is derived from the land registry. For unregistered land, title is proved by title deeds. Title deeds are a set of documents which constitute the proof of ownership of the property. They also show past transfers of ownership. They are necessary in order to transfer the property and so to deduct the title.

2. The Law of Property Act 1925

The Law of Property Act 1925 is the main piece of legislation governing property law. Its purpose was, firstly, to make the conveyancing procedure easier and, secondly, to increase the opportunity to purchase land. In order to accomplish the second purpose, the Law of Property Act 1925 had to ensure that the purchaser of the land gained as secure a title as was possible whilst still recognising the rights of other persons with interests in the land. Section 1(2) of the Law of Property Act 1925 therefore established five recognised legal interests which bind the purchaser of the land and section 1(3) of the Law of Property Act 1925 states that all other rights were equitable and had the effect of binding the whole world except a bona fide purchaser for value of the legal estate without notice.

3. Registered land

Land registration is the registration of title to land in a register at the Land Registry. There are a number of District Land Registries throughout the country covering different areas. The underlying principal of a system of land registration is that a person seeking to acquire an interest in land need only check the register to determine if the land is subject to any adverse interests. A person possessing an interest in land needs to take action to protect their interest by entering it on the register. Generally, a purchaser will take land free of any interests not on the register, however this is not absolute. Determining priority of competing interests in registered land will vary depending on the type of interest involved.

Land registration simplifies the conveyancing process. For most transactions, bundles of title deeds no longer need to be produced. In registered land, title deeds comprise of official copies of the registered title, the title plan and any document referred to in the

þ the Property Register; þ the Proprietorship register; and þ the Charges register.

The register should reflect precisely the land in the title and any third- party interests. Interests that are capable of being overriding are not, however, found in the register. Since December 1990 the whole of England and Wales has been an area of compulsory registration. So, following certain ‘triggering’ transactions, the land must be registered at the Land Registry within two months of completion otherwise the transaction is void. The governing statute used to be the Land Registration Act 1925 but this is now superseded by the Land Registration Act 2002 which came into force on 13 October 2003.

Section 28 of the Land Registration Act 2002 sets out the basic rule that priority between interests in registered land are determined by the order of creation. An earlier interest will, prima facie, be given priority over a later one. However, this basic rule is subject to sections 29 and 30 of the Land Registration Act 2002 and thus only comes into play where these do not apply. By virtue of section 29 of the Land Registration Act 2002 a registered disposition for valuable consideration will take priority over unprotected interests. Protected interests include a registered charge, or those subject to a notice on the register, overriding interests or those excepted from the effect of registration (section 29(2)(a) Land Registration Act 2002).

The estates and interests capable of substantive registration, which are given a unique title number, are as follows:

Under the Land Registration Act 1925 þ fee simple absolute in possession (freehold estate); þ term of years absolute over 21 years; and þ rentcharges.

Under the Land Registration Act 2002 þ fee simple absolute in possession (freehold estate);

þ term of years absolute of seven years or more. This also includes leases (whether at least seven years unexpired or not) subject to the right- to-buy provisions or where there is a period of more than three months between the signing of the lease and the moving. into occupation of the property; þ rentcharges; þ franchises; and þ profits à prendre in gross if in perpetuity or for a term with more than seven years remaining.

All other interests are protected by entry of a notice or restriction in the register of the relevant title number.

Under the Land Registration Act 1925, the copy of the register in the form of a land certificate will be given to the registered proprietor. If there is a mortgage on the property, the Land Registry will retain the land certificate and a charge certificate will be issued in favour of the mortgagee. Under the Land Registration Act 2002 no land or charge certificate is issued. Instead, the Land Registry issues a title information document which consists of a copy of the register and, where the title plan has been amended, a copy of that title plan. This is not a document of title and is issued for information purposes only.

The Register is divided into three parts:

Property Register This part of the register describes the property and rights benefitting the property (e.g a right of way over neighbouring (including a plan) land). This part of the register shows the names of the current owners Proprietorship and the quality of title, usually absolute title. The different grades Register of title that can be given by the Land Registry are absolute title, good leasehold title, qualified title and possessory title. This part of the register shows encumbrances on the property, for Charges Register example, mortgages, restrictive covenants and rights burdening the property, such as an easement.

3.2 The Property register

This part of the register defines and describes the property, the rights benefiting the property, its address and it must also include an attached plan which must correspond with the real boundaries of the property. This register can contain any rights of way or other positive rights adhered to this property. The wording of these must be carefully read to ensure suitability for the purposes of the use of the new owner. For example, a common right is a right of way but this is usually specified so that it is on foot only. Therefore, it would be no use to someone who wants to use a vehicle at that property. A benefit of an easement may be registered in this register too. There may also be a reference to a specific conveyance which contains the rights which benefit the property. With any of these rights, the buyer may acquire an obligation and may therefore be required to contribute towards the maintenance costs or adoption of roadways.

3.3 Proprietorship register

Contains information about who the owner is (registered proprietor), the name, class of title (absolute, qualified, possessory, leasehold) and entries affecting the owner’s right of disposal.

3.4 Charges Register

This may contain various charges, covenants and any other third party rights with respect to the property which may affect the owners’ rights. For example, a common right is a restrictive covenant which restricts the owner so he cannot do whatever he wants with the property. Such dealings are always subject to the consent of the person with the benefit. It is also important to check whether there were any past breaches of this covenant as the liability passes with the ownership. The new owner could be responsible for paying for © Association of Costs Lawyers Training 2020 21 something which was not his fault. The charges register may contain other restrictions in relation to property e.g. a mortgage. Consent of the lender will therefore be required before any disposition of the property takes place.

4. Interests which have overriding status

Overriding interests were created by the Land Registration Act 1925. They are interests that are not protected by an entry on the land register but which nevertheless bind any person who acquires an interest in registered land, either on first registration or where there has been a registrable disposition of a registered estate that has been completed by registration. The rationale behind these types of rights binding the purchaser is that they would not require registration for them to become apparent because they ought to be apparent to any person acquiring ownership of the registered title upon a physical inspection of the land (and/or inquiring with persons residing on the land) or by reference to other evidential aids, such as the registers of local land charges maintained by local authorities.

The Land Registration Act 1925 was repealed by the Land Registration Act 2002 which now refers to overriding interests as:

þ unregistered interests which override first registration, which are dealt with under Schedule 1 to the Land Registration Act 2002; and þ unregistered interests which override a registered disposition, which are dealt with under Schedule 3 to the Land Registration Act 2002.

The class interests that have overriding status under the Land Registration Act 2002 are more restricted than those under the Land Registration Act 1925 but include short leases, certain rights of people in actual occupation, unregistered legal easements and local land charges.

Section 29(1) of the Land Registration Act 2002 provides that no interest can be an overriding interest unless it had existed immediately before and up to the relevant date of disposition, and that up to that date it had affected the estate that forms the subject of the disposition. Therefore, any interest which arises between the dates of disposition and registration, the so-called registration gap, can qualify for overriding status (section 74 of the Land Registration Act 2002).

The person disposing of the registered title of an estate has a duty to disclose to the purchaser any subsisting overriding interests. If they fail to do so the purchaser may have a cause of action against them (Ferrishurst v Wallcite Ltd [1999] Ch. 355).

5. Unregistered Land

To establish title to unregistered land the purchaser must investigate the title deeds, tracing back at least 15 years leading up to the present seller. In other words, they will investigate the conveyancing relating to the property, up to and including the present person in possession of the property. This establishes a good root of title. So in unregistered land, title deeds are not contained in one document and are set out in a number of separate documents. A set of these documents is called epitome of title. Epitome is a selection of those important documents which show the history of the land concerned e.g. what rights © Association of Costs Lawyers Training 2020 22 and encumbrances are attached to the land, who is the owner, how is the beneficial title held etc. Epitome usually also contains the list of contents. The seller is required to show the epitome to the buyer. Title deeds therefore comprise of conveyances, mortgages and any other documents such as death certificates, grants of representation, marriage certificates, deeds of easement.

The following is a summary of the three main types of document:

þ Conveyance: a document which is evidence of the legal transfer of the property. þ Deeds of easement: an easement is a right which grants certain rights of way over the property which belongs to some other owner. þ Mortgage: this represents a certain interest in the land in return for a loan.

For leasehold property, title deeds comprise of the lease, if the lease is registered then official copies of that lease, any subsequent lease, landlord licences and rent review memoranda.

The following is a summary of the three main types:

þ Lease: an agreement between the landlord and the tenant as to the occupation of the landlord’s property for some consideration and for a certain period of time. þ Rent review: a review of rent amount in certain periods of time. It is important to see in the lease whether the rent review is upwards or downwards. Upwards rent review means that the tenant will not be able to have the rent at any lower rent than it is now even if the market prices fall. On the other hand, downwards rent review means that the rent can only be less than the current amount. þ Landlords licences: these can be a licence to sublet or licence to assign. May be given to the tenant upon the agreement between the landlord and the tenant.

The equitable interests are protected in three ways:

þ the family equitable interests are protected by overreaching; þ the commercial equitable interests are protected by registration of land charges at the Land Charges Registry. In this instance the purchaser will be bound only by the charges that are registered (section 198 of the Law of Property Act 1925). He will not be bound by any charges which are registrable, but not registered, even if he knows about them (section 4 of the Land Charges Act 1972), so it is vital that the equitable interest holder ensures that the interest is properly registered to ensure protection. Note that registration is not made against the property but against the name of the estate owner. The land charges are set out in the Land Charges Act 1972; þ where the interests are not overreachable, nor fall within the ambit of the Land Charges Act 1972 then whether those interests are binding is dependent on the doctrine of notice.

6. Boundaries

A boundary separates the land owned by one person from his neighbour. A general boundary is an imaginary line dividing one person’s property from another. It is rarely identified with precision on the ground or in documents. Section 60 of the Land Registration Act 2002 provides: © Association of Costs Lawyers Training 2020 23

þ the boundary of a registered estate shown for the purposes of the title register is a general boundary, unless shown as determined under this section; and þ a general boundary does not determine the exact line of the boundary.

All boundaries shown on title plans that are produced by the Land Registry are subject to the general boundaries rule. This rule means that the precise line of a boundary is undetermined by the Land Registry unless an application is made for it to be fixed. In Drake and Another v Fripp [2011] EWCA 1279, it was emphasised that the boundary line on a title plan is just a general boundary and cannot show the precise boundary between two properties.

In Lee v Barrey [1957] Ch 25, the contract plan and the transfer plan showed a plot of land with irregular boundaries and these had been marked out on the site by pegs. The Land Registry title plan showed a plot with regular boundaries. The defendant built his house based on the title plan and the claimant brought an action for trespass. The claimant was entitled to seek relief. It was held that the general boundaries rule is confined to the effect of the title plan only. It does not allow the registrar or the court to alter the effect of a transfer plan, which represents the contractual bargain between the parties.

6.1 Title plan

A title plan is based on ordnance survey mapping and shows:

þ the ordnance survey map used to prepare the title plan; þ the north point; þ any building, walls fences or hedges represented by a black line; þ the general boundary of the land indicted by a red line; and þ sometimes measurements are included that have been taken from deeds when the land was registered/agreement reached by way of a deed that has been used to update the register.

If a plan is taken from an ordnance survey map, the boundary line is taken to be the centre line of any boundary feature; for example, a hedge.

6.2 Physical and legal boundaries

A boundary can be physical or legal. A physical boundary is a feature that can be seen which marks out a legal boundary. Examples of a physical boundary are natural features such as a stream or river or man-made features such as a wall or fence that has been erected to mark a boundary. The fact that a physical feature is followed does not indicate who it is owned by or whether the boundary shown runs on one side or down the middle.

Where two properties are divided by a hedge, there is a presumption that the boundary is along the opposite edge of the ditch from the hedge or bank unless the ditch is man- made or there are two ditches either side of the hedge.

© Association of Costs Lawyers Training 2020 24 A legal boundary is one that can be identified in historic legal documents, but is not seen on the ground. It is an exact line and has no thickness. This may be because the landscape has changed over time and/or the boundary has been moved.

A person will often assume the physical extent of the property they are buying. However, a lawyer should review the title plan and any plans annexed to title documents supplied; particularly to ensure that any plans or descriptions of the property are clear, consistent and conclusive. If the exact extent of the boundary is not shown and it is unclear, the owner should agree where the boundary is and apply to the Land Registry for determination. Where possible, this should be agreed between all relevant neighbours to avoid any future conflict. There may be new or changed physical features that interrupt the original boundary or change its course.

In Zarb v Parry [2011] All ER (D) 100 a neighbour obtained title to a strip of land by adverse possession. In a postscript to this decision, the Court of Appeal appeared to encourage pursuit of boundary disputes when it confirmed that a buyer cannot assume that a boundary dispute has gone away, even if the seller confirms this in replies to enquiries. Buyers were advised to seek to regularise the position before completing the purchase. Lady Justice Arden acknowledged that taking those steps “will involve extra costs and delay”, but suggested that those costs “will be less than the undoubted cost of litigation”. The result of this guidance is that a buyer’s solicitor might be considered negligent if a latent dispute is left untested.

© Association of Costs Lawyers Training 2020 25 Chapter 2 Learning outcomes After studying this chapter you should understand the following main points: þ Trusts of Land with particular reference to co-ownership of the family home including the holding and management of co-owned land; þ the characteristics of an easement, how they are created and discharged; þ the common law rules on the creation of covenants, the distinction between restrictive and positive covenants and the enforcement of covenants.

2.1 Co-Ownership

1. Introduction

Co-ownership is a legal concept where more than one owner shares the legal ownership of a property. The characteristics are that ownership is concurrent and owners are entitled to possession at the same time.

Co-ownership can arise deliberately or by operation of law. Co-ownership will arise deliberately because the property is conveyed to two or more persons as co-owners so that they own the same legal estate at the same time. Co-ownership can arise by operation of law as the product of a resulting trust, for example.

In England and Wales, there are two ways of co-owning property. Property may be held by owners as tenants in common or as joint tenants. The case of Goodman v Gallant [1986] Fam 106 is authority that a written declaration that a couple owns joint beneficial interests as tenants in common or as joint tenants will be sufficient proof of the parties’ interest.

The characteristics of each type of ownership is summarised in the following table:

Joint Tenancy Tenancy in Common 1. Each owns the whole 1. Each owns a notional share 2. Four unities apply 2. Only unity of possession applies 3. Can exist at law and in equity 3. Exists only in equity 4. Survivorship rule applies 4. Survivorship rule does not apply

In the case of Stack v Dowden [2007] UKHL 17 it was held that if there is no declaration or contract specifying the shares the parties hold then the court will start off with the presumption that the parties own the property as joint tenants and, thus, in equal shares. The burden of proof is on the party seeking an unequal contribution of the property. The Court of Appeal applied the Stack case in Fowler v Barron [2008] EWCA Civ 377. In this case the property was held in joint names. It was held that the presumption would not be rebutted even where the female cohabitant had made no contribution. In order for a claimant to show there should be more than a presumed share, or a share in property that is held in a sole name, the party must prove there is an implied trust.

2. Joint tenancy

In a joint tenancy each owner is entitled to the whole estate and the co-owners do not have shares in the land. In order for a joint tenancy to exist it must be proved that the four unities exist. These are the unities of possession, interest, time and title.

The unity of possession requires that the co-owners are equally entitled to the whole of the land. There can be no physical division of the land separating each joint tenant’s share and there must be no restriction on the use of all of the land of the co-owners. The unity of interest requires that the interest of the co-owners must be identical and each interest must be for the same duration and of the same nature. The unity of time requires that the interest of all the owners should vest at the same time. Finally, the unity of title requires that all the co-owners should have acquired their interest in the land at the same time in the same way, or by adverse possession (i.e. squatting). © Association of Costs Lawyers Training 2020 27 Even where all four unities are present, the arrangements may still not satisfy the requirements for a joint tenancy. For example, where the grantor used, or the conveyance contains, words of severance indicating that the owners are to have separate shares in the property. For example, to hold the property in “equal shares” or “to A, two-thirds and B, one-third”.

The doctrine of survivorship is a crucial aspect of a joint tenancy. As the joint tenant is not regarded as having a distinct share of the land he is not able to dispose of his interest by will on his death, nor may the land pass on intestacy if he fails to make a will. Instead, on the death of one joint tenant, the remaining joint tenants acquire the interest of the deceased. The last surviving joint tenant will become the sole beneficial owner and can dispose of the property as he wishes.

3. Tenancy in common

The tenant in common is entitled to a notional share of the property, for example, a half or a quarter. The tenant can dispose of his share during his lifetime or upon his death. However, this is an “undivided share” and until partition or sale takes place the tenants in common are entitled to possession of the whole. Examples of tenancies in common are:

þ when co-owners contribute in unequal shares; þ where commercial ownership is in partnership property; and þ where there are joint mortgagees.

Since 1925, co-ownership of any legal estate in land must be a joint tenancy. A tenancy in common can only exist in equity.

4. Co-ownership in law and equity

Both law and equity recognise joint tenants, but tenants in common are only recognised in equity. Therefore, if the conveyance of a legal estate is made to A and B as tenants in common, the legal estate will pass to them as joint tenants, but effect will be given to their intention by treating them as tenants in common in equity. A and B will hold the property as trustees, since a trust of land is automatically imposed whenever there is co-ownership of land. In every case of co-ownership, the legal estate in land is held by the joint tenants on trust for one another.

Where there are more than four joint tenants (trustees) of a piece of land, the first four named trustees of full age will be classed as the trustees of the land, holding the land/property on trust for all the joint tenants, including those who are not named as trustees. A person must be 18 years or older to be of full age and therefore able to become a trustee over the land in favour of the joint tenant.

5. Severance

Co- ownership does not have to be a joint tenancy if the words in its creation clearly indicate that the owners want separate shares in the property from the outset. Severance can occur at a later stage in the property’s history and a joint tenancy can convert to a tenancy in common. It is, however, not possible to sever the joint tenancy of a legal

© Association of Costs Lawyers Training 2020 28 estate, but it is possible to sever an equitable joint tenancy (sometimes called the beneficial joint tenancy). When the equitable joint tenancy is severed, the joint tenant severing will take an equal portion of the interest as a tenant in common, regardless of his or her original contribution. As an example, if a property was expressly conveyed to two persons as joint tenants, on severance each will acquire a half share as tenants in common.

Severance can be brought about in several ways:

þ notice in writing in accordance with section 36(2) of the Law of Property Act 1925. The notice must evince an intention to sever immediately (Harris v Goddard [1983] 3 All ER 242) and the notice must be served on all the joint tenants (Kinch v Bullard [1998] 4 All ER 650). In Kinch v Bullard the court decided that a notice of severance delivered to the husband was valid even though it was his wife who accepted it; þ an act done by the joint tenant to his own share, for example, offering it for sale; þ mutual agreement – severance will take place where there is an agreement between the joint tenants to hold the equitable interest in shares even though the agreement may not be enforceable in law (Burgess v Rawnsley [1975] Ch 429); þ any course of dealing that indicates that the co-ownership is a tenancy in common (Palmer v Rich [1897] 1 Ch 134).

5. Implied Trusts

Co-ownership can come about at the express decision of the parties themselves, but it can also occur “by operation of law”. An example of this is by the presumption of a resulting trust or a constructive trust - collectively known as implied trusts.

Where one partner (known as a cohabitant) is trying to establish an implied trust against the other it is usually for one of two reasons:

þ Where the home is in joint names, to establish that the beneficial interest is not held equally; or þ Where the property is in the sole name of the other partner, to show that the beneficial interest is shared.

The latter is the most common and intention to share can be express or inferred by conduct.

Prior to the case of Oxley v Hiscock [2004] EWCA Civ 546, implied trusts were categorised as either a resulting or constructive trust.

5.1 Resulting trusts

A resulting trust comes into existence where a nominal purchaser of property, X, is deemed to hold the property on trust which “results” back to the person who has financed his purchase, Y. Under the resulting trust X takes the legal or paper title in the property and the equitable interest is presumed to belong to Y, the “real” purchaser. This is based on the maxim that “equity assumes bargains, and not gifts” - the person who pays the money normally expects to get something for it. So, when Y purchases property in the name of X, there is a presumption of a resulting trust in the name of Y, in the absence of a clear © Association of Costs Lawyers Training 2020 29 intention to donate or to lend. Such resulting trusts usually arise where Y contributes to the purchase of a property but X is the sole registered proprietor. Y’s contribution gives Y an equitable or beneficial interest in the property.

An example of a resulting trust can be found in Bull v Bull [1955] 1 QB 234 which you may recall from a previous handout. To summarise the facts again - a mother and her son purchased a house, with the son contributing more than the mother and the son becoming the sole legal owner. It was agreed that the mother would occupy two rooms of the house only. Following a disagreement, the son wished to have his mother leave the house and so sought to sell the house. The issue the court was asked to consider was could the mother occupy the house pending sale? It was held that she could; the property was held on trust by the son for both himself and his mother.

A direct financial contribution to the purchase price or deposit is required for a resulting trust and a person's share in the property will depend upon the contribution as demonstrated in the case Curley v Parkes [ 2004] EWCA Civ 1515. Payment towards solicitors’ fees or towards the mortgage will not suffice.

5.2 Constructive Trusts

This is similar to a resulting trust in that the legal owner holds the property in trust for another person. The creation of a constructive trust is not related to the direct contribution of the purchase price.

The following must be shown to establish whether a constructive trust exists:

þ There must be an agreement; i.e. a common intention between the parties that one of them, not named on the legal title, will have an interest in the land; and þ that person has made a contribution (direct or indirect) towards the purchase of the property.

It is therefore necessary to determine the meaning and existence of a common intention, the level of contribution and its nature.

A constructive trust refers to an agreement between the parties to share the home beneficially, with the non-owing party relying on the agreement to his detriment. In Lloyds Bank v Rossett [1990] UKHL 14 the House of Lords made a distinction between cases where there was an express agreement to share the property and those where there was no express agreement to share. In respect of the former (express agreement) the court said that question to resolve was whether the parties had reached “any agreement, arrangement or understanding that the property is to be shared beneficially”. An example can be seen in the case of Eves v Eves [1975] 1 WLR 1338 where the man told the woman that the house had to be put into his sole name because she was under 21 years of age, but had she been older it would have been in joint names. The court held this to be express common intention to share the property.

Where there is no express agreement to share the court looked to conduct. Case law suggests that contributing to the purchase price and sharing the mortgage payments regularly will suffice, as will complete renovation of a property or major improvements. However, as was stated in the Lloyds Bank case, spending seven weeks turning a house into © Association of Costs Lawyers Training 2020 30 a liveable condition was held to be “trifling” and not sufficient to constitute a common intention to share.

The case of Midland Bank v Dobson [1986] 1 FLR 171 demonstrates that, in both situations, the applicant also has to show that he acted to his detriment in reliance upon the agreement. The purchase of some household equipment and redecoration of the property were not enough to be considered detrimental reliance on the common intention to share. In Grant v Edwards [1986] 3 WLR 114 the court found that detrimental reliance had to consist of conduct that the party could not reasonably be expected to take unless he was to have an interest in the property.

5.3 Oxley v Hiscock and beyond

In Oxley v Hiscock [2004] EWCA Civ 546 the Court of Appeal provided very useful guidance in the area of implied trusts. The focus was taken away from the type of trust and more focus was attached to the “intention to share”. In this case a relationship had broken down and the dispute was about the proceeds of the sale of the property. The parties had previously discussed owning the property jointly but had not discussed the size of the beneficial interests. Both parties had made direct financial contributions to the purchase price. Initially it was held that the man was holding the proceeds of sale on trust for them both in equal shares. The man appealed stating that each party's beneficial interest should be based on what they contributed to the purchase price. The Court of Appeal said that if there was no express declaration of trust, the court should approach it as follows:

þ First consider whether there was evidence of a communicated common intention that both parties should share in the property beneficially. Look to discussions at the time of purchase. þ If there was no express discussion, ask whether the necessary intention can be inferred from direct financial contributions to the purchase price or other conduct.

The House of Lords decision in Stack v Dowden [2007] UKHL 17 built on the guidance in the Oxley case. Lady Hale stated:

“the court must decide the result which reflects what the parties must, in the light of their conduct, be taken to have intended.”

This case strongly restated the principle that equity should follow the law. The court said that the starting point is:

þ a house in joint names legally is held on a beneficial joint tenancy; and þ a house in one party's sole name is owned by that party absolutely.

Furthermore, the party seeking to establish otherwise has the burden of proving it and it is a “considerable burden”. In so doing, he would need to establish a common intention when the property was acquired that the beneficial ownership should be different from the legal ownership. The court then went on to consider the two different situations.

5.3.1 Where the property is held in joint names

The court will consider two questions: © Association of Costs Lawyers Training 2020 31

þ Firstly, did the parties intend their beneficial interest to be different from their legal interests? þ Secondly, if they did, in what way and to what extent?

Each case will turn on its own facts and more than just financial contributions will be looked at in considering the parties’ true intentions.

The court stated it will look at:

þ any discussions that took place at the time of the transfer þ the reason why the home was put in joint names þ the purpose the home was acquired þ the nature of the relationship between the parties þ whether the parties have any children þ how the original purchase was financed þ how the mortgage is dealt with þ the financial arrangements of the parties (joint account?) þ how the household bills are paid

Such factors were applied in the case of Fowler v Barron [2008] EWCA Civ 377in which the court found that there was no shared intention for the property to be held other than equally as Ms Fowler contributed to household expenses and the parties had “pooled” their resources from which household bills were paid.

5.3.2 Where the property is held in one party's sole name

Firstly, the party seeking to establish an implied trust will have to show that the parties intended that he should have any interest at all. If that can be established then, in order to establish the size of the beneficial share, the court will consider the “whole course of dealings” taking account of all relevant conduct.

In the Privy Council case of Abbott v Abbott [2007] UKPC 53 shortly after the marriage, the husband's mother transferred a plot of land into the husband's sole name. The mother helped with the construction costs but the couple also took out a joint mortgage that was paid from pooled resources and secured by insurance policies on both parties. The Privy Council stated that the initial judge had relied too heavily on the comments of Lord Bridge in Lloyds Bank v Rossett (1990):

“it is extremely doubtful whether anything less than direct financial contributions would suffice”.

The Privy Council went on to say that the law had moved on and to establish a trust it was necessary to look at the whole course of conduct between the parties to find out their intentions. In this case the course of conduct showed that the house was intended to be shared jointly between them.

The fairly recent case of Jones v Kernott [2011] UKSC 53 echoes these developments in this area. © Association of Costs Lawyers Training 2020 32 5.4 Unregistered Land

The doctrine of notice applies as equitable interests arising under constructive and resulting trusts are not registrable as land charges. In the circumstances of co-ownership, however, they give rise to family interests which can be overreached. Equitable interests arising in the case of sole owners can be protected only by the doctrine of notice based on occupation (Kingsnorth Trust Ltd v Tizard (1986) 1 WLR 783).

5.5 Registered land

Equitable interests must be protected by registration in the Land Register. If an equitable interest is not registered, the holder of the interest is still protected as long as he is in occupation. It will be classed as an interest which is capable of being overriding (Schedules 1 and 3 Land Registration Act 2002). In the instance of both unregistered and registered land, spouses have additional statutory protection under the Family Law Act 1996 which re-enacts, with minor amendments, the Matrimonial Homes Act 1983.

6. Overreaching

Overreaching is where there are two or more trustees holding land on trust (e.g. co- ownership and joint tenancy) and they decide to sell the land. Provided the purchase money is paid to the two trustees, the purchaser of the land will receive the land free from any of the beneficiaries’ interest. This means that, because the trustees were holding the property for the beneficiaries (e.g. joint tenants), the person who bought the land could be stuck with having property which many people have a legal claim to. Overreaching occurs where the beneficiaries of the land have an interest in the money paid for the property, so can claim from that rather than have a claim on the property which is now owned by someone else. The interest of the beneficiaries is lifted from the trust property and, instead, attached to the capital money. An example of this can be seen in the case City of London Building Society v Flegg [1988] 1 AC 54. For the overreaching provision to be effective the receipt for the money must be signed by two trustees or a trust corporation, otherwise the beneficiaries will retain an interest in the land (Williams & Glyn’s Bank v Boland [1980] UKHL 4).

7. Solving disputes between co-owners

All trusts of land are governed by the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996).

A new trust, however worded, must be a trust of land and governed by TOLATA 1996. the Trusts of Land and Appointment of Trustees Act 1996. All beneficial interests are in land rather than in money. The following sections of the 1996 Act are those which are relevant to solving disputes:

Section 11: Requires trustees to consult with and gain the consents of the beneficiaries before selling. Section 12: Concerns the right of occupation. Sections 14 and 15: provide that disputes can be referred to court. A buyer of the property will still be able to take the land free of the

8. Constructive trusts and third-party interests

The equitable doctrine of notice has been replaced by a scheme of registration where title to the land is registered. Lesser interests must be protected by means of an entry on the register of the title to which they relate. If an interest is unprotected, a transferee for valuable consideration of the legal title will acquire the land free from it, unless it is an “overriding interest” in which case it will bind the transferee irrespective. However, it has been held that if a transferee of the land expressly agrees that he will honour the rights of a third party, he will be bound by those rights under a constructive trust even though it had not been properly protected on the register. This constructive trust prevents the purchaser taking advantage of his strict rights under the statute. An example where such a constructive trust was held to have arisen is the case of Lyus v Prowsa Developments [1982] 1 WLR 1044. In this case Mr and Mrs Lyus entered into a contract to purchase a house which was built on a new estate. The developers subsequently went into liquidation and the bank, which held a mortgage on the land, sold it to another developer. In the contract, this second developer agreed to take the land “subject to, but with the benefit of the contract made with Mr and Mrs Lyus”. This developer subsequently sold the land to a third developer who agreed to the same terms. The contract entered between the first developer and Mr and Mrs Lyus was an interest in land which should have been protected on the register as a minor interest. Even though it had not been protected appropriately, Dillon J held that the developers who had purchased the land were bound by it. They had expressly agreed to take subject to the interest and therefore a constructive trust was raised to “counter unconscionable conduct or fraud”. Dillon J stressed that the agreement was not a general agreement to take the land subject to possible encumbrances, but a positive stipulation in favour of a particular identified interest.

Further consideration to the operation of such a constructive trust was given by the Court of Appeal in the case of Ashburn Anstalt v Arnold [1989] Ch 1. The court addressed, obiter, the question whether a purchaser could be bound by a constructive trust when he had expressly agreed to acquire land subject to a third party’s contractual licence. Citing the Lyus case, the court accepted that a constructive trust could arise in such circumstances, but stated that “the court will not impose a constructive trust unless it is satisfied that the conscience of the estate owner is affected”. The mere fact that land was expressly said to be conveyed “subject to” a contractual right would not suffice alone:

“We do not think it is desirable that constructive trusts of land should be imposed in reliance on inference from slander materials.”

The court suggested that other factors would be necessary to justify the imposition of a constructive trust, for example evidence that the purchaser paid a lower price for the land as a consequence of the express agreement to take subject to the interest. The essence of the constructive trust is the purchaser’s voluntary acceptance of obligations in favour of the third party.

When a bankruptcy order is made, a bankrupt’s property normally automatically vests in the official receiver/trustee in bankruptcy. However, property owned by the bankrupt on trust does not. This means that, in the case of co-owned property (whether as joint tenants or as tenants in common), where one joint proprietor is made bankrupt, only the bankrupt’s equitable interest vests in the trustee. The co-owners can therefore still proceed with a sale of the property and the buyer is protected by the usual overreaching provisions as long as he pays the purchase price to all the trustees and complies with any restrictions on the register. It should be noted that bankruptcy automatically severs a joint tenancy.

It is likely that following the bankruptcy, the official receiver/trustee in bankruptcy will apply for a restriction to be entered on the register at the land registry:

“No disposition of the registered estate, other than a disposition by the proprietor of any registered charge registered before the entry of this restriction, is to be registered without a certificate signed by the applicant for registration or their conveyancer that written notice of the disposition was given to [name of trustee in bankruptcy] (the trustee in bankruptcy of [name of bankrupt person]) at [address for service].”

The co-owners can also apply for the usual tenants in common restriction. On any sale by the registered proprietors, these restrictions must be complied with in the normal way. If they are, the buyer will be registered in the usual way and the restriction(s) removed. The official receiver/trustee in bankruptcy will have no claim against the buyer or the property and must look to the seller for the bankrupt’s share of the net sale proceeds.

If co-owners do not wish to sell, section 335A of the Insolvency Act 1986 provides:

þ any application by a trustee of a bankrupt’s estate under section 14 TOLATA 1996 (powers of court in relation to trusts of land) for an order under that section for the sale of land shall be made to the court having jurisdiction in relation to the bankruptcy; þ on such an application the court will make such order as it thinks just and reasonable having regard to: o the interests of the bankrupt’s creditors o where the application is made in respect of land which includes a dwelling house which is or has been the home of the bankrupt or the bankrupt’s spouse or civil partner or former spouse or former civil partner § the conduct of the [spouse, civil partner, former spouse or former civil partner], so far as contributing to the bankruptcy § the needs and financial resources of the [spouse, civil partner, former spouse or former civil partner], and § the needs of any children, and o all the circumstances of the case other than the needs of the bankrupt þ where such an application is made after the one-year period beginning with the first vesting under IA 1986, Part IX, Chapter IV of the bankrupt’s estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.

© Association of Costs Lawyers Training 2020 35 These statutory provisions essentially codify the common law rules. The principle behind the rules is that, in a case of insolvency, the court will order an immediate sale of the land, in the absence of exceptional circumstances, even in the common case where the co- owners are spouses. The courts have refused to lay down guidelines to define “exceptional circumstances”, as each case turns on its own facts, but the following are examples:

þ where the bankrupt’s spouse was seriously ill; þ where the house had been specially adapted for a handicapped child or spouse; þ where the bankrupt was bankrupt on his own petition, was not being pressed by creditors and the property was occupied by his former wife and children.

The displacement of a spouse and children is not an exceptional circumstance. If the court exercises its powers, it may refuse to order a sale of the property, or postpone it.

9.1 Re-vesting of the bankrupt's home

Section 283A of the Insolvency Act 1986 applies where the bankrupt’s estate includes an interest in a dwelling house which, at the date of the bankruptcy order, was the sole or principal residence of:

þ the bankrupt; þ the bankrupt's spouse or civil partner; or þ a former spouse or former civil partner of the bankrupt.

Unless the trustee in bankruptcy has taken action to deal with the interest in the meantime (e.g. by selling it or applying for a possession order) the interest will automatically re-vest in the debtor (without any transfer, assignment or conveyance) three years after the date of the bankruptcy order. The three-year period can be extended by order of the court, or if the debtor fails to inform the official receiver/trustee in bankruptcy of his interest in the property. The three-year period can also be reduced in certain circumstances. If the trustee in bankruptcy considers that:

þ the continuing vesting of the property in the bankrupt’s estate is of no benefit to the creditors; or þ the re-vesting to the bankrupt will facilitate a more efficient administration of the bankrupt’s estate; and þ the trustee can send the bankrupt a notice to that effect. The property will then re-vest in the bankrupt one month after the date of the notice.

Where re-vesting occurs in respect of the debtor's beneficial interest in a jointly owned property, the trustee in bankruptcy must, within seven days, make the relevant Land Registry application so as to reflect the re-vesting on the register. This will normally be an application to withdraw the restriction.

1. Introduction

As well as owning an interest in land, a person can also own an interest in the land of another. This interest may be a legal or an equitable interest.

Easements are incorporeal hereditaments which comprise either a positive or negative right of a user over the land of another. An easement is, in effect, a right annexed to one piece of land (the dominant tenement) to utilise land in a different ownership (the servient tenement) in a particular way. Easements are usually positive, giving the dominant owner the right to enter or use the servient land in some way (e.g. a right of way). However, they can be negative and prevent something being done on the servient land and so giving the dominant owner the right to receive something from the servient land (e.g. a right to light).

Easements are different from:

þ natural rights arising by law from the ownership of land (e.g. a right to continuance of an accustomed flow of water in a natural channel bordering land) John Young v Bankier Distillery [1891-94] All ER Rep 439; þ profits a prendre which are the right to take something from the servient land; þ rights of common which are a form of profit a prendre exercisable over common land (e.g. rights of pasture or to cut turf, peat or wood); þ customary rights enjoyed by a changing body of persons incapable of taking a grant and in relation to which there is no dominant tenement (e.g. the right to use a way to get to a church or market); þ public and statutory rights where there is no dominant tenement (e.g. the right of the public to pass along a highway or the statutory rights of utility companies to run pipes and cables); þ licences which grant a contractual non-proprietary permission to do something on the licensor’s land which would otherwise amount to trespass (e.g. a right to erect scaffolding or for a crane to oversail). These are personal rights only enforceable by the original contracting parties (with the exception of certain statutory electricity wayleaves).

An easement falls within the definition of "land" (section 205(1)(ix) of the Law of Property Act 1925). It is capable of existing at law only if granted for an estate in fee simple or for a term of years absolute (section 1(2), of the Law of Property Act 1925). Legal easements may be expressly created by deed, by statute or by will. Easements arising by implied grant initially take effect as equitable easements, pending the completion of the relevant lease or conveyance, but thereafter they take effect as legal easements. The acquisition of an easement by prescription assumes a grant by deed and takes effect as a legal easement for a fee simple absolute in possession.

2. Characteristics of an easement

There are four essential criteria for an easement to exist. These criteria were laid down in Re Ellenborough Park [1955] 3 All ER 667:

© Association of Costs Lawyers Training 2020 37 þ it must relate to a dominant and servient tenement; þ these tenements must be owned or occupied by different persons; þ it must accommodate the dominant tenement; and þ it must "be capable of forming the subject matter of a grant.

2.1 Relate to a dominant and servient tenement

The two portions of land, though separate, must (for easements) be adjacent and neighbouring to each other, and must be two distinct parcels of land. The benefit accrues to the dominant land, and the servient land is burdened by the easement (London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 4 All ER 157).

It is long established law that a right claimed by way of easement cannot exclude the servient tenement owner from his own land (Copeland v Greenhalgh [1952] Ch 488). It was therefore held in Newman v Jones (unreported, 22 March 1982) that a right to park cannot amount to an easement if the right refers to a specific parking space. Rights to park in a larger area are more problematic and, in the case of London & Blenheim Retail Parks v Ladbrokes [1993] 4 All ER 157 the court suggested (obiter) that a right to park in a non- specified space, in common with others, in a larger parking area may be capable of being an easement. The decision in Batchelor v Marlow [2001] EWCA 1051 held that the key is whether the user is exclusive and whether it deprives the servient tenement owner of the reasonable use of his land. In that case the claim related to parking six cars on a piece of land just big enough to do so. The court made it clear that the servient owner would have no use of his land and that his ownership would be “illusory”.

The Lords did not follow this approach in the Scottish case of Moncrieff v Jamieson [2007] UKHL 42. If the ratio as to whether such a right lies in grant is followed by English courts, a right to park may qualify as an easement provided the servient tenement owner retains possession and control of the land, even if he cannot practically use the land.

So, the easement must be appurtenant to a dominant tenement. It cannot exist without one (i.e.“in gross”). The dominant tenement may be corporeal or incorporeal so an easement can be granted and used. The servient tenement must be defined sufficiently to enable its boundaries to be identified. Best practice is to define the dominant and servient land by reference to an accurate plan, meeting the Land Registry requirements where the easement must be registered.

2.2 Which are owned or occupied by different persons

The dominant and servient owners must be different. A person cannot claim an easement over land already owned by himself. However, note Wheeldon v Burrows (1879) LR 12 Ch D 31. An owner can grant an easement over his own land if he is not in possession; for example, an owner of two pieces of land can grant an easement over one parcel to the tenant of the other. If the dominant and servient land come into common ownership at a later date any subsisting easements are extinguished.

The Law Commission’s report on “Making Land Work: Easements, Covenants and Profits a Prendre” recommends that a landowner should be able to create an easement over his own land as long as both the benefited and the burdened land are registered. This ability is particularly useful when: © Association of Costs Lawyers Training 2020 38 þ dealing with a large residential estate as appropriate easements could be attached to each plot before any plot sales take place. Currently there is no way of ensuring that the registration of transactions, and the consequent creation of legal interests, occurs in the ‘correct’ order because easements have to be created one by one as sales are effected. As several transactions take place, it is possible for a property to be registered as subject to a right that has not yet been reserved to a neighbour; and þ creating a mortgage over part of a property. Currently some mortgagees are reluctant to accept a charge of part because they cannot guarantee that the mortgaged property can be sold with all the rights it requires over the retained property if the mortgagee takes possession.

2.3 Accommodate the dominant tenement

An easement will accommodate the dominant tenement where there is sufficient proximity between dominant and servient tenements. Proximity requires that the land is neighbouring or adjacent for an easements, it is nonsensical to suggest there can be ‘a right of way over land in Kent appurtenant to an estate in Northumberland’ (Bailey v Stephens (1862) 12 CBNS 91 per Byles J). To accommodate the dominant tenement the rights must also benefit the estate (and any owner of it) rather than being a personal right. This is illustrated in the case of Hill v Tupper (1863) 159 ER 51. In this case, a canal-owner leased a portion of the canal to Hill and purported to grant Hill ‘a sole and exclusive’ right to dock pleasure boats on the canal. A landlord of a nearby inn later sought to put rival boats on the canal and thereby interfere with Hill’s business. Hill claimed to have an exclusive easement over the waterway. Here the right claimed benefited the business of the owner of the dominant tenement rather than the land itself so the right was held to be incapable of being an easement.

An easement must be reasonably necessary for the better enjoyment of it. To be “reasonably necessary” it need only be connected with the normal enjoyment of the dominant land. The dominant owner need not show that without the easement the dominant land cannot reasonably be enjoyed. The easement must:

þ confer on the dominant land a real and practical benefit; and þ have some necessary connection with it.

If there is no connection between a right and the dominant tenement it will simply be a personal contractual right even though it may be advantageous to the dominant owner.

In Beech v Kennerley [2012] All ER (D) 146, the Court of Appeal held that the grant of a right of way on foot over a path was not an easement but a contractual right which was not enforceable against successors in title of the servient tenement. The right of way did not accommodate the dominant tenement as it conferred no benefit on the owner of the dominant tenement. Whilst reserved in his favour its only purpose was to assist the owner’s tenant to get to a kitchen garden. No use was made of the path once the tenant gave up the garden. In addition, there was a gap between the end of the path and the kitchen garden so use of the garden must have depended on a licence from the owner of that land. That was for a limited purpose and duration and was obviously personal to the tenant.

Whilst the right must benefit the owner of the dominant land in his capacity as owner, not just personally, a right benefiting a business carried out on the dominant land can constitute an easement if the business is being carried out by the dominant owner (even if it is only useful as long as the dominant land is used for a particular purpose). The dominant and servient land need not be immediately adjacent but do need to be close to each other.

2.4 Be capable of forming the subject matter of a grant

The final point takes in both the capacity of the grantor and grantee and ensuring that the right claimed falls within the range of rights recognised by the courts as being capable of amounting to easements.

The right must be able to be put into a grant by deed therefore the persons who create the easement must be competent and capable of doing so. No person can seek to create rights that exceed their own proprietary interests, an easement can only be created by persons with the leasehold or freehold interests over the land (Wall v Collins [2007] EWCA Civ 444).

In order for a right to be capable of forming the subject matter of a grant it must be clear, it must not be vague or indefinite as in a right to light or a view (Webb v Bird (1863) 13 CBNS 841). Therefore, rights which are too broadly phrased or ill-defined cannot form the subject matter of a grant.

In Coventry v Lawrence [2014] All ER (D) 245, the Supreme Court confirmed the right to carry on an activity which results in noise, or the right to emit a noise, which would otherwise cause an actionable nuisance, was capable of being an easement, albeit an unusual one. Equally, the fact a right is only exercisable at specified times does not prevent it from being an easement. A right to emit noise could be characterised as “the right to transmit sound waves over” the servient land. Where there was an express grant, it is usually not difficult to identify the level of permitted noise, the periods when it may be emitted and the activities which may produce the noise.

2.5 Recreation Rights

There had been arguments that a right must be of utility or benefit and not just of ‘pure’ recreation. However, the existence of this requirement was uncertain and it was considered that there was a certain amount of overlap with the requirement for an easement to accommodate the dominant tenement. In Re Ellenborough, rights to use a communal garden were held to be easements because they benefited the dominant owner’s residence, rather than being rights of mere recreation or amusement.

In Regency Villas Title Ltd and others v Diamond Resorts (Europe) Ltd and another [2015] EWHC 3564 (Ch), the High Court confirmed that there was no reason in law why an easement could not be granted for recreational purposes. In this case the persons claiming the easement were the owners of timeshare properties on the dominant land. The case involved rights granted in a transfer to use the swimming pool, golf course, squash courts, tennis courts and other sporting or recreational facilities on the adjoining (servient) land. © Association of Costs Lawyers Training 2020 40 The court confirmed that the objection that a mere right of recreation could not take effect as an easement was likely to mislead, unless the limits of the proposition were understood. The key lay in the use of the word “mere”, which suggested a right which did not benefit dominant land at all because:

þ there was no dominant land; or þ the right was wholly extraneous to, and independent of, the use of the dominant land.

Outside those examples, rights of recreation could take effect as easements, as long as they otherwise qualified.

2.6 Summary

The following table provides an overview of the characteristics of an easement.

Criteria Meaning There must be a dominant and There must be two pieces of land, one which benefits a servient tenement. (dominant) and one which is burdened (servient). The dominant and servient A person cannot claim an easement over land already owners must be different owned by himself (but note Wheeldon v Burrows [1879] LR 12 people. Ch D 31). The easement must The easement must benefit the land, and not be of purely “accommodate” the personal benefit to the current owner. The right to use a dominant tenement. mooring for the purpose of letting out pleasure boats for hire was not an easement (Hill v Tupper [1863] 159 ER 51). However, in P & S Platt Ltd v Crouch [2003] EWCA Civ 1110 the court decided that the right to use moorings could be an easement. The right to place a pub sign was capable of being an easement (Moody v Steggles [1879] 12 Ch D 261). The easement must be The right must be sufficiently definite. There is usually no capable of forming the requirement to spend money (except for the easement of subject-matter of a grant. fencing (Crow v Wood [1970] EWCA Civ 5). The right claimed must be similar to existing easements. Only certain rights can exist as an easement, for example, there can be no right to a view from a window. Easements of storage may exist ( Wright v Macadam [1949] 2 KB 727 should be contrasted with Grigsby v Melville [1973]1 WLR 80. Easements of car-parking may exists Batchelor v Marlow [2001] EWCA 1051 should be contrasted with London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 4 All ER 157.

3. The Creation of easements

An easement can be created as a legal right so long as the easement is created in one of the approved methods.

3.1 Express grant by deed

An express grant of a legal easement made during one’s lifetime must be by deed or it will be void (section 52(1) of the Law of Property Act 1925). By virtue of section 65 of the Law of Property Act 1925, it must be executed by the grantor. Easements are most commonly © Association of Costs Lawyers Training 2020 41 granted in a transfer of a legal estate or upon the grant of a lease where the new owner is going to enjoy a right over land retained by the transferor or landlord, they can also be created independently of any other disposition between two landowners.

In accordance with section 27(2)(d) of the Land Registration Act 2002 the express grant of an easement over registered servient land must be completed by registration. This is because it is a registrable disposition. Section 27(1) of the Land Registration Act 2002 makes it clear that it will not operate at law until the registration requirements have been met. It should be noted, however, that where the servient land is unregistered, the grant of an easement is not a registrable disposition, so it is effective at law when it is made.

An easement may be created on a sale of part where the seller reserves a right over the part sold. Whilst this is often expressed as a reservation it is technically a grant by the buyer to the seller - the buyer acquires the land and then immediately grants the easement back to the seller. In such a situation, section 65 of the Law of Property Act 1925 provides that it is not necessary for the buyer to execute the deed (usually the transfer) even though it is the buyer that is making the grant.

3.2 Statute

Easements are capable of being created by statute, many statutes confer easements on third party grantees. For example, easements can be acquired under the enfranchisement provisions of the Land Registration Act 1967. Easements can also be acquired by the exercise of compulsory purchase powers which are found in section 13 of the Local Government (Miscellaneous Provisions) Act 1976.

Unless the relevant statute provides for such a grant, an easement acquired by statute is not usually an express grant so it does not have to be completed by registration to be a legal easement. In accordance with the general rules governing easements it will be enforceable against third parties, although this is subject to any particular provisions of the relevant statute.

There are statutes which give special powers to utility companies (for example, gas, water and electricity companies) to enter onto private land to install pipes and cables for their public supply. In such cases the need for dominant land is often abrogated by statutory provisions.

Where an easement is enjoyed as part of a lease of the dominant land, in respect of which there is a right of renewal under the Landlord and Tenant Act 1954 then the easement is available for renewal along with the rest of the holding (section 32(3) of the Landlord and Tenant Act 1954).

3.3 Will

A testator, through his will, may leave dominant and servient land to different people and an easement will therefore created by will. Until the personal representative makes the written assent, the easement takes effect only in equity. If the easement arises by implication it should be expressly referred to in both the assent of the dominant land and the servient land. Although rare in practice, a testator is also able to subject the land being left by the will to an easement in favour of land owned by a third party. © Association of Costs Lawyers Training 2020 42 3.4 Necessity

An easement will only be implied by necessity where the estate cannot be used at all without it (Union Lighterage Co v London Graving Dock Co [1902] 2 Ch 557 and Nickerson v Barraclough [1981]1Ch 246). Necessity claims are usually based on claims to a right of way to land-locked land. The case of Wong v Beaumont [1965]1QB 173 considered a right of way for egress of fumes through a ventilation system. This case can, however, be distinguished on the basis that the estate was leasehold with a restrictive user covenant and thus the leasehold estate could not be used at all.

3.5 Common Intention

An easement may be implied in order to give effect to a prior understanding of the parties. The case of Liverpool City Council v Irwin [1976] UKHL 1 illustrates that an easement will be implied by common intention where it is objectively the common intention of the parties that the estate be used in a particular way. In this case this was the right to use the stairs and lift to access a ninth floor flat. In such a case, the courts will be willing to imply easements necessary to that use, i.e an easement of common intention would also require that the easement be necessary (Nickerson v Barraclough [1981] Ch 426).

Necessity and common intention based on the presumed intentions of the parties may be vulnerable to the express wording in the grant. In Nickerson v Barraclough [1981] 1 Ch 246 the conveyance expressly precluded the grant of any rights and the estate remained landlocked.

It should be noted that the court does have some limited powers to create temporary rights that resemble an easement. The Access to Neighbouring Land Act 1992 entitles the court to make an ‘access order’. By virtue of section 1 of the Access to Neighbouring Land Act 1992 these orders entitle the recipient of the order to access adjoining or neighbouring land in order to undertake certain kinds of preservation works for property and buildings.

3.6 Wheeldon v Burrows

An easement can apply, from which the grantor cannot derogate, on a subdivision of land. This type of easement entitles the holder of the right to exercise the same rights over a given section of land as those rights formerly exercised by the grantor over the same portion of land.

This rule, from Wheeldon v Burrows (1879) LR 12 Ch D, requires evidence of a "quasi- easement" which is the use by the owner of a single estate or parts of that estate in a manner such that an easement would be required if the use of those parts in that manner was to continue if one part was sold. Where a part of that estate is sold, the continued user (assuming the user "crosses" both estates) will be implied as an easement where the quasi- easement was "continuous and apparent" and where its continuation as a "full" easement is "reasonably necessary for the enjoyment" of the dominant tenement (the part of the estate sold). What is “reasonably necessary” is not necessarily a high threshold. A right claimed by way of access will not be “reasonably necessary” if it is simply more convenient as was the case in Goldberg v Edwards [1950] Ch 247). However, in Borman v Griffith [1930] 1 Ch 493, where the estate benefited from an express right of access to the rear of the property, the

The rule in Wheeldon is vulnerable to evidence of a contrary intention. In Squarey v Harris- Smith (1981) 42 P & CR 118 a standard term in the contract for sale excluded implied rights. On that basis the Court of Appeal did not find an implied right.

In the absence of express provision, a claim under Wheeldon would potentially succeed. One such situation could be where a house, for example, is transferred whilst the parking space of the previous occupier is retained.

3.7 Section 62 Law of Property Act 1925

Section 62 of the Law of Property Act 1925 implies easements into the transfer of an estate where there is already diversity of occupation between the dominant and servient tenements, for instance on the purchase of a reversion by the tenant. Section 62 of the Law of Property Act 1925 contains ‘general words’ which, in the absence of any contrary statement or intention included in a given conveyance, will be implied into that conveyance by operation of law. The words enable the holders of existing easements to continue enjoying the benefit of those rights following conveyance which relate to the land being conveyed at the date of the conveyance (Kent v Kavanagh [2006] EWCA Civ 162).

The operation of section 62 of the Law of Property Act 1925 extends to the conversion of precarious rights into easements. Therefore, in Hair v Gillman (2000) 80 P&CR 108, a tenant’s mere permission to use the landlord’s forecourt became an easement on her purchase of the freehold, notwithstanding that the permission could have been withdrawn at any time prior to the transfer of the freehold.

3.8 Prescription

The concept of prescription enables a person claiming a right to refer to a period of long use of an alleged right, over a period of 20 years, and new rights impliedly are created from that period of long use.

So, a claim to an easement by way of prescription is based on the claimant’s long user of another’s land in the manner of an easement. The doctrine is based on the fiction that there has been some grant in the past which would explain the servient tenement owner’s failure to take action to prevent the use.

A prescription claim has three basic requirements:

þ The user must be nec vi (without force). þ The user must be nec clam (without secrecy). þ The user must be nec precario (without permission).

The user must be nec vi, without force. This connotes unlawful acts rather than violence. In Brandwood and others v Bakewell Management Ltd [2004] UKHL 14, a claim for a prescriptive right of way was defended on the basis that the use, which involved driving on commons land, was unlawful. The court accepted the point that it was an offence to drive

The user must be nec clam, without secrecy. This means that the user is readily apparent to the servient tenement owner, rather than any intent to deceive. A person intending to claim a right of prescription cannot lawfully acquire that right if they act in such a way as to hide their use of the land from the “servient tenement” owner. It does not matter if the “dominant tenement” owner intended to conceal it from the servient tenement owner or not. For example, underground fixings which were long undetected could not give rise to a right of prescription (Union Lighterage Co. v London Graving Dock Co.[1902] 2 Ch 557).

Finally, there is nec precario, without permission. This means that prescription cannot arise where the landowner has given their permission or consent to the “dominant tenement” owner to use the land in the manner intended (Odey v Barber (2006) EWHC 3109). If for example the “dominant tenement” owner uses the land as intended in exchange for periodic payments to the “servient tenement” owner (Mills v Silver [1991]), or where a gate placed over a path is locked for periods of time at the owner’s discretion (Goldsmith v Barrow Construction Co. Ltd [1977] 1 WLR 478) then permission has been granted and prescription cannot apply.

The use must also be continuous (infrequent use will not suffice as can be seen in Hollins v Verney [1884] LJQB 430) and by the freehold owner of the dominant tenement against the freehold of the servient tenement. Under the common law doctrine, if the claimant can show twenty years use, a presumption arises that there is a prescriptive easement. This is, however, easily rebutted by evidence that the use cannot have existed since time immemorial (since 1189). Thus, in Duke of Norfolk v Arbuthnot (1880) 5 CPD 390 424, the presumption of a right of way to a church was rebutted by evidence that the church hadn’t been built until 1380.

The doctrine of lost modern grant relies on the fiction that a grant was once made but that the deed has been lost. Provided the claimant can show twenty years use and the defendant cannot show that such a grant was impossible (for example, because at the relevant time there was no capable grantor) the claim is made out.

The requirements for a claim under the Prescription Act 1832 depends on whether the claimant can show 20 or 40 years long use. The exception is a right to light where there is only one period of 20 years. Where a use has been enjoyed without interruption for 20 years “next before action”, it will not be defeated by proof that it commenced later than 1189, but it may be defeated in any other way possible at common law, for instance by establishing that the use had not been “as of right” (section 2 of the Prescription Act 1832). Where an easement has been enjoyed without interruption for a period of 40 years “next before action” it will not be defeated unless it appears that the user was enjoyed by some consent or agreement expressly given for that purpose by deed or in writing (section 3 of the Prescription Act 1832).

Interruptions must be “hostile” in that they interfere with and prevent the exercise of the claimed right, and of at least a year in duration. The Prescription Act 1832 provides for deductions from the period, for example if the servient tenement owner lacked capacity during the relevant period.

© Association of Costs Lawyers Training 2020 45 A comparison of Lost Modern Grant and Prescription Act 1832 claims arguably turn on the next before action point (although there may be some mileage in Lost Modern Grant where there has been a recent “interruption” for the purposes of the Act, but twenty or more years user prior to that interruption). In Hanning v Top Deck [1993] NPC 73 CA, the claimant was unable to evidence any period of use during which it was not unlawful. However, in Hayling v Harper [2003] All ER (D) 41 the claimant made her case in Lost Modern Grant. She could not evidence the period next before action as the user was unlawful during that period. She could, however, evidence a period of twenty years user prior to the time the user was rendered unlawful by statute.

However, following the decision of the House of Lords in Brandwood v Bakewell [2004] UKHL 14 this point may now be moot - at least in cases where the servient tenement owner could give lawful authority for the user. As it is highly unlikely that any piece of land will have been used in the same way for nearly 1000 years, a claim at common law is most likely to fail. The usefulness of a claim in Lost Modern Grant appears to have reduced following the decision in Brandwood. The Prescription Act 1832 is widely regarded as being particularly poorly drafted and reform has been recommended in a number of Law Commission reports so as to bring clarity and certainty to the law. It would be welcomed by most legal commentators.

3.9 Summary

The following table provides an overview of how an easement can be created.

Method Characteristics Express grant The owner of the servient land expressly agrees to allow the owner of the dominant land an easement over his land. This is usually granted by deed under section 52 of the Law of Property Act 1925. Express reservation The owner of land sells part of the land and reserves an easement over this land. Implied grant Necessity – if the only way the purchaser can get to the land he has bought from the owner is over the owner’s retained land (that is, the land is landlocked), a right of way across the retained land will be implied (Nickerson v Barraclough [1981] 1 Ch 426 at 440).

Common intention - where it is objectively the common intention of the parties that the estate be used in a particular way (Liverpool City Council v Irwin [1976] UKHL 1).

The rule in Wheeldon v Burrows [1879]. Implied reservation Only permitted in cases of necessity or common intention. Section 62 of the This can convert mere permissions into easements if three Law of Property Act conditions are met: there must be diversity of ownership and 1925 occupation, permissions must be given to the occupier, and there must be a conveyance, to the occupier. Consider the successful claim of an easement of storage in a coal shed (Wright v Macadam [1949] 2 KB 727). Prescription Long usage – if someone has been walking across the garden of the servient land for over 20 years it is presumed that at some time in the past an easement must have been granted. Note three different types of prescription – common law, doctrine of lost modern grant and Prescription Act 1832. © Association of Costs Lawyers Training 2020 46 4. Equitable Easements

Easements that are only capable of being equitable rights arise principally:

þ under a contract to grant a legal easement, which is never completed; þ by proprietary estoppel; þ by reason of a grant of a lesser interest than a fee simple absolute in possession or a term of years absolute. For example, a life interest in an easement.

4.1 Contract

A contract to grant a legal easement is a contract for the sale or other disposition of an interest in land within section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The general requirements for a contract apply (e.g offer and acceptance, consideration and intent to create legal relations) but the contract must also:

þ be in writing; þ incorporate all the express terms; and þ be signed by both parties (grantor and grantee).

Until the disposition is properly completed the easement will take effect only in equity.

4.2. Proprietary Estoppel

An equitable easement may arise by way of proprietary estoppel where:

þ the servient owner allows the dominant owner to believe that it has or will enjoy some benefit over the servient land; þ the dominant owner acts to its detriment in reliance on this belief and to the knowledge of the servient owner; or þ the servient owner then seeks to take an unconscionable advantage of the dominant owner by denying the right or benefit that had been expected.

The court has a wide discretion as to how to give effect to the equity. The relief may be the grant of a proprietary right to the owner of the dominant land. There has been uncertainty over whether there is a proprietary right that is capable of binding successors in title before the court gives effect to the equity. In relation to registered land, section 116 of the Land Registration Act 2002 declares that where there is an equity by estoppel, it has effect as an interest capable of binding successors in title from the time the equity arises whether or not it has been recognised by the court.

5. Extinguishing Easements

Generally, once an easement or right of way has arisen it will continue indefinitely unless it is extinguished or released. However, easements can be extinguished in four ways:

þ when the dominant and servient tenements come into the same hands; þ by release when the dominant owner gives up his right; þ by statute; and

5.1 Same Hands

Both the dominant land (the land with the right to an easement or profit) and the servient land (the land over which the right can be exercised) must both come into the common ownership and possession in fee simple of the same owner for an easement to be extinguished. The principle is that a person cannot have rights against himself. Once an easement or right of way is extinguished then it cannot be revived at a later date should both plots be separated and sold off to different owners.

5.2 By Deed

An easement can be expressly released by deed. Once this has happened then it is extinguished and cannot be revived. As a matter of good practice, when the party benefiting from the easement (the dominant owner) and the party subject to it (the servient owner) agree to a release, they should enter into a deed. If the dominant land has subsequently been divided into smaller plots the benefit of the easement will have passed to each of the plot owners. In such cases, for the easement to be completely extinguished, it is essential that all of the owners of the divided dominant land enter into the deed of release with the servient owner.

If the easement has been noted on the registered titles of the dominant and servient land an application should be made to the Land Registry to remove the entries from the registers. The application will need to be supported by the deed of release. There is no prescribed form for a deed of release under the Land Registration Act 2002. The Land Registry will accept the deed as long as it is properly drawn up and executed.

5.3 Statute

Some statutes may provide for easements to be overridden. For example, under section 237 of the Town and Country Planning Act 1990, a local authority has power to override easements and other rights restricting the execution of works on land where both of the following apply:

þ the local authority has acquired or appropriated the land for planning purposes; and þ the works are in accordance with a planning permission.

The provision applies not only to development by the local planning authority itself but also to any person deriving title from it.

A typical example of the way in which this is used is for the freehold interest to be transferred to the local authority for the purposes of it exercising its powers and for it to grant a lease or licence to the developer to carry out the development with an option for the developer to recover its original interest on completion of the development. In such circumstances, the developer will indemnify the authority against liability to pay compensation. In order to avoid a claim for judicial review, the local planning authority

If section 237 of the Town and Country Planning Act 1990 applies, the right to light will be overridden during construction or carrying out of works and during the subsequent use of the land. Even where section 237 of the Town and Country Planning Act 1990 applies, compensation may still be payable to the injured party. This will be based on the “injurious affection” measure. The measure of compensation is, in principle, the same as damages for tort in that the damage must not be too remote. No claim will lie for temporary interference caused by the execution of the works, as opposed to the permanent obstruction resulting from the construction (once complete).

5.4 Abandonment

An easement can sometimes be impliedly released by the owner’s actions, inaction and it is also possible for it to be established that a right has been abandoned. These are rare and it is not easy to establish the latter as, at law, there is no obligation on a party to exercise that right. Failure to do so will not automatically result in an easement or right of way being released due to the assumption that it has been abandoned. If the owner explains the non-use he may still be regarded as not having abandoned the right. Failing to use an easement or right of way is not of itself sufficient and abandonment will not be inferred. In the case of Benn v Hardinge (1992) 60 P&CR 246 the Court of Appeal said that the failure to use the right for 175 years was not enough on its own to indicate an intention to abandon. The owner must make it clear that he is abandoning the right not just for himself but also for his successors in title.

There is an assumption that the right has been abandoned, however, where it can be shown that the original character of the dominant land has been changed to such an extent that the right of way has become unnecessary or impossible to exercise. This is only a presumption and can be rebutted by the owner producing evidence to show that the original character of the dominant land can be restored at a later date and that the need for the right would be revived.

1. Introduction

This is a means by which a landowner can attempt to control the use of land after ownership has passed to others. In simple terms, a covenant is a contract between landowners to do or not to do something on the land. Leasehold covenants tend to regulate the use of land and freehold covenants tend to refer to an obligation on the owner of the land to do something or take some ‘positive’ action or refrain (or restrict the owner) from doing something.

A covenant is usually created by deed but must always be in writing in accordance with section 53(1) of the Law of Property Act 1925. The contract is between the covenantor (who assumes the burden of the covenant) and the covenantee (who takes the benefit under the covenant). The rules of contract apply between the original parties and the covenants can be enforced whether they are negative or positive. Under the rule of privity of contract, when ownership changes, only the original parties are bound. However, there are some rules that allow for privity to be circumvented. The problems which are encountered in land law are concerned with whether these covenants can be enforced against the successors of the original parties.

Remedies where covenants are enforceable but not followed are damages or a mandatory injunction.

2. Covenants restricting the use of land

Covenants restricting the use of land imposed by a seller may be divided into three classes:

þ covenants imposed for the seller’s own benefit; þ covenants imposed as owner of other land, of which the land sold formed a part, and intended to protect or benefit the unsold land; and þ covenants on a sale of land to various buyers who, with their respective successors in title, are intended mutually to enjoy the benefit of, and be bound by, the covenants.

2.1 Covenants imposed for the seller’s own benefit

This type of covenant is personal to the seller and is only enforceable by him unless expressly assigned. In Cosmichome v Southampton City Council [2013] All ER (D) 306, a covenant which required property to be solely occupied by the buyer for a specified purpose, and subject to removal in return for overage payment, was not intended to protect or benefit the seller’s land.

2.2 Covenants imposed as owner of other land

These “run” with the land and are enforceable without express assignment by the owner for the time being of the land for the benefit of which they were imposed. This means that the benefit and burden of the covenant relates to land itself and not to the land owner. If one

2.3 Covenants on a sale of land to various buyers

These covenants are most usually found in sales under building schemes. They are enforceable where it was the parties' intention that the various buyers from a common vendor of parts of a defined area of land should have rights to enforce the covenants against each other.

3. Transmission of the benefit at common law

The benefit of a covenant will pass at common law when the following conditions are satisfied:

þ the covenant must touch and concern the land; þ the covenantee must have held the legal estate; þ the covenant must have been intended to benefit subsequent owners of land; and þ the buyer must derive his title from the original covenantee.

Providing these four requirements are met, the benefit of the covenant will passed at common law, meaning the current owner can sue for breach of covenant. If any one of the requirements have not been met, the test fails and the covenantee must look to equity for a remedy.

Whether or not the benefit is annexed to each and every part of the retained land is a question of construction, although in Federated Homes v Mill Lodge Properties [1980] 1 All ER 371 the court favoured the view that the benefit is prima facie annexed to every part of the land unless a contrary intention appears. This means it can be extremely difficult to identify who has the benefit of a restrictive covenant. Even where the initial description was clear, the sale of land in parts can produce a situation in which the benefit is (notionally at least) divided among a large number of owners and occupiers. The problem is exacerbated as the Land Registry has no obligation or power to note the benefit of a restrictive covenant on the register of title to the dominant (benefiting) land. However, in Crest Nicholson v McAllister [2004] 2 All ER 991, the Court of Appeal helpfully found that effect can be given to words that are intended to reduce the land with the benefit of a covenant as parts are sold off, and that the benefit of a covenant might fall away entirely once the developer has sold off the last plot.

3.1 The covenant must touch and concern the land

The covenant must “touch and concern” the freehold land affected for the benefit to be enforceable by successors in title. A covenant was held to “touch and concern” land if it either affects the land as regards mode of occupation or is such that in itself, and not merely from collateral circumstances, affects the value of the land. This can be seen in the case of Rogers v Hosegood [1900-03] All ER Rep 915 where a covenant was given for the benefit of the vendors, their heirs and assigns “and others claiming under them to all or any of their lands adjoining or near to the [premises conveyed]”. In this case It was held that the words were a sufficient description to demonstrate the covenant touched and concerned the land. © Association of Costs Lawyers Training 2020 51 The modern test for whether the covenant touches and concerns the land was formed in P & A Swift Investments v Combined English Stores Group [1989] AC 632:

þ Does the covenant benefit the owner of the dominant land? The benefit to this owner ends when ownership of the land ends þ Is there an effect on the nature, quality, mode of use or value of the dominant land? þ Is the covenant be worded in a generic manner to apply to all owners of the dominant land – it must not be addressed to a specific individual.

3.2 The covenantee must have held the legal estate

Covenants which run with the land must be made with a covenantee who has an interest in the land to which they refer. This requirement is fairly straightforward. Simply, the covenantee must hold a recognised legal estate in the land. This can either be through fee simple absolute in possession or a term of years absolute under section 1(1) of the Law of Property Act 1925. However, it is not necessary for the covenantor to have held an interest in the land or for there to be any servient land as can be seen from the case Smith and Snipes Hall Farm v River Douglas Catchment Board [1949] 2 All ER 179. In this case the River Douglas Catchment Board agreed with a number of landowners between the River Douglas and the Leeds and Liverpool Canal) to carry out some work if some contribution to the cost was given. In 1940 Mrs S, one of the covenantees, sold her land ("Low Meadows") to Smith, which incorporated Snipes Hall Farm Ltd in 1944. In Autumn 1946 the Ellen Brook burst its banks and flooded Smith and Snipes Hall Farm land. They made a claim against the Board for damages in tort and breach of contract. The question was whether not having been privy to the original agreement was a bar to any recovery. It was held that because the covenant ran with the land, under section 78 of the Law of Property Act 1925 it could be enforced by the covenantee and successors in title.

3.3 The covenant must have been intended to benefit subsequent owners of land

Under section 78 of the Law of Property Act 1925, there is a statutory presumption that a covenant entered into on or after 1 January 1926 is made by a covenantor on behalf of himself, his successors in title (which includes owners and occupiers) and the persons deriving title under him or them. Under pre-1926 covenants, the parties must show they intended the benefit of the covenant to pass to new owners.

The provisions of section 78 of the Law of Property Act 1925 appear to relate only to the form of the covenant and do not touch the question whether the benefit and burden respectively in fact run with the land. It is simply a form of conveyancing shorthand making it unnecessary to refer to the covenantor's successors in title. The presumption is displaced by the expression of a contrary intention. It is sufficient if a contrary intention can be found in the wording and the context of an instrument, without need for express provision. In City Inn (Jersey) v Ten Trinity Square [2008] All ER (D) 76, only the consent of the original transferor was held to be required to the carrying out of works. The restrictive covenant was drafted so as to be for the benefit of the transferor and his successors in title, but the clause requiring consent to the works referred only to the transferor.

The test here depends on whether the covenant is pre or post 1926. For pre-1926 covenants, the new owner of land must hold the same legal estate as the original covenantee. For post-1926 covenants, pursuant to section 78(1) of the Law of Property Act 1925, the new owner of land only needs to hold either a fee simple absolute in possession or a term of years absolute.

4. Transmission of the burden at common law

At common law the general rules is that the burden of a covenant cannot run (i.e. so as to bind successive owners or occupiers) with freehold land in any circumstances. However, in some circumstances, the burden of a covenant may be enforced against a successor in title to the original covenantor in equity. An undertenant or other occupier may also be bound.

It has been long established that the burden does not pass as can be seen from the case Austerberry v Oldham Corporation (1885) 29 ChD 750. In this case trustees had land conveyed to them, and in return, covenanted, on behalf of themselves and their heirs to keep the land in good repair (positive covenant). They failed to do so. The burden cannot pass at common law, the common law will not impose obligations (to spend money) on third parties automatically, just as equity will not.

There are exceptions to this rule which include circumstances where there is an estate rentcharge, or where the rule of mutual benefit and burden applies. This last rule, deriving from the case of Halsall v Brizell [1957] Ch 169, provides that a covenant to pay the cost of maintaining a facility on the dominant tenement binds the owner of the servient tenement where the servient tenement benefits from rights to use that facility.

In Halsall v Brizell [1957] Ch 169, homebuyers on a Liverpool estate got the right to use estate roads, drains, the promenade and sea walls subject to the obligation to contribute to repair and upkeep. Brizell, a successor of an original purchaser, claimed he should not need to pay. The court held that he could not claim the benefit of the facilities without having to pay as well - he could not exercise the rights without paying his costs of ensuring that they could be exercised. The case was approved by Rhone v Stephens [1994] UKHL 3. It is clear from Thamesmead v Allotey [1998] 30 HLR 1052 that the cost must relate directly to the facility. In this case, a covenant to pay for the maintenance of landscaping had insufficient nexus with the right to use estate roads for the rule to apply.

It may be possible to enforce covenants indirectly where there is a chain of indemnity covenants by successive assignees of the servient tenement. The dominant tenement owner can take enforcement action against the original covenantor, who, in turn, will seek an indemnity from his or her successor and so on.

There are two weaknesses inherent in chains of indemnities:

þ that the chain “breaks” in that one or more assignees in the chain has died, become insolvent or undiscoverable; þ that the dominant tenement owner’s only remedy is damages, where it is actual compliance with the covenant which is sought. © Association of Costs Lawyers Training 2020 53 Furthermore, it is possible to incorporate a further obligation by which the transferor of the burdened estate procures a direct covenant from the transferee in favour of the dominant tenement owner, thus maintaining privity of contract. This method is, however, unusual and unwieldy.

5. Transmission of the benefit in equity

The benefit of a covenant, provided it touches and concerns the land, will run in equity where it is annexed, assigned or because it’s part of a building scheme.

5.1 Annexation

Annexation is where the benefit of a restrictive covenant is clearly applicable to a defined area of land in such a way that the benefit of the covenant will pass on any transfer of the land. Annexation takes two forms:

þ express annexation; and þ statutory annexation (section 78 of the Law of Property Act 1925).

Express annexation is where the document conferring the covenant makes it clear that the covenant is made for the benefit the land and not the covenantee. Today, a covenant will be deemed annexed in the absence of words to the contrary, by section 78 of the Law of Property Act 1925. Thus, per the ratio in Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594, the benefit will run unless the conveyance states otherwise however the annexation rule does not apply to covenants entered before 1926. For covenants created before 1926, the covenant must be expressly annexed (by wording in the deed creating it) or assigned (by wording in the transfer from the original covenantee to the next owner of the dominant tenement).

Following the decision in Crest Nicholson Homes Ltd v McAllister [2004] 1 WLR 2409 the dominant tenement must be clearly identified for statutory annexation to operate.

5.2 Assignment

Where annexation cannot be evidenced the rules on assignment are relevant. The landowner must show that the benefit of the covenant has been assigned to him by an unbroken chain of assignments. For assignment the requirements of Miles v Easter [1933] Ch 611 need to be met:

1. the covenant is for the benefit of some identifiable land; 2. the identifiable land must be benefitted; 3. the assignee must acquire some of the identifiable land; and 4. the assignment of the restrictive covenant must be simultaneous with the conveyance of the land.

By virtue of the decision in Earl of Leicester v Wells-next-the-Sea [1972] 3 All Er 77, the whole of the identifiable land must be benefitted. Stilwell v Blackman [1967] 3 All ER 514 demonstrates that the assignee need not acquire the whole of the land, but some will be sufficient. When the piece of land is transferred there should be an express clause in the

5.3 Building scheme

A building scheme is where land is sold or leased in lots/plots, and these pieces of land are subject to benefits and burdens of covenants which the purchasers are subject to and will be mutually enforceable between the current owners. When validly created, all properties are servient and dominant. Elliston v Reacher [1908] 2 Ch 374 laid down four conditions to be satisfied in order for there to be a building scheme:

þ the purchasers must have derived title from a common owner; þ the seller must have set out the estate in lots and imposed restrictions prior to the sale consistent with some general scheme of development; þ the seller must have intended that the restrictions were to be for the mutual bene t of all the purchasers of the various lots of land; þ the purchasers or their predecessors in title must have bought their property on the basis that the covenants were to be mutually enforceable by the owners of all the other lots within the scheme.

6. Transmission of the burden in equity

The covenantor’s successors in title will be bound by the burden of the covenant if it complies with the requirements of Tulk v Moxhay [1848] EWHC J34 (Ch).

Tulk was the owner of a few pieces of land in Leicester Square. Tulk sold a piece of that land with a covenant to prevent the land being built on. The land was then sold on multiple times and eventually one of the owners, despite having knowledge of the covenant, built on the land. Tulk took action to enforce the convenant and sought injunctive relief. It was held that the owner could not build on the ground and an injunction was granted.

The court noted that a covenant is enforceable under equity when the following four requirements are satisfied:

þ the covenant is restrictive in nature; þ on the date of creation it must be made to benefit the dominant land; þ the covenant must touch and concern the dominant land; and þ the covenant must be made with the intention to pass with the land (section 79 of the Law of Property A 1925).

Finally, Tulk v Moxhay held that such an agreement could only properly be enforced in equity because the purchaser of land had notice of the covenant.

7. Registration requirements

For covenants affecting registered land, a notice must be entered in the charges register of the burdened land. Notice of the covenants on the register takes effect as an incumbrance so that each subsequent registered proprietor of the land which is subject to the covenants, or of a derivative interest such as a lease, will be bound by the covenants. Where there is no entry on the register, subsequent registered proprietors (whether or not © Association of Costs Lawyers Training 2020 55 they acquired the title as purchasers) will take free of the covenants. It is the fact of entry on the register, rather than notice to the person acquiring the title, that has the effect of making the burden of the covenants bind the land and run with it—because the absence of notice of the restrictive covenants in the register means the priority of any subsequent registered disposition is not postponed to the interest of the covenantee or its successors.

For covenants affecting unregistered land, a restrictive covenant entered into after 1925 must be registered as a D(ii) land charge. Registration of any instrument or matter required or authorised to be registered under the Land Charges Act 1972 is deemed, in general, to constitute actual notice of the instrument or matter, and of the fact of such registration, to all persons and for all purposes connected with the land affected.

8. Discharge of covenants

A covenant can be extinguished automatically should the burdened and benefiting land come into common ownership and possession. A covenant can continue to affect land in perpetuity unless the parties affected discharge the obligation by deed.

The Law of Property Act 1925 gives the Upper Tribunal (Lands Chamber) the power, on application, to discharge or modify the covenant.

Other methods of discharge include a deed of release (or variation) and merger.

9. Enforcement of Positive Covenants

Property law may allow a covenant to be enforced by and against persons other than the original parties but the burden of a positive covenant will not run with the land in any circumstances. The fact that positive covenants do not run with the land is seen as a serious deficiency in English property law; it is not possible to bind successors in title to a straightforward positive obligation, for example to maintain a boundary or a shared roof. A further problem under privity of contract is that a party who has made a positive covenant remains bound by it even after he has disposed of the relevant property.

There are a number of ways of dealing with this problem regarding positive covenants, but these can be complex and are not necessarily fully effective. Those most commonly encountered in practice are chains of indemnity covenants, renewed direct covenants and a right of entry annexed to an estate rentcharge. Less commonly used methods include:

þ a right of re-entry; þ enlargement of a long lease; þ common law “benefit and burden” principle; and þ commonhold.

9.1 Chain of indemnity covenants

A person who gives a positive covenant can seek to protect himself from ongoing liability under the covenant by obtaining a further covenant from his immediate successor in title to comply with the original covenant and to provide an indemnity for any loss which he may incur under the original covenant. This process should be repeated each time the © Association of Costs Lawyers Training 2020 56 property changes hands. There are some disadvantages of this approach, for example you are unlikely to be able to obtain a mandatory injunction to perform the positive obligation, the courts are likely to find that the appropriate remedy would be damages. Another problem is that the chain of indeminyt covenants can be broken by the insolvency of one of the parties, the disappearance of one of the parties or a failure of a successor to obtain an indemnity covenant on a sale.

9.2 Renewed direct covenants

A person giving a positive covenant promises to compel his successor in title to enter into a deed of covenant directly with the party who has the benefit of the positive covenant. The deed will comprise a covenant in the same form as the original positive covenant. He must also impose on his successor in title the same obligation to obtain a deed from the next successor in title and so on. In the case of registered land this process can be protected by a restriction in the proprietorship register of the covenantor's title.

This method shares the same drawback as the use of successive indemnity covenants in that the chain is only as strong as its weakest link.

If a buyer is to be under a positive obligation to perform certain obligations, going beyond mere indemnity, there must be a clear covenant in unequivocal terms. In Ridgewood Properties Group v Valero Energy [2013] All ER (D) 226, the High Court, in deciding a preliminary issue, held that a standard clause confirming the sale was subject to disclosed matters was not effective to oblige the buyer to perform the covenants in “airspace agreements” with a third party, even though the agreements were included in the definition of disclosed documents in the sale documentation. This put the seller in breach of the airspace agreements as it had put itself out of power to perform them.

9.3 A right of entry annexed to an estate rentcharge

Section 2(4) of the Rent Charges Act 1977 defines a rent charge as a legal interest in land that can be enforced against successors in title to the land charged. An estate rentcharge is one that is created for the purpose of:

þ ensuring the performance of positive covenants (“covenant supporting rentcharges”) þ meeting or contributing towards the cost of the performance by the chargee (rent owner) of covenants for the: o provision of services o carrying out of maintenance or repairs o effecting of insurance, or o making of any payment for the benefit of the land affected by the rentcharge or for the benefit of that and other land (“service charge rentcharges”).

The right of entry can be exercised on non-performance of such covenants to enforce them. That right is exempt from the perpetuity rule.

In Canwell Estate Company v Smith Brothers Farms [2012] All ER (D), the Court of Appeal held that a rentcharge qualifies as an estate rentcharge even if it does not directly benefit the chargor’s land. The focus is on the overall beneficial purposes of the rentcharge for the estate, not on the specific, direct benefit for particular pieces of land affected. It is sufficient that the purpose of the rentcharge is performance of a covenant that will benefit the land affected directly or indirectly.

A charge of more than a nominal amount is not treated as an estate rentcharge unless it represents a reasonable payment for performance by the rent owner of service charge rentcharge covenants (S.2(5) of the Rent Charges Act 1977). In Canwell Estate Company v Smith Brothers Farms [2012] All ER (D), the Court of Appeal held that the validity of a rentcharge does not depend on the reasonableness of the amount calculated from time to time. If the estate rentcharge is legitimate it is valid from the outset. If the payment sought is not reasonable in relation to the performance of the covenant, then the rentcharge cannot be relied on to collect that particular payment. However, the rentcharge does not cease to be valid.

Developers who are going to rely on rentcharges to secure the payment of service charges must make sure that the transfers include a positive covenant by the developer/management company to provide the relevant services. Otherwise, the rentcharge may not be enforceable.

The main drawback of the rentcharge method is that lenders can be deterred by the draconian nature of the right of re-entry. Careful drafting is required to provide the lender with comfort that if the covenant is breached, it will:

þ be notified before any steps are taken to re-enter; þ have an opportunity to remedy the breach; and þ on remedying the breach obtain legal title to the land by way of substituted security.

9.4 A right of re-entry

This right, which can only take effect in equity, can be reserved without the need to hold an interest in land such as an estate rentcharge. It can be used to take possession of the land and even to sell it. Use of such a right is limited because it is enforceable during the perpetuity period only even though the covenants are perpetual.

9.5 Enlargement of a long lease

A lease granted for at least 300 years of which no fewer than 200 years remain unexpired can be enlarged into a freehold estate under section 153 of the Law of Property Act 1925. The freehold estate which is created is made subject to the same covenants as the former lease. This includes positive covenants.

This provides that, if a deed contains both a positive covenant and a benefit, it may be possible to enforce the burden of the positive covenant against a party who uses and enjoys the benefit (for example where a party promises to pay a contribution towards the maintenance of estate roads over which it enjoys a right of way).

As can be determined from Davies v Jones [2009] All ER (D) 104 the scope of this device is limited as:

þ the benefit and burden have to be conferred in or by the same transaction; þ there must be a reciprocal relationship between the benefit and the burden of the covenant; þ a successor in title must have the choice to enjoy the benefit and take on the burden of the covenant or to divest himself of the burden at the expense of the benefit.

In Wilkinson v Kerdene [2013] EWCA Civ 44, the Court of Appeal found bungalow owners (successors in title to the original owners) in a holiday village, liable to pay a maintenance charge in the original conveyance. The bungalow owners argued that there was no reciprocal relationship between the benefit and burden. In the conveyances in question, the obligation to pay the maintenance charge was linked to the original village owners’ obligation to carry out the works, not the rights granted in the conveyances to use the roads etc. The Court of Appeal disagreed and stated that it did not matter that the continued exercise of the rights in the conveyances was not made expressly conditional upon payment (any more than it was in Halsall v Brizell). The payment was intended to ensure that the rights remained capable of being exercised. The authorities required one to look beyond the express terms of the conveyance and consider what in substance the covenantor was paying for. Here, as in Halsall, the payment, at least in substantial part, was intended to provide a contribution to the cost of maintaining the roads and other facilities over which the owners of the bungalows were granted rights. None of them had ceased to use the roads, nor wished to do so.

Unlike in Halsall, here there was also a covenant by the original site owner to carry out the repairs. This was not sufficient in itself to sever any link between the payment covenant and the rights granted. It merely provided the covenantor with the added assurance that (at least while the site remained the property of the original covenantee) the work would be carried out. However, the performance (or not) of that covenant was not the determinant of liability to pay. That remained the subsistence of the rights granted.

In Elwood v Goodman [2013] EWCA Civ 1103 purchasers of units on an industrial estate argued the benefit and burden principle did not apply as the rights granted to use a roadway were not expressed to be conditional on payment of maintenance costs. The Court applied the principles in Wilkinson that the requirement for the rights to be conditional on payment is a matter of substance rather than form. In this case there was a clear and obvious link between the rights of way reserved over the roadway and the obligation to contribute to repair. Therefore, the purchasers were obliged to make contribution. The purchasers also argued that the burden of the payment obligation could not pass to them because the burden of the covenant was not registered against the title.

© Association of Costs Lawyers Training 2020 59 The Court of Appeal considered S.20(1) Land Registration Act 1925 (no longer in force). They concluded that the question of whether the burden in equity of a positive covenant requires to be registered in order to bind successors in title seemed to be free from authority. The court held that the effect of registration under S.20(1) is that the transferee takes the legal estate subject to registered incumbrances but otherwise free from all other estates and interests whatsoever. Therefore, to be registrable, an incumbrance (such as the rights based on proprietary estoppel) must be capable of creating an estate or interest in the registered land. Since the burden in equity of a positive covenant does not have this effect, it does not require to be registered in order to bind successors in title of the original covenantor.

In Elwood v Goodman [2013] EWCA Civ 1103, the owner of the roadway had incorporated an additional one metre strip of land into the road and had also erected lighting. The works had been carried out after the purchasers acquired their units. The decision in Crane Road Properties v Hundalani [2006] EWHC 2066 (Ch) is authority that where owners acquire a prescriptive right of way over a widened roadway, their liability to contribute is extended to contribution towards repair of the widened roadway. However, in Elwood there was no evidence that the purchasers had acquired a right of way (as opposed to a licence to use) the additional one metre strip. Absent the grant of a right of way over the additional strip, there was no obligation to contribute to maintenance of it.

9.7 Commonhold

This form of tenure provides a means for the burden of positive covenants relating to management of the commonhold itself to bind successors in title.

10. Proposals for reform

A number of problems have been identified with the current law, these include:

þ the burden of a restrictive covenant does not run at law, but does in equity; þ the rules under equity are complicated; þ the benefit of a covenant runs at law and equity but under different rules; þ the rules are more complicated than the burden rules; and þ the annexation and building scheme rules are technical and difficult to apply sometimes.

The Law Commission published report no. 327 in 2011 following the publication of a consultation paper on “Easements, Covenants and Profits a Prendre” in 2008 (Consultation Paper No 186). In the consultation paper, the Commission recognised a number of defects in the law relating to these interests which can cause significant difficulties for purchasers, owners, and developers of land. Recommended reforms include making it possible for the benefit and burden of positive obligations to be enforced by and against subsequent owners (by replacing positive and negative covenants with “Land Obligations”). These would govern the future use and enforcement of positive and restrictive obligations and would be designed to complement the systems set out in legislation relating to commonhold tenure and land registration.

© Association of Costs Lawyers Training 2020 60 Very recently, on 18 May 2016 it was confirmed in the Queen’s Speech that the government will bring forward proposals to respond to the recommendations of the Law Commission’s report, with a view to introducing a draft Law of Property Bill.

© Association of Costs Lawyers Training 2020 61 Chapter 3 Learning outcomes After studying this chapter you should understand the following main points: þ the main types of mortgage available, how to create a mortgage and how a mortgage can be discharged with remedies in default; and þ the main types of proceedings concerning land and the relevant procedure.

3.1 Mortgages

1. Introduction

A legal charge is the means by which lenders enforce their rights to a property. Lenders may loan money in return for a charge against a property. There are different types of legal charge and the type used by lenders will vary from lender to lender. A primary mortgage will normally be secured by a registered first charge against the property. The obvious example of a primary mortgage is when people borrow to purchase their own home. The holder of a ‘first charge mortgage’ (normally a bank or building society) has the legal right to make a first call on the property in the event that the borrower defaults on repayments. A second or subsequent charges may be made on a property if additional money has been borrowed against the same property. The holder of a second charge has a legal call on the property in the event of the borrower defaulting on repayments, but only after all liabilities to the holder of the first charge have been settled.

The case Santley v Wilde [1899] 2 CH 474 defined a mortgage and that classic description was reaffirmed in Re Cosslett (Contractors) [1997] 4 All ER 115 as being:

‘a conveyance of land…for the payment of a debt or the discharge of some other obligation for which it is given’.

The term “charge” is also used as having the same meaning as “mortgage” and the terms are used as though they are interchangeable. However, technically, they are not. They are both security for the payment of a debt or other obligation. However, while a mortgage confers an interest in property, a charge is the appropriation of property without giving the creditor either a general or special interest in, or possession of, the subject of the security.

The difference between the two is blurred by the reference to a “charge by way of legal mortgage” in the Law of Property Act 1925 (LPA 1925). The Law Commission has expressed the view that the area of law is too complex and it has made recommendations for all existing methods of mortgaging and charging land to be abolished and two new forms of mortgage (formal and informal) to be introduced. This has not, so far, been acted upon.

2. Types of Mortgage

There are a number of different types of mortgage, some of which are no longer used. Today, because land is registered, the ‘registered charge’ is most commonly used. The two main ways mortgages can be categorised are as follows:

þ They may be categorised as legal or equitable. þ There are three categories of mortgage under the Law of Property Act 1925.

2.1 Equitable Mortgages

The first way a mortgage may be classified is either by it being legal or equitable. Almost any interest in land can be used as security under a mortgage but the type of interest used as security will impact the type of mortgage formed. If a legal interest is used as security

The equitable maxim ‘Equity regards as done that which ought to be done’ can apply to create an equitable mortgage. This principle operates where:

þ there has been a contract to create a legal mortgage but it has not yet been executed as a deed; or þ where a legal mortgage which has not been properly executed.

An equitable mortgage will be in existence from the date the contract is formed. In accordance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 the agreement must be in writing, contain all express terms, be signed by or on behalf of all parties, provides for consideration and is specifically enforceable. The remedy of specific performance will be available if the mortgage money has been advanced to the mortgagor (Walsh v Lonsdale(1882) 21 ChD 9), in the absence of this the mortgagor must seek damages.

Equity will also protect an individual where it was clear that the owner of the property intended to charge their property in relation to a loan. For example, where the estate owner deposits their title deeds with the lender in return for a loan (Russel v Russel(1783) 1 Bro CC 269). However, for an informal mortgage to be formed, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires there to be an agreement made in writing meaning the simple deposit of deeds with the lender is not enough, a written agreement must accompany this (United Bank of Kuwait plc v Sahib[1997] Ch 107).

2.2 Legal Mortgages

Legal mortgages may be created under The Law of Property Act 1925. Section 85 of the Law of Property Act 1925 sets out a mode of mortgaging freeholds by allowing the mortgagor to grant a long lease of the property to the mortgagee. Section 86 of the Law of Property Act 1925 sets out a mode of mortgaging leaseholds through the creation of a sub- lease. The leases will be terminable once the loan is repaid. These methods of creating a mortgage are advantageous because the mortgagor retains a legal estate, yet the mortgagee has an estate in the land.

Section 87 of the Law of Property Act 1925 is the method of creating a legal mortgage most commonly used today. Rather than granting a lease or sub-lease over the property to the mortgagee, a deed will be executed by the mortgagor confirming that there is a mortgage/charge over his land by way of legal mortgage, the condition being repayment of the loan plus interest. Section 87 of the Law of Property Act 1925 gives the same powers and remedies to the mortgagor as would be given if the property had been leased or subleased under sections 85 or 86 of the Law of Property Act 1925.

Where land is registered, a legal charge should be used. The power to create a legal charge, by the completion of a deed, is provided under section 23(1)(a) of the Land Registration Act 2003. However, until the charge is registered it will not have legal effect but will operate only in equity. A legal charge is created by simple words showing an intention that the land is to be mortgaged with the repayment of a loan and there does not need to

Unregistered land must be registered when certain trigger events happen, by virtue of section 4(1)(g) of the Land Registration Act 2002 the grant of a legal mortgage is one of those triggers. Following the registration of the estate, the charge must be then registered as per the Land Registration Act 2002. Once registered, the charge will take effect as a charge by deed by way of a legal mortgage even if it was created in a different manner, i.e pursuant to sections 85 or 86 of the Law of Property Act 1925.

3. Lenders Classifications of Mortgages

The money borrowed is called the capital. The lender also charges interest on the capital until it is repaid. The type of mortgage a buyer may apply for will depend on whether he wants to repay interest only or interest and capital:

Repayment With repayment mortgages the interest is paid and part of the mortgage: capital off every month. At the end of the term, typically 25 years, the mortgage should have been completely paid off. Interest-only With interest-only mortgages, only the interest is paid on the loan mortgage: and nothing off the capital (the amount borrowed). These mortgages are becoming much harder to come by as lenders and regulators are worried about homeowners being left with a huge debt and no way of repaying it. Borrowers will have to have a separate plan for how they will repay the original loan at the end of the mortgage term.

Mortgages fall into two main categories in relation to interest:

Fixed rate: The interest rate paid will stay the same throughout the length of the deal no matter what happens to interest rates. These will be advertised as ‘two-year fixed rate’ or ‘five-year fixed rate’, for example, along with the interest rate charged for that period. Variable rate: With variable rate mortgages, the interest rate can change at any time.

Variable rate mortgages take various forms:

Standard This is the normal interest rate the mortgage lender charges variable rate homebuyers and it will last as long as the mortgage or until you (SVR): take out another mortgage deal. Changes in the interest rate may occur after a rise or fall in the base rate set by the Bank of England. Discount This is a discount off the lender’s standard variable rate (SVR) and mortgages: only applies for a certain length of time, typically two or three years. Tracker Tracker mortgages move directly in line with another interest rate – mortgages: normally the Bank of England’s base rate plus a few percent. So if the base rate goes up by 0.5%, the rate will go up by the same amount. Usually they have a short life, typically two to five years, though some lenders offer trackers which last for the life of your mortgage or until the mortgagee switches to another deal.

© Association of Costs Lawyers Training 2020 65 Capped rate The rate moves in line normally with the lender’s SVR. But the cap mortgages: means the rate can’t rise above a certain level. Offset These work by linking savings and current accounts to the mortgages: mortgage so that interest is only paid on the difference. The mortgage is still repaid every month as usual, but the savings act as an overpayment which helps to reduce interest due.

4. Mortgage Terms

There has been considerable judicial intervention as far as concerns the terms of a mortgage. The protection from “unfair” or “unconscionable” terms seems limited to extreme cases and today the courts are increasingly reticent to view matters in complex contracts as clogs or collateral advantages.

4.1 Oppressive or Unconscionable Terms

There must be no “oppressive or unconscionable” terms. The court has made it clear that when considering terms of a mortgage that the test is not one of reasonableness (Multiservice Bookbinding Ltd v Marden [1979] Ch 84). The courts look for some degree of moral reprehensibility. Thus, in Cityland & Property (Holdings) Ltd v Dabrah [1967] 2 All ER 639, the court held that an annual interest rate equivalent to 19% to be unconscionable in circumstances where the borrower had been a tenant of the property and his landlord threatened not to renew his lease unless he bought the reversion with a loan of funds from the same landlord.

As well as its inherent jurisdiction, the courts can also “reopen an extortionate credit bargain” under powers contained in the Consumer Credit Act 1974 (as amended by the Consumer Credit Act 2006).

4.2 No Clogs or Fetters on the Right to Redeem

There must be no clogs or fetters on the right to redeem. The mortgagor cannot be prevented, by terms in the mortgage, from satisfying the obligation and discharging the mortgage (Santley v Wilde [1899] 2 Ch 474). Typically an option in the mortgage for the mortgagee to acquire the estate was considered a clog (Samuel v Jarrah Timber & Wood Paving Corporation Ltd [1904] AC 323), although the courts now consider each case on its own facts in determining whether an option is indeed a clog (see, for example, Warnborough Ltd v Garmite Ltd [2003] EWCA 1544). Today the courts appear increasingly inclined to find that the option does not amount to a clog or fetter.

4.3 No Collateral Advantages

There must be no collateral advantages. Once the mortgagor’s obligations are satisfied, the estate must be as if it was never charged (Noakes & Co Ltd v Rice [1902] AC 24). Resultingly, where the mortgage contains a solus type agreement which continues after the underlying loan is repaid, the solus will amount to an unenforceable collateral advantage. Even where a solus expires on redemption it is subject to a test of reasonableness as it amounts to a restraint of trade (see, for example, Esso Petroleum v Harper's Garage (Stourport) Ltd [1967] UKHL 1).

The right of redemption refers to the right of the borrower to ‘redeem’ the mortgage once the loan and all of the interest has been repaid. In other words, the right of the borrower to pay back the debt. Following repayment the mortgage ends and the lender no longer has any right over the property.

The right to redeem the mortgage at law is a contractual right and the agreement between the borrower and lender will contain provisions about when the mortgage can redeem, for example it may be a certain date. The contractual provisions cannot be altered or ignored (Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25).

Equitable redemption is possible as long as the loan and any interest has been repaid. By giving this right to redeem the mortgage, equity protects the mortgagor. Any agreement to defeat this right is void at law because it will be regarded as a “clog on the equity of redemption” (Toomes v Conset (1745) 3 Atk 261). This approach is taken by equity as the purpose of the mortgage is to provide security for the loan – once this has been paid, there is no reason why the mortgage should continue to exist.

6. Remedies of the mortgagee

A mortgagee has a number of options available to it to enforce its charge. The principal ones are:

þ to sue on the covenant to repay; þ to repossess; þ to exercise a power of sale; þ to appoint a receiver; or þ to foreclose.

6.1 Sue on the covenant to repay

It is settled law that a secured lender cannot be in a worse position than an unsecured lender, and can therefore raise a simple debt action (C&G v Johnson & Sunshine (1997) 73 P & CR 293).

6.2 Reposes

The right to repossess arises as soon as the mortgage is executed (section 95(4) of the Law of Property Act 1925). Repossession may not done by force, using force would be a criminal offence under sections 5 and 6 of the Criminal Law Act 1977. Common law intervenes with the statutory right to repossess and provides that possession can only be claimed “bona fide” by the lender and only then for the purposes of enforcing the charge (Quennell v Maltby [1979] 1 All ER 568). Furthermore, where the property is residential, S.36 Administration of Justice Act 1970 gives the court a wide discretion to vary or suspend any order for possession of that property (see C&G v Norgan [1996] 1 WLR 343) which lists factors to be taken into account principally concerning the likelihood of the mortgagor satisfying the mortgage in the future). Such an order is likely to be necessary for the repossession of residential property, given the provisions of the Protection from Eviction Act 1977. © Association of Costs Lawyers Training 2020 67 6.3 Exercise a power of sale

The power of sale arises, per section 101(1)(i) of the Law of Property Act 1925, where the mortgage is by deed, contains no contrary provision and where the date for redemption has passed. The date for redemption is the earliest date on which the lender can demand repayment of the whole outstanding sum. In most institutional mortgages for the purchase of residential property, this is the date the mortgage is executed, or a few months later.

The power of sale can only be exercised if section 103 of the Law of Property Act 1925 is satisfied. This section requires default of repayments for three months after notice has been served, two months arrears of interest or breach of any other covenant.

If the power is exercised, the mortgagee has a duty to take reasonable care to secure the market value of the property (Cuckmere v Mutual Finance [1971] EWCA Civ 9) and the proceeds are held on trust by the mortgage to be distributed in accordance with section 105 of the Law of Property Act 1925. The court may delay an order for possession and sale if they believe the mortgagor can obtain a higher price by selling the property themselves (Target Home Loans Ltd v Clothier [1994] 1 Ell ER 439 and Barrett v Halifax Building Society (1995) 28 HLR 634).

Section 105 of the Law of Property Act 1925 states that, once the property is sold, the mortgagee becomes a trustee of the proceeds of sale. The proceeds of sale must then be distributed in this order:

þ to discharge encumbrances prior to the mortgage which the sale is not subject to; þ payment of costs and expenses incurred in arranging the sale; þ to discharge the mortgage debt, including interest and any other payments required; and þ the balance be paid to the mortgagor or anyone else entitled (British General Insurance Co Ltd v Attorney-General (1945) 12 LJNCCR 113.

6.4 Appoint a receiver

If sections 101 and 103 of the Law of Property Act 1925 are satisfied, there can be an appointment of a receiver to manage a property.

6.5 Foreclose

Foreclosure is the process of the mortgagee taking possession of the property. Foreclosure means that any outstanding loan is extinguished but that the mortgagee becomes the legal and beneficial owner of the property. As can be seen in the case Williams v Morgan [1906] 1 Ch 904, the remedy of foreclosure cannot be effected until the contractual obligation of the mortgagor to keep up with the mortgage repayments has been broken.

The mortgagee would obtain a court order, as in the case Re Farnol Eades Irvine & Co Ltd [1915] 1 Ch 22, for possession of the property to transfer to the mortgagee as settlement of the mortgagor’s debt.

The mortgagee can then sell the property, if the property realises more than the debt owed the mortgagee may retain the balance. This may be deemed unfair on the mortgagor, it © Association of Costs Lawyers Training 2020 68 could permit the lender to make a “windfall” if the borrower has positive equity and therefore section 91 of the Law of Property Act 1925 gives the court a discretion to order a sale in lieu of foreclosure, which it is highly likely to do if there is any “equity” in the property.

7. Bars to Enforcement

The only bars to enforcement action are the expiry of the limitation period under the Limitation Act 1980 (generally 12 years for recovery of monies owed and secured by mortgage under section 20 of the Act) and a successful plea of undue influence. In respect of undue influence, institutional lenders are increasingly aware of the steps that they must take to “avoid the taint”.

Whilst it might seem that statutory provision has enhanced the protection of mortgagors from the oppressive exercise of the mortgagee’s remedies, the reality is that the mortgagor is not protected from the mortgagee’s remedies where the mortgage is breached by the mortgagor, as the remedy will usually be granted.

1. Introduction

A tenancy is an estate in land which is granted for a determined period of time such as a number of years or fixed term. The tenant pays his landlord rent in return for the use and possession of this land, albeit that the period of possession is time limited.

A tenant has a “legal interest in the land” and it is not easy for the landlord to deprive the tenant of that interest. There would need to be a good reason to terminate the tenancy such as a breach of contract. The landlord would usually need a court order to do so.

Tenants have the right to “quiet enjoyment” of the land, which means they have the freedom to enjoy the property in the same way any “owner” would and free from unnecessary interference by the landlord. Tenancy agreements are partly contractual, i.e. an agreement between landlord and tenant which can be enforced by a court of law. In England and Wales, they are also controlled by long established common law property laws. With residential tenancies in particular (as opposed to commercial or business tenancies), they are partly governed by statutory rules which cannot be over-ridden by the contractual common law rules.

It is important to remember is that residential tenancy agreement terms must be deemed” fair” by the Unfair Terms in Consumer Contracts Regulations 1999. An unfair term in a tenancy agreement may well reassure the landlord, or indeed the tenant, on some point, but it would be unenforceable at law.

2. Rent Act Tenancies

Private tenancies granted before 15 January 1989 (and new tenancies granted after that date to an existing Rent Act tenant by the same landlord) are likely to be governed by the Rent Act 1977. Rent Act tenants will be known as either “protected tenants” if they are occupying within a fixed or periodic term, or “statutory tenants” if they are in occupation following termination of the fixed or periodic term. Rent Act tenants benefit from:

Rules for setting fair rents: and there is a limit that can be charged which is linked to the retail prices index. Once the rent has been set by the Rent Service and registered it is fixed and cannot be re-registered for two years (subject to a substantial change in condition of the premises).

Security of tenure: at the end of the protected tenancy (determined by effluxion of time/break notice or notice to quit as appropriate), the tenancy will continue as a statutory tenancy and to gain possession the landlord must obtain a court order for possession. The grounds or “cases” for possession are set out in Rent Act 1977, Schedules 15 and 16 and include discretionary and mandatory grounds. An order on a mandatory ground will be granted only if the tenant has been given notice that it may be used. If using discretionary grounds, such as rent arrears, the court has to decide whether it is reasonable for possession to be granted to the landlord before an order can be made

© Association of Costs Lawyers Training 2020 70 Statutory succession rights: on the death of the tenant the tenancy can be transferred to a surviving spouse or civil partner (who will occupy as a Rent Act statutory tenant) or relative (who will occupy as an assured tenant under the Housing Act 1988 paying market rent and will only be entitled to succession rights in certain circumstances). This is known as a statutory tenancy by succession.

There are various types of tenancies which cannot be Rent Act tenancies as set out by sections 4-16 of the Rent Act 1977, including:

þ tenancies at low rent; þ shared ownership leases; þ holiday lettings; þ student lettings; þ lettings of licensed premises; þ lettings with a resident landlord; and þ lettings by local authorities, housing associations and housing co-operatives.

3. Assured Tenancies

The Housing Act 1988 replaced the Rent Act 1977 security of tenure regime for residential tenants, although it should be noted there are still a significant number of Rent Act tenancies in existence as the Rent Act 1977 regime effectively provides security of tenure for life and succession rights, save for the landlord's right to obtain possession in certain circumstances.

Accordingly, tenancies granted on or after 15 January 1989 are likely to automatically be assured tenancies governed by the Housing Act 1988 where the tenancy was a renewal of an existing Rent Act tenancy. This is subject to the tenancy meeting the relevant criteria and not falling within the exceptions. The criteria are found in section 1(1) of the Housing Act 1988, they are:

þ the tenant (or if joint tenants at least one of them) was an individual; þ the tenant (or if joint tenants at least one of them) occupied the dwelling house as their only or principal home; and þ the tenancy was not one that could not be an assured tenancy.

Tenancies which cannot be assured are found in schedule 1 of the Housing Act 1988 and include:

þ high value properties (a tenancy granted on or after 1 April 1990 with an annual rent of £100,000 or more in England or £25,000 or more in Wales); þ tenancies granted at a low rent (a tenancy granted on or after 1 April 1990 with an annual rent of £250 or less or £1000 or less in Greater London); þ tenancies for no rent; þ business tenancies; þ student lettings; þ holiday lettings; þ lettings by resident landlords; and þ letting by local authorities and public bodies—although please note that Welsh fully mutual housing associations are, subject to certain criteria including that they © Association of Costs Lawyers Training 2020 71 were entered into on or after 1 December 2014, excluded from this exemption under Schedule 1, paragraph 12(3) of the Housing Act 1988 and accordingly they can be assured tenancies (section 137 of the Housing (Wales) Act 2004).

Market rent will be payable under the terms of the tenancy agreement.

In the period 15 January 1989 to 28 February 1997, a landlord could serve a notice on the tenant under section 20 of the Housing Act 1988 stating that the tenancy would be an assured shorthold tenancy rather than an assured tenancy.

4. Assured Shorthold Tenancies

Following amends to the Housing Act 1988 by way of the Housing Act 1996, tenancies granted on or after 28 February 1997 are likely to automatically be assured shorthold tenancies governed by the Housing Act 1988, as amended, unless a prior notice was served beforehand stating, or it was written into the tenancy agreement, that it would not be an assured shorthold tenancies; or one of the above-mentioned exceptions in respect of assured tenancies apply. However, in order that existing assured tenants are not deprived of their rights, a new tenancy granted to an existing assured tenant will only be an assured shorthold tenancy if the tenant serves a notice on the landlord, in the prescribed form, stating that the tenancy is to be an assured shorthold tenancy. If he does not, the tenancy will be fully assured. In Kahlon v Isherwood [2011] All ER (D) 205, the Court of Appeal held that a Tomlin order agreeing the grant of an assured shorthold tenancy did not amount to such a notice.

An assured shorthold tenancy is a form of assured tenancy, but assured shorthold tenancies do not provide long term security of tenure. In that regard, an assured shorthold tenancy can only be terminated within its fixed term.

5. Public sector residential tenancies

Tenancies granted by Local Authorities cannot be Rent Act tenancies, assured tenancies or assured shorthold tenancies. There are various types of tenancies granted by local authorities including:

Secure tenancies: These are the most common type of tenancy granted by Local Authorities and are governed by section 79 of the Housing Act 1985. Demoted tenancies: A secure tenancy can be demoted to a 12-month probationary tenancy if the tenant has engaged in housing related anti-social conduct or has used the property for unlawful purposes (section 82A of the Housing Act 1985). Introductory tenancy: A probationary tenancy granted for a trial period of 12 months (unless extended to a maximum of 18 months) will automatically become secure after the trial period (section 124 of the Housing Act 1996). Flexible tenancy: A type of secure tenancy which arises in certain circumstances, including where the fixed term granted is not less than two years and the tenant was given notice beforehand that it would be a flexible tenancy. These are governed by section 154 Localism Act 2011. © Association of Costs Lawyers Training 2020 72 Family intervention A tenancy of a dwelling house granted instead of an assured or tenancies: secure tenancy to a tenant who has been (or could have been) the subject of a possession order on grounds of anti-social behavior. Starter tenancies: A starter tenancy is an assured shorthold tenancy granted by a registered provider of social housing and is similar to a local authority introductory tenancy.

6. Common law tenancies

Common law tenancies are tenancies which do not fall within any of the statutory security of tenure regimes outlined above and which are not public sector residential tenancies. If a common law tenancy originally had a fixed term, upon expiry of the term, the tenant's right to possession ceases and the landlord becomes entitled to possession. No notice to quit is required and it would be inappropriate to serve one.

7. Licences and tenancies at will

7.1 Licenses

When considering licenses and the rights of licensees, it is first necessary to consider the range of statutory protections given to tenants through a leases. These include:

þ various forms of “security of tenure”, including under Pt II of the Landlord and Tenant Act 1954, in respect of business tenancies and under the Housing Act 1988 in respect of assured tenancies and assured shorthold residential tenancies; þ compensation for improvements under the Landlord and Tenant Act 1927; þ in respect of residential leases, protection from eviction and the regulation of costs such as service charges.

Licensees, however, will not generally enjoy those protections. Both the Landlord and Tenant Act 1954 and the Housing Act 1988 apply to tenancies, not licences. A licence might therefore seem to offer the owner of commercial property a way to allow occupation and use on an “easy in, easy out” basis, without the need to follow complex statutory procedures.

Licences may also sometimes be used in order to allow a future tenant early access to a property before a tenancy is finalised. Caution should, however, always be exercised in attempting to use licence agreements because, where there is any doubt about its legal effect, there is a risk that the court may lean towards finding that an agreement is a lease rather than a licence, in which case the occupier may benefit from valuable statutory rights and protections.

The court will determine whether an agreement is a lease or a licence by looking at its substance, not the label attached to it by the parties. In Street v Mountford [1985] 2 All ER 289 the House of Lords identified the hallmarks of a tenancy. They are:

þ exclusive possession; þ of defined premises.

© Association of Costs Lawyers Training 2020 73 Payment of rent might also be an indication of a tenancy, although rent is not required for a tenancy to exist. Pressure to permit access as a “licensee” often occurs where a would- be tenant wishes to begin trading (e.g. in the critical run up to Christmas) or to carry out fitting out works before completing a lease.

7.1.1 Trading

If trading is to be permitted, and if the licence relates to the whole of the property, then there is a real risk that the court would find that a right of exclusive possession has been given and that a tenancy has been created. That tenancy is likely to be construed as being a periodic tenancy and, accordingly, if it relates to business use it will automatically fall within the security of tenure protection under the Landlord and Tenant Act 1954. For that reason, the use of a licence in those circumstances would be ill advised. If the full lease has yet to be agreed and the parties wish to allow early occupation, consideration should be given instead to using a short term tenancy agreement that meets the criteria set out in section 43 of the Landlord and Tenant Act 1954, i.e. being for a period of less than six months in length and therefore being excluded from the Act’s protection - although if more than one short term agreement is entered into which results cumulatively in the tenant or their predecessor being in occupation for more than 12 months, their occupation will be protected under the Landlord and Tenant Act 1954.

7.1.2 Carrying out works

If access is to be permitted to carry out works then the form of licence should expressly state that it is only for that purpose. This is to make it clear that the licence does not give a right of exclusive possession. If a licence allows occupation to carry out works, but also allows the occupier to remain in occupation and to start its business (whether under the terms of the agreement or in reality), then the longer that situation continues the stronger the occupier's argument that in fact they have taken exclusive possession of the premises and accordingly that they occupy under a tenancy with valuable security of tenure rights. This will negatively impact on any leverage the landlord had to ensure that the proposed lease is completed on the originally agreed terms.

7.1.3 No defined premises

A licence may be appropriate in circumstances where there will be no defined premises. For example, where it permits the:

þ location of a barrow or kiosk within a shopping centre; þ use of car parking spaces within a large area of other car parking spaces which do not form part of that licence agreement (if the licensee occupies all, rather than just some, of the spaces within a car park then there is a clear risk that the agreement will be found to be a tenancy, which is accordingly likely to be protected under the Landlord and Tenant Act 1954), or þ use of one or more “hot desks” within an office.

In those cases, and generally, the key is to ensure that the licensor retains the right to move the licensee around within the large area identified by the licence so that no particular area can be identified by the licensee as its own. It must also remain practically possible for the licensee to be moved around in that way. If possible it would be helpful to then © Association of Costs Lawyers Training 2020 74 exercise that right periodically in order to demonstrate that the agreement not only allows the right to move the licensee around, but that is the reality on the ground.

As stated above, licence agreements frequently include clauses stating that no tenancy is to be created. Nonetheless, if the agreement has the hallmarks of a tenancy then it will create a tenancy. An exception to this rule was made in Clear Channel v Manchester BC [2005] All ER (D) 112, but that exception applies only where the agreement made an unequivocal statement of fact that it was intended to be a licence and was made between commercial parties of equal bargaining strength and with the benefit of legal advice. Even in that scenario, depending on all of the circumstances there is still a risk that the court might construe the agreement to be a tenancy.

Furthermore, even if clearly drafted and intended at the outset to be a true licence, it appears to be possible for the parties' conduct to alter the nature of the agreement so that a tenancy is created. In Portfolio Resources v Franks [2002] All ER (D) 292 licences were initially granted to two occupiers of a commercial garage. As neither occupier had rights over a defined area, no tenancy was created. Some time later the occupiers painted a line down the middle of the premises and subsequently acted as though it was a dividing line between their respective areas. Next, one of the occupiers moved out and the remaining occupier took up all of the space within the garage. The case was framed as a negligence action against the garage owner's solicitor and barrister and related to their advice that one or both of those actions might have resulted in the creation of a tenancy with Landlord and Tenant Act 1954 protection. The court found that there was a risk of a tenancy having arisen and so the solicitor and barrister were found to have been justified in warning that the occupier might have acquired Landlord and Tenant Act 1954 protection.

A fixed term contractual licence will terminate at the end of the term. Unless a periodic licence provides otherwise, reasonable notice must be given to terminate. Furthermore, if the periodic licence relates to premises occupied as a dwelling, that notice to quit will need to contain the prescribed information required under section 5 of the Protection from Eviction Act 1977 and give not less than four weeks' notice, and if the licensee fails to vacate on expiry then possession will need to be by way of court proceedings.

7.2 Tenancies at will

A tenancy at will arises by implication where a person is either allowed into or permitted to remain in, exclusive possession of premises for an indefinite period on the basis that either party may end the arrangement on demand. By way of example, a tenant taking possession during negotiations for a lease has been held to be on the basis of a tenancy at will in certain circumstances. The problem with such an arrangement, however, is that it gives no certainty to either party and may, inadvertently, be interpreted as being occupation for a particular period which may result in the tenancy becoming a periodic tenancy. A periodic tenancy used for business purposes will automatically be protected under the Landlord and Tenant Act 1954.

A tenancy at will must be determinable at the will of either landlord or tenant. The use of the expression “tenant at will” in an agreement will not create a tenancy at will if the rest of the agreement contains terms which are inconsistent with such a tenancy. Inconsistent terms include provision for break notices, payment of periodic rent and forfeiture clauses.

© Association of Costs Lawyers Training 2020 75 The case law on the topic, i.e. as to whether an agreement is a tenancy at will or a periodic tenancy, is inconsistent and fact specific with each case being determined on its own facts. There was previously a ready inference that, if rent was paid, the tenancy became a periodic one. However, the current case law emphasises that this depends on the intentions of the parties. The following cases should be considered as examples of different scenarios giving rise to different conclusions as to the status of an occupier:

Javad v Aqil [1991] 1 Where a prospective tenant was allowed to enter into All ER 243: possession and thereafter paid periodic payments of rent while negotiations actively proceeded on the terms of a lease to be granted to him, it was to be inferred in the absence of any other material factors that the parties intended to create a tenancy at will rather than a periodic tenancy. Barclays Wealth v Inactive negotiations for the grant of a new lease continued for Erimus Housing [2014] a substantial period of time. The negotiations for a new lease EWCA Civ 303: arguably then came to an end and the parties instead discussed how long the existing occupation would continue for. This therefore led the court to the conclusion that there was a periodic tenancy: “I, therefore, conclude that this is a case where there was a periodic tenancy, where the landlord and tenant expected to have a proper landlord and tenant relationship where notice had to be given. It was a consensual occupation which had lasted for a substantial period of time.”

7.3 Periodic tenancies

A periodic tenancy is a tenancy that can be created either by express agreement or by inference. The period of the tenancy will usually be the period by reference to which rent is reserved, rather than when it is payable. By way of example, if the parties agree (or agreed under a previous fixed term lease):

þ an annual rent of £40,000 payable monthly - a yearly tenancy will likely arise, rather than a monthly tenancy; þ a quarterly or monthly rent - a quarterly or monthly tenancy will arise respectively.

A periodic tenancy will continue until determined by a notice to quit. This can be given by the other party but must expire at the end of a relevant period.

If the periodic tenancy is used for business purposes, it will automatically fall within the protection of Landlord and Tenant Act 1954. It cannot be contracted out since it is not a tenancy “granted for a term of years certain” (section 38A(1) Landlord and Tenant Act 1954). Accordingly, any notice to quit served will take effect subject to the provisions of Landlord and Tenant Act 1954. Either a section 25 notice and a notice to quit should be served, or a section 25 notice which also complies with the requisite notice period for terminating the periodic tenancy can be served. Please note that if the Landlord and Tenant Act 1954 applies then the tenant will be entitled to a renewal lease unless the landlord is able to establish one of the grounds of opposition under section 30(1) of the Landlord and Tenant Act 1954.

If the periodic tenancy is used for residential purposes, it may fall within one of the residential security of tenure frameworks, such as the Housing Act 1988 in respect of Assured

© Association of Costs Lawyers Training 2020 76 Tenancies and Assured Shorthold Tenancies. In that event, section 5 of the Housing Act 1988, provides that an Assured Tenancy can only be brought to an end by the landlord obtaining a court order for possession under sections 7 or 21 and the execution of the order (or the tenant surrendering the tenancy). As such, where the landlord obtains a possession order, the tenancy does not end until the order is executed in accordance with the rules of court (section 5(1A) Housing Act 1988).

If the tenancy is for residential use but does not benefit from statutory security of tenure, the notice to quit will still need to comply with section 5 of the Protection from Eviction Act 1977 and, if the tenant fails to vacate on expiry, then court proceedings under section 3 of that 1977 Act will be required in order to gain possession.

1. Introduction

This handout aims to provide an overview of the type of proceedings that you may encounter involving or concerning land. It will also provide an overview of the rules regarding costs and land.

Consideration will be given to matters which are dealt with by:

þ First-tier Tribunal (Property Chamber); þ Appeals to the Upper Tribunal (Lands Chamber); þ Tribunals; þ County Court; þ High Court; þ Court of Protection.

2. The First-tier Tribunal (Property Chamber)

The First-tier Tribunal (Property Chamber) is one of 7 chambers of the First-tier Tribunal which settles legal disputes and is structured around particular areas of law. They handle applications, appeals and references relating to disputes over property and land. The functions of this Chamber are allocated by article 5A of the First-tier Tribunal and Upper Tribunal (Chambers) Order 2010.

First-tier Tribunal (Property A reference by the Chief Land Registrar and any Chamber) has jurisdiction over other application, matter or appeal under the all functions relating to: Land Registration Act 2002. Proceedings under any of the enactments referred to in section 6A(2) of the Agriculture (Miscellaneous Provisions) Act 1954 or the Hill Farming Act 1946. Housing etc, under the Housing Act 2004. Leasehold property. Residential property. Rents. The right to buy. Proceedings relating to mobile homes and caravan sites. Proceedings for approval by the First-tier Tribunal of the exercise of a power of entry, made under paragraph 6B of Schedule 9 to the Local Government Finance Act 1988 or under section 25A of the Local Government Finance Act 1992.

3. Appeals to the Upper Tribunal (Lands Chamber)

The jurisdiction of this Chamber is allocated by article 12 of the First-tier Tribunal and Upper Tribunal (Chambers) Order 2010. It has jurisdiction of:

© Association of Costs Lawyers Training 2020 78 þ All functions related to compensation and other remedies for measures taken which affect the ownership, value, enjoyment or use of land or water, or of rights over or property in land or water. þ Appeals from decisions of: o The First-tier Tribunal made in the Property Chamber other than appeals allocated to the Tax and Chancery Chamber by article 13(h) o Leasehold valuation tribunals in Wales, residential property tribunals in Wales, rent assessment committees in Wales, the Agricultural Land Tribunal in Wales or the Valuation Tribunal for Wales. o The Valuation Tribunal for England. þ The determination of questions of the value of land or an interest in land arising in tax proceedings. þ Proceedings in respect of restrictive covenants, blight notices or the obstruction of light. þ The Upper Tribunal's function as arbitrator under section 1(5) of the Lands Tribunal Act 1949. þ An application for the Upper Tribunal to grant the relief mentioned in section 15(1) of the Tribunals, Courts and Enforcement Act 2007 (Upper Tribunal's “judicial review” jurisdiction) in particular cases. þ Any case which may be transferred under Tribunal Procedure Rules to the Upper Tribunal from the Property Chamber of the First-tier Tribunal in relation to particular functions. þ Any other functions transferred to the Upper Tribunal by the Transfer of Tribunal Functions (Lands Tribunal and Miscellaneous Amendments) Order 2009.

A person may appeal to the Upper Tribunal (Lands Chamber) if a decision was made by the:

þ First-tier Tribunal (Property Chamber) - except decisions about land registration þ Residential Property Tribunal in Wales þ Leasehold Valuation Tribunal in Wales þ Valuation Tribunal in England or Wales

Permission may need to be obtained before an appeal is made. Applications may also be made to the tribunal about:

þ compensation for the compulsory purchase of land þ discharge or modification of land affected by a ‘restrictive covenant’ þ compensation for the effect on land affected by public works þ a tree preservation order þ compensation for damage to land damaged by subsidence from mining þ the valuation of land or buildings for Capital Gains Tax or Inheritance Tax purposes þ a ‘right to light’ dispute þ compensation for blighted land

4. Tribunal Procedure

Although the idea is that litigants will generally represent themselves, and the informal nature of the Tribunals together with the wide rights of audience in most Tribunals, litigants may still want to have legal representation (for example in the Employment Tribunal). Legal © Association of Costs Lawyers Training 2020 79 Aid is generally not available for tribunal work, although there are some organisations (such as the Citizens Advice Bureau and some universities) who provide free legal assistance, and litigants may be able to engage counsel on a pro-bono basis. Where a party is legally represented, then unless the rules of the Tribunal permit a legal representative to be instructed, it is likely that the costs of such representation will not be recoverable inter partes.

Section 22 of the Tribunals, Courts and Enforcement Act 2007 requires that Tribunal Procedure Rules are made by the Tribunal Procedure Committee and states that the objectives of the rules are that: justice is done; the tribunal system is accessible and fair, proceedings are handled quickly and efficiently, the rules are both simple and simply expressed and that the rules where appropriate confer on members of the relevant Tribunal responsibility for ensuring that the proceedings are handled quickly and efficiently.

There are variations in procedure depending on the area of law involved. However, each set of procedures must follow the basic objectives listed above. Schedule 5 of the Tribunals, Courts and Enforcement Act 2007 provides the rules relating to the tribunal procedures. Part 1 sets out that the procedural rules may contain certain provisions relating to time limits, whether hearings should be in public or private, representation, evidence, witnesses and notice.

The Tribunal Procedure Committee is in charge of creating the individual sets of procedural rules. So far several sets of procedural rules have been devised including those relating to social entitlement, health and education. Generally, the procedural rules do not require leave for the commencement of proceedings, but normally the applicant should send an application within 28 days of the decision in dispute. The respondent must then state the grounds, if any, on which the application will be opposed. A hearing will then normally take place, with the general rule being that these are in public except in relation to mental health issues and some educational issues. Each party may have a representative, who may be legally qualified or not, and the tribunal has wide powers to control the way in which evidence is given and the amount of evidence which may be presented. Once a decision has been reached the Tribunal must provide written reasons for it and notification of any rights of review or appeal.

5. The County and High Courts

Both the County and High Courts hear civil matters, sometimes these may involve a dispute over land or property. The types of matter that the courts may hear include:

þ Trespass þ Neighbour disputes þ Charging Orders þ Possession proceedings þ Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) Applications þ Court of Protection

The tort of trespass to land is committed when a person (D) does an act, which causes entry into the land of another person (C) without permission or justification. It is not necessary for any harm to be caused to the land concerned for the tort to be committed.

For there to be a trespass in tort, D must enter C’s land voluntarily (Stone v Smith (1647) 82 ER 533). As illustrated in the case of Ellis v Loftus Iron Co [1874-80] All ER Rep 232 any entry will suffice, no matter how trivial or small. However, Conway v George Wimpey [1951] 1 All ER 363 confirms that it is not necessary that D knows that he is committing a trespass. It is therefore possible to trespass accidentally, e.g. if D is mistaken as to who is the owner of the land concerned. As demonstrated in the case of Bernstein v Skyviews [1977] 2 All ER 902, the definition of “land” extends not just to the surface of a piece of land, but also to the soil below the surface and (within limits) the sky above the ground.

An action in trespass is open not only to the owner of a piece of land but to anyone who has exclusive possession (AG Securities v Vaughan [1988] 3 All ER 1058). A claimant in a trespass claim can seek a possession order to remove people from their land or an injunction to prevent people from trespassing in the first place. Damages can also be claimed if appropriate. For practical guidance on removing trespassers from residential property.

5.2 Neighbour Disputes

Neighbour disputes may not be of high financial value, but they can be among the most acrimonious and difficult to resolve. The Court of Appeal has stressed that professional advisers have a duty to warn their clients at an early stage about the downside of ‘neighbour litigation’ even for a successful party. Apart from significant costs, ongoing relationships will be affected and the litigation may blight the properties and lives of those involved. If at all possible, disagreements about rights of way, boundaries and similar should be settled without resorting to court (Wilkinson v Farmer [2010] All ER (D) 217).

5.2.1 Boundary Disputes

Land Registry title plans record only the general position of property boundaries. Consequently, in the case of a boundary dispute, it remains necessary to refer back to the deeds or to resort to legal presumptions. The Land Registration Act 2002 provides for the precise position of a boundary to be determined, either on application by the registered proprietor or, in the case of a transfer or lease of part, by the registrar in respect of any common boundary. Once determined the exact line of the legal boundary will be shown, on a detailed and larger-scale map, as a single line, showing the relationship between it and other features on the plan. If the boundary has been determined in this way, squatters cannot rely on 'reasonable belief' as to its location to support an application for title by adverse possession.

Professional advisers have a duty to warn clients of the potentially catastrophic costs and consequences of boundary disputes. The Court of Appeal has said that advisers should urge their clients to consider alternative dispute resolution procedures following one case in which a dispute over a small strip of land led to a legal bill exceeding £500,000.

In England and Wales, local authorities have powers to deal with trees on private property which are on the point of causing damage. A local authority can:

þ make the tree safe, if asked by the owner of the land on which the tree stands. The local authority will recover its costs from the owner; þ make a tree safe on someone else’s land, if asked by a neighbour whose property is in imminent danger from the tree and the owner of the land on which the tree stands is not known; þ serve a notice on someone who has a tree which is on the point of causing damage to the property of a neighbour and that neighbour asks the local authority to take action. The owner of the tree must comply with the notice. If they do not, the local authority will do the work and recover its costs from the owner. The owner can appeal to the county court against the notice.

It is up to the local authority to decide if the tree is on the point of causing damage. If they consider it's not on the point of causing damage, they don't have to take any action. If the roots of a neighbour’s tree spread into a property, they can be removed using the least damaging method available, unless there is a tree preservation order on it. If a neighbour has to enter the tree owner’s property to do this, they must give reasonable notice. The neighbour may also wish to consult their insurers, if there is a possibility that their property may be damaged by the roots. If the roots have already caused damage, the tree owner is liable to pay compensation but it must be shown that the tree owner knew, or ought to have known, of the danger.

All trees in an area designated as a Conservation Area are automatically protected. In other areas, Tree Preservation Orders might apply. Regulations in force from 1 October 2008 provide for a standard form of application for local authority consent for cutting down, topping, lopping or uprooting trees covered by a tree preservation order.

In England and Wales complaints can be made to the local authority if residential property is affected by a neighbour’s evergreen or semi-evergreen hedge which is more than two metres high. Neighbours must try to resolve the complaint before going to the local authority. The local authority may charge a substantial fee before considering the complaint. Either neighbour can appeal against the local authority's decision.

5.2.3 Rights of way

Disputes over shared access may arise, commonly they arise:

þ when someone (not necessarily the servient owner) blocks or restricts the right of way; þ when trying to decide who pays for the maintenance of the right of way (repairing the road surface, or clearing vegetation); þ when the servient owner wishes to change the route of the right of way; þ when the dominant owner claims to have rights in excess of those granted to him; þ when the servient owner plans development within the right of way or butting up against the right of way; þ when the servient owner gates or fences the right of way. © Association of Costs Lawyers Training 2020 82 The primary remedy for interference with an easement would be an injunction.

Access to Neighbouring Land Act 1992 gives limited right of access to a neighbours garden/land to carry out 'basic preservation works'. Until the Access to Neighbouring Land Act 1992 was passed, adjoining owners had virtually no right to go onto their neighbour's land unless an express easement had been granted, such as a right to maintain drains, pipes and wires.

Noise and nuisance can be among the most difficult and potentially dangerous neighbour disputes. Before considering any private action, consider whether it would be sensible to seek help from local and other authorities:

þ neighbours who make too much noise can be fined up to £5000 or have noisy equipment removed if warnings are ignored from local authorities; þ the police and social landlords can apply for anti-social behaviour orders (ASBOs); þ social landlords can apply to the courts for a demoted tenancy, or even evict tenants in severe cases; þ properties in which class A drugs are supplied or used can be closed by the police; þ houses or businesses where persistent anti-social behaviour is reported could ultimately be closed and sealed by police or local authorities.

5.2.4 Disclosing disputes

Enquiries before contract ask whether the seller knows about any disputes. In Doe v Skegg [2006] All ER (D) 250, the adult son of the seller's neighbour had created problems by trespassing and harassing the sellers. The seller had considered mentioning the problems, but had decided against doing so since there was no real 'dispute', merely his complaints, and because the problems related only to antisocial behaviour and were not about the property in the way that, for example, a dispute over boundaries would have been. The buyer alleged fraudulent misrepresentation as the seller had answered 'no' to the relevant enquiries before contract.

The claim was allowed. The word “dispute” covers a situation where one party has threatened legal proceedings against another. The dispute was “over the property” in that trespass was involved. The answer given had been false. The seller had carefully considered whether to disclose the dispute and had been aware that disclosing it would have been the honest thing to do. He had known that his answers were not truthful, and, in the circumstances, his behaviour had been fraudulent.

5.3.5 Party Walls

The Party Wall Act 1996 affects any building owner who wishes to:

þ work on existing party walls or structures; þ construct a new wall or structure at or astride the boundary line with an adjoining property; or þ excavate within three or six metres of an adjoining building or structure (depending on the depth of the works).

© Association of Costs Lawyers Training 2020 83 The Party Wall Act 1996 sets out a process whereby a building owner intending to carry out party wall works is required to serve a notice on any adjoining land owner specifying the works intended to be carried out and the proposed start date of such works. The process then allows for the adjoining land owner either to serve:

þ a positive acknowledgment of the notice; or þ a negative acknowledgement (objecting to the proposed works) or to do nothing.

In the latter two scenarios, the next stage of the process is for the dispute resolution mechanism to kick in, whereby surveyor(s) are appointed to survey the proposed works, consider any objections and to make a Party Wall Act 1996 award. Whether the proposed works are to an existing structure or the building of a new one, will affect the length of notice to be provided to the adjoining land owner. The Party Wall Act 1996 also applies where an existing party wall is in need of repair and either both or one of the parties adjoining it wishes to carry out repairs to the wall.

The Party Wall Act 1996 process provides for security for costs of repair or compensation for damage to property resulting from party wall works. This includes the ability of the adjoining owner to seek security for any costs resulting to him from a building owner's proposed works as well as for the building owner himself to seek costs from the adjoining owner where works are carried out.

5.3 Charging Orders

Charging orders are a relatively popular method of enforcing a judgment debt for money. They are a heavily procedural process and therefore there is a cost associated with them. A charging order is a means of securing a judgment debt against the judgment debtor's assets. A charging order can be sought over land (e.g. a house) or securities (e.g. shares) or funds in court. the charging order of itself does not realise money to satisfy the judgment debt, that only happens if and when an order for sale is obtained (after a final charging order has been made) and, again, only if and when the charged property is sold and there are sufficient sale proceeds to discharge the judgment debt.

These orders are governed by the provisions of the Charging Orders Act 1979 and CPR 73 and its accompanying Practice Direction. In addition to or, as an alternative to a charging order, a judgment creditor may also seek to protect his position in relation to any claimed entitlement to an interest in securities or funds in court by applying for a stop order or (in relation to securities only) a stop notice. These are also governed by the rules set out in CPR 73 and CPR PD 73.

CPR 73 and CPR PD 73 were amended with effect from 6 April 2016, the aim being to streamline the process for obtaining charging orders in more straightforward cases (and so with limited judicial involvement in such cases). The Practice Notes and forms in this subtopic all cover the procedure post-6 April 2016. The new provisions apply to all applications for a charging order or to vary/discharge a charging order or a claim for an order for sale to enforce a charging order made on/after 6 April 2015. It is understood, however, that subject to any obvious conflict, the authorities on charging orders which pre- date the 6 April 2016 CPR 73 and CPR PD 73 provisions remain good law.

þ CCMCC charging order cases: when an application for a charging order is a straight-forward case which can be started and progressed through the County Court Money Claims Centre (CCMCC) þ non-CCMCC charging order cases: for those applications which cannot be started in the CCMCC and will, instead, be started either in the County Court hearing centre for the judgment debtor's home court or in the High Court

A charge may be imposed by a charging order only on:

þ under section 2 (1)(a) of the Charging Orders Act 1979: any interest held by the debtor beneficially in land, or under any trust; or þ under section 2 (1)(b) of the Charging Orders Act 1979: any interest held by a person as a trustee of a trust in land where the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust, or the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit, or there are two or more debtors, all of whom are liable to the creditor for the same debt, and they together hold the whole beneficial interest under the trust unencumbered and for their own benefit.

In accordance with section 5 and Sch 1 of the Interpretation Act 1978, land in this context is widely defined to include buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land.

In Walton v Allman [2015] EWHC 3325 (Ch), the High Court held that the court has jurisdiction to make a final charging order in respect of a beneficial interest in property, even where the extent of the interest has not yet been quantified.

A charging order may be made to secure “the payment of any money due or to become due” under a judgment or order. However, as can be seen from the case A and M Records v Darakdjian [1975] 3 All ER 983, it cannot be made in respect of an order for costs which have not yet been assessed. The case of Monte Developments (in administration) v Court Management Consultants [2010] EWHC 3071 (Ch) confirms nor can it be made where the costs have been ascertained, but a further step is required, such as entering judgment in default on the failure of the debtor to make an agreed payment into court.

Important limitations also apply in connection with legal aid. If costs are awarded against a party funded by the Legal Services Commission as part of the Community Legal Service (the client), in a case where costs protection applies, and a charging order for such costs is obtained over the client’s interest in their main or only home:

þ the charge will only secure the amount payable under the costs order to the extent of the amount (if any) by which the proceeds of sale of the client’s interest (after the deduction of any mortgage debts) exceed £100,000 þ it will not be possible to apply for an order to sell the property.

5.4.1 Mortgages

As we have seen a mortgagee's remedies include sale and the appointment of a receiver. Taking possession and foreclosure will rarely be encountered in practice.

The mortgagee’s power of sale arises under section 101 of the Law of Property Act 1925, and is regulated by section 103 of the Law of Property Act 1925. This allows a mortgagee to instigate possession proceedings once:

þ two current monthly instalments have fallen due and remain unpaid;, or þ for a repayable on demand mortgage, a notice requiring payment of the mortgage money has been served and payment has not been made three months after service.

To provide a level of protection to defaulting homeowners, section 36 of the Administration of Justice Act 1970, provides that where the mortgagor is likely to be able within a reasonable period of time to pay any sums due under the mortgage the court may:

þ adjourn the proceedings; þ stay or suspend execution of the judgment or order; or þ postpone the date for delivery of possession, for such a period or periods as the Court thinks reasonable.

The exercise of the statutory power of sale under section 101 of the Law of Property Act 1925 after a relevant default by the mortgagor, has been held, in Horsham Properties Group v Clark [2008] All ER (D) 58, not to be a deprivation of possessions within the meaning of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, Art 1.

If possession proceedings are brought by a lender, because of the borrower’s default on mortgage payments, a tenant in the mortgaged property may have the right to be joined as a party to the proceedings and oppose eviction. The tenant’s right to be joined is dependent on the time the tenancy agreement was entered into and any term in the mortgage deed which affects the borrower’s statutory right to grant a tenancy. To be joined as a party to the proceedings, the tenant must prove:

þ the existence of the tenancy (by way of agreement), and þ that it is binding on the lender (i.e. that the tenancy was not granted in breach of the mortgage deed)

If the tenant cannot show that his tenancy is binding on the lender, he cannot be joined as a party to the proceedings and cannot oppose possession or eviction.

5.4.2 Tenancies

During any fixed term of the Assured Tenancy, the landlord will only be able to end the tenancy by:

© Association of Costs Lawyers Training 2020 86 þ exercising any break option or exercising any right to forfeit available; or þ serving a notice under section 8 of the Housing Act 1988 (which must be in the prescribed form) and obtaining and executing a court order for possession under one of the available grounds at Housing Act 1988, Sch 2. Only certain of the grounds can be used during the fixed term, which mostly involve a breach of the terms of the tenancy or some other default on the part of the tenant.

On expiry of the fixed term, a periodic statutory tenancy will arise, and the landlord will again only be able to determine the tenancy by serving a notice under section 8 of the Housing Act 1988 and obtaining and executing a court order for possession under one of the relevant grounds found in Sch 2 of the Housing Act 1988.

The grounds under section 8 of the Housing Act 1988 are a mixture of mandatory and discretionary grounds. Once a valid section 8 notice has been served, proceedings under CPR Part 55 will be required, which can be under the:

þ standard procedure; þ Possession Claims Online (PCOL) procedure (where the only remedies are for possession, arrears and costs).

Assured Shorthold Tenancies do not provide long term security of tenure and in that regard, can only be terminated within its fixed term:

þ by use of any right to forfeit combined with the section 8 procedure (as above); þ by use of any break right combined with either the section 8 or section 21 procedure as appropriate (although the s 21 procedure cannot be exercised to bring the tenancy to an end in the first six months of the fixed term).

A landlord can gain possession of the property at the end of the fixed term under either:

þ the available grounds under the section 8 procedure, or þ the section 21 procedure.

If a valid two-month notice is served under section 21 of the Housing Act 1988, the court must order possession; there is no need to prove any ground for possession. The section 21 procedure is accordingly likely to be preferable. However, strict compliance with the procedure and any pre-conditions is essential, as otherwise the notice will be invalid.

One pre-condition which applies in respect of all Assured Shorthold Tenancies is that a section 21 notice cannot be served where the tenancy deposit scheme (since 6 April 2007, all deposits taken by landlords for residential Assured Shorthold Tenancies in England and Wales must be protected by a tenancy deposit scheme) has not been complied with. In particular, within 30 days after receiving the deposit, the landlord must give the tenant and any relevant person certain prescribed information about the tenancy deposit scheme, the deposit and the Assured Shorthold Tenancy.

Following the coming into force on 1 October 2015 of sections 33-41 of the Deregulation Act 2015, and the Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 SI 2015/1646, the regime in respect of section 21 notices and related requirements has changed in respect of English tenancies. Accordingly, for a © Association of Costs Lawyers Training 2020 87 transitional period of 1 October 2015 to 30 September 2018 under section 41 of the Deregulation Act 2015, the requirements as to the form of notice and other requirements for serving a valid section 21 notice in respect of tenancies:

þ entered into before 1 October 2015 (or statutory periodic tenancies which arose on/after 1 October 2015 at the end of a fixed term which was granted before 1 October 2015) remain as they were. This also remains the procedure for all Welsh tenancies. The procedure is set out in Practice Note Terminating an Assured Shorthold Tenancy. þ which were entered into on/after 1 October 2015 (or renewals of fixed term tenancies entered into before 1 October 2015 which did not first become a statutory periodic tenancies), the procedure includes prescribed forms of notice, additional pre-conditions and timing issues as to service of the notice and future possession proceedings. After the end of the transitional period on 30 September 2018, they will apply to all English tenancies. The procedure is set out in Practice Note Terminating an Assured Shorthold Tenancy, and in respect of service of the notice more generally Serving Notices—potential issues.

Once a valid section 21 notice has been served, subject to compliance with any timing issues identified under the procedures above and if the tenant does not leave the property by the time the notice expires, proceedings under CPR Part 55 will be required. These can either be brought under the:

Accelerated procedure: The advantages being that this may be a speedier and less costly procedure which may even just be dealt with on paper without a hearing if appropriate, the disadvantage being that any claim for arrears or other breach would need to be dealt with under separate proceedings. Standard procedure: The advantage being that any claim for arrears or other breaches can be included, the disadvantage being that it is likely to be a lengthier and more costly procedure as it will likely involve exchange of evidence, disclosure and a hearing.

If a tenancy was periodic (from the outset or following the tenant holding over after expiry of the fixed term), notice to terminate will need to be given equal to the period of the tenancy. The notice to terminate will need to contain the prescribed information required under section 5 of the Protection from Eviction Act 1977 and give not less than four week’s notice.

If the tenant remains in occupation once their tenancy has come to an end and the landlord has demanded possession, they will become a trespasser.

Note however that they will not be deemed a “trespasser” for the purposes of the Civil Procedure Rules (CPR) Part 55, in respect of which the provisions regarding a 'possession claim against trespassers' only relates to persons who enter and remain on land without consent, and not to former tenants. However, residential common law tenants are protected by the Protection from Eviction Act 1977 and therefore if a tenant refuses to leave once their tenancy has come to an end, a court order for possession is required. The procedure for possession will be under the Civil Procedure Rules (CPR) Part 55. © Association of Costs Lawyers Training 2020 88 5.5 TOLATA Applications

Cohabitants do not have the same rights to make property claims as married couples or civil partners; therefore, disputes between cohabitants regarding their beneficial interests are determined in accordance with the law of trusts. There are two main ways in which cohabitants may have an interest in property: as a joint owner or, where the property is in the sole ownership of the other cohabitant, under a trust, whether express or otherwise.

Disputes regarding interests in property are most likely to arise where a property is solely owned by one cohabitant. The other cohabitant may have an interest where the cohabitant who owns the property in their sole name may make a valid express declaration of trust in writing declaring that they hold the property beneficially in trust for themselves and their cohabitant, and declaring their respective shares in accordance with section 53(1)(b) of the Law of Property Act 1925. This is an express trust. If there is no express trust, and a non-legal owner wishes to claim a beneficial interest, they must establish one of the following:

A resulting trust: This arises where the non-legal owner contributed in money or money's worth to the purchase, when there is a (rebuttable) equitable presumption that it was the cohabitants' common intention to hold the beneficial interests in proportion to their contributions (Oxley v Hiscock [2004] 2 FLR 295). A constructive trust may If a cohabitant can show a common intention that be established: they should have a beneficial interest and, crucially, that they have acted to their detriment on this basis—the Court of Appeal has emphasised the need for claimants to produce evidence that is capable of establishing detrimental reliance (Curran v Collins [2015] EWCA Civ 404). A non-legal owner If the cohabitant legal owner has led the non-legal cohabitant may be able owner cohabitant, either by words or conduct, to to establish proprietary believe they have a beneficial interest, as a estoppel: consequence of which the non-legal owner cohabitant has acted to their detriment, making it unconscionable (in equity) for the legal owner to insist that they have total beneficial ownership of the property in question.

A cohabitant who is a trustee of land or who has an interest in a property subject to a trust of land may make an application to the court under the Trusts of Land and Appointment of Trustees Act 1996, as permitted by section 14(1) of that Act. Under section 14(2) of the Trusts of Land and Appointment of Trustees Act 1996 the court may make orders:

þ regarding the exercise of the functions of the trustees, which may include relieving them of an obligation to obtain the consent of, or consult, any person in connection with the exercise of their functions, or þ declaring the nature or extent of a person's interest in property subject to the trust

Under section 14(3) of the Trusts of Land and Appointment of Trustees Act 1996 the court cannot make an order to appoint or remove trustees under the 1996 Act.

þ the intention of the person or persons who created the trust; þ the purposes for which the property subject to the trust is held; þ the welfare of any minor who occupies or might reasonably be expected to occupy the; property subject to the trust as their house; and þ the interests of any secured creditor of any beneficiary.

5.6 Conversion

Anyone who does an intentional act inconsistent with the rights of the owner of a chattel commits the tort of conversion. Liability is strict and the tort can be committed even though the act in question was committed innocently.

The case OBG Ltd v Allan [2007] UKHL 21 saw the Law Lords being asked to consider whether the tort of conversion can be committed against intangible property such as rights under a contract and causes of action which are not evidenced by any specific document. To recognise such an extension would involve breaking new ground and the House was split. The majority held that conversion should not be extended but the dissenting opinions of the two judges, who wished to see the law develop in this area, were strongly expressed. At the heart of this difference of opinion lie opposing views as to the role of the judiciary (to develop the common law) and that of Parliament (to introduce change in line with perceived current social and policy needs).

6. The Court of Protection

Professional Deputies for property and finances, may have to deal with is an application to the court for permission to buy and sell property. The first thing to do as a Deputy for property and finances, when considering the sale or purchase of property, is to check the Order. Whilst First General Orders can be phrased quite widely, there are often restrictions included about buying or selling property, and the court will then require a further application to be made to them to go forward with a transaction.

One of the main issues with the applications to the court on specific property matters is that it is time consuming and expensive, as the Applications can take months to deal with. Six months is a typical time, and sometimes longer depending on what you are asking for. In real terms, this could mean that the client can miss out on a particular purchase. A formal application for a purchase can sometimes be avoided where the purchase is made pursuant to an interim payment by a Defendant in a personal injury or clinical negligence claim. The civil courts in which the claim is made may authorise the release of funds to a solicitor to apply towards the purchase. What sometimes happens is that the purchase can take place, even while the Deputyship Application to have a Deputy actually appointed is ongoing. Once the Deputy has been appointed, they would then advise the Court of Protection about the order in the civil claim, so they can make sure that they are happy with it, and do not need to make any further orders. Where minor children are involved in clinical negligence claims, and an interim order is made for the purchase of a property, the property is usually purchased in the name of the proposed Deputy and the litigation Solicitor, as trustees for the child concerned, until the Deputyship Orders are made.

© Association of Costs Lawyers Training 2020 90 The court will require as much detail as possible about the new property and the circumstances pertaining to it for the client. If there are any disputes about the property matter, e.g. if there is disagreement about the client moving/selling then the Court will get involved in making the decision, and in that situation the Official Solicitor would normally get involved to represent the patient.

If a person is acting under an Lasting Power of Attorney and Enduring Power of Attorney, and does not need to make an application to the court, it will still be their duty to act in the patient’s best interests and to consider all the appropriate factors. If an application to the court is required then a specific order will be made by the court which will deal with the provision of the purchase money, and any release of funds from the court, as well as for the safe custody of the title deeds of the property.

The Deputy or Attorney will always need to ensure that there are sufficient funds to both exchange and complete a purchase transaction and that the monies will be available in a timely fashion. If funds are on deposit or invested in a Portfolio or other form of account, then it will be up to the Deputy or Attorney to make sure they are available for both exchange (the usual 10% deposit) and completion (the balance of the purchase price). Certainly, the Deputy or Attorney would be in breach of contract if sufficient funds are not available in time for completion. That would have financial penalties under the contract for which a Deputy, or Attorney, may be personally liable.

If the Patient is owning the property with somebody else (often the parents) then a Declaration of Trust will be essential, which will set out the contributions that have been made, and the percentages that will be due to the Patient and the co-owners on any subsequent sale of the property. In a situation where the Patient lacks capacity, then the property would usually be held on a tenants in common basis with a restriction entered at the Land Registry.

If the patient does have any tenanted properties, then the Deputy will need to have a widely drafted general order that will give authority for such transactions. Where a formal authority is needed in any property transaction, then a formal application has to be made with appropriate explanation to the court as to why their authority is required and information which enables the appropriate form of authority to be drawn up. If the application is complex, or involves a benefit to a third party (for instance a loan on favourable terms) then it will be for the court to request further evidence or direct that other parties be notified or joined as respondents.

Professional Deputies may also have to deal a person that lacks capacity but is a Trustee of land (e.g. an elderly spouse co-owns the property with the spouse who lacks capacity) and is no longer able to act. In these cases, the incapable trustee must be discharged from the trust and, where necessary, replaced by a new Trustee so that a property transaction is able to go ahead. If the person who lacks capacity also has a beneficial interest in the property (e.g. a joint property where they have a half share), and the other trustee remains competent then the competent trustee can appoint a new trustee with the permission of the Court of Protection. The application is made under section 36(9) of the Trustee Act 1925. Unfortunately, this is often a separate application that has to be made to the court, and stands apart from the general order under which a Deputy can act. Detailed evidence has to be provided and a fee paid, even if the application relates only to the sale of land.

© Association of Costs Lawyers Training 2020 91 There are more complicated applications that have to be made under the Trustee Act 1925 to the Court of Protection where there is a lack of a competent Co-Trustee, or where there are other trust assets involved. For ongoing trusts of land deputies must also think about retiring and discharging the incapacitated.

7. Costs

The starting point when considering the costs in tribunals is the Tribunals, Courts and Enforcement Act 2007. For all matters that proceed to the county court or the High Court the CPR will be applicable, and of course for Court of Protection Matters the Court of Protection Rules 2007 will apply (the latter is beyond the scope of this handout).

7.1 The Property Chamber

Tribunals governed by the Tribunals, Courts and Enforcement Act 2007, but each chamber also governed by its own set of Procedure Rules. A summary of the relevant provisions is as follows:

Section 29(1) Costs shall be in the discretion of the Tribunal. Section 29(2) The Tribunal has full power to determine by whom & to what extent costs are to be paid. Section 29(3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules. Section 29(4) Orders can be made against a representative. Section 29(5) Defines Wasted Costs.

Rule 13(1)(a) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 contains the usual provisions providing for the Tribunal to make a wasted costs order. Rule 13(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 gives the tribunal power to make an order for costs if a person has acted unreasonably in bringing, defending or conducting proceedings but unlike other rules this power is restricted to the following four types of case:

þ An agricultural land and drainage case. þ A residential property case. þ A leasehold case. þ In a land registration case.

The Tribunal may also make an order requiring a party to reimburse to any other party the whole or part of the amount of any fee paid by the other party which has not been remitted by the Lord Chancellor (rule 13(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013).

The Tribunal may make an order under rule 13 on an application or on its own initiative. Where a person makes an application for an order for costs they must, unless the application is made orally at a hearing, send or deliver an application to the Tribunal and to the person against whom the order is sought to be made; and may send or deliver together with the application a schedule of the costs claimed in sufficient detail to allow

© Association of Costs Lawyers Training 2020 92 summary assessment of such costs by the Tribunal (rule 13(4) of the Tribunal Procedure (First- tier Tribunal) (Property Chamber) Rules 2013). Such an application may be made at any time during the proceedings but must be made within 28 days after the date on which the Tribunal sends a notice of the decision which disposes with the matter or the case is withdrawn. Again, the paying party must be afforded the opportunity of making representations before any such order is made in accordance to rule 13(6) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013.

The Tribunal may order an amount to be paid on account before the costs or expenses are assessed (rule 13(9) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013).

7.2 Lands Chamber Costs

The Tribunal may make an order for costs on its own initiative, or on the application of either party (Rule 10(1) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010). Unlike with the other first tier tribunals, the circumstances under which such an order may be made are not restricted to wasted costs and/or conduct issues (save for where the proceedings relate to an appeal from a decision of the leasehold variation tribunal). Under Rule 10(14) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 the Tribunal may order a party to pay to another party costs of an amount equal to the whole or part of any fee paid in the proceedings by that other party that is not otherwise included in an award of costs. When making an order for costs the Tribunal must have regard to the size and nature of the matters in dispute Rule 10(8) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010).

A person making an application for an order for costs, or a direction regarding costs must send or deliver a written application to the Tribunal and to the person against whom it is proposed that the order be made and must include in the application, where it is for a direction regarding costs, the person’s reasons why the conditions or circumstances relevant to making such a direction (Rule 10(9)(a) and (b) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010). They should also send or deliver with the application a schedule of the costs claimed in sufficient detail to allow summary assessment of such costs by the Tribunal (Rule 10(9)(c) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010). As far as timing is concerned, Rule 10(10) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 stipulates that an application for an order for costs may be made at any time during the proceedings but may not be made later than 14 days after the date on which:

þ The Tribunal sends a decision notice recording the decision which finally disposes of all issues in the proceedings. þ The Tribunal sends notice under rule 20 (withdrawal) that a withdrawal which ends the proceedings has taken effect. þ Notice of withdrawal is sent to the Tribunal with the consent of all parties

The SCCO or the county court can hear the detailed assessment of a Land Tribunal claim Rule 10(12)(c)(ii) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.

Where the decision of the Tribunal provides for a sum to be payable, including a sum awarded in respect of costs of the proceedings before the Tribunal, interest may also be © Association of Costs Lawyers Training 2020 93 payable, as if the proceedings in the Tribunal were proceedings in a court to which the following provisions apply:

þ Section 35A of the Senior Courts Act 1981. þ Section 74 of the County Courts Act 1984. þ Section 17 of the Judgments Act 1838. þ The County Courts (Interest on Judgment Debts) Order 1991.

7.3 Fixed costs applicable in Land under the CPR

There is a fixed costs regime under the Civil Procedure Rules Part 45 in respect of commencement costs which applies in respect of certain types of land claims, generally where a defendant delivers up possession and pays any arrears claimed or does not file a defence and a possession order is made.

These types of claims fall into three categories. Firstly, category I, or in other words Claims for the recovery of land, including a possession claim under CPR 55 where one of the following apply:

CPR 45.1(2)(c): Whether or not the claim includes a claim for a sum of money and the defendant gives up possession, pays the amount claims, if any, and the fixed costs stated in the claim form. CPR 45.1(2)(d): Where one of the grounds for possession is arrears of rent for which the court gave a fixed date for the hearing when it issued the claim and judgment is given for the possession of land (whether or not the order for possession is suspended on terms) and the defendant has neither delivered a defence, or counterclaim, nor otherwise denied liability, or has delivered a defence which is limited to specifying his proposals for the payment of rent arrears.

Secondly there are category 2 claims, or claims defined under CPR 45.1(2)(e) as being possession claims under Section II of Part 55 (accelerated possession claims of land let on an assured shorthold tenancy) where a possession order is made as the defendant has neither delivered the defence or counterclaim nor otherwise denied liability.

Finally, there are category 3 cases or cases defined by CPR 45.1(2)(f) as being those demotion claims under section III of Part 65 or a demotion claim is made in the same claim form in which a claim for possession is made under Part 55 and that demotion claim is successful.

For categories 1 and 3, the amount of fixed commencement costs are calculated by reference to Table 3 at CPR 45.5. The amount of fixed costs recoverable will depend on the type of service of the claim form and/or how many defendants there are. The table is reproduced below for ease of reference.

© Association of Costs Lawyers Training 2020 94 Claim form served by court or any other method £69.50 apart from personal service Claim form served personally by claimant and £77 there is only one defendant Where there is more than one defendant, for £15 each additional defendant personally served at separate addresses by the claimant

In addition to the amounts allowed under Table 3 additional fixed costs in relation to service are also allowed, if applicable. The fixed costs for service are set out in Table 4 found within CPR 45.7.

For service by a party of any document other £15 than a claim form required to be served personally including preparing and copying a certificate of service for each individual served Where service by an alternative method is £53.25 permitted by an order under r 6.15 for each individual served Where a document is served out of the (a) £68.25, jurisdiction: (a) in Scotland, Northern Ireland, the (b) 77 Isle of Man or the Channel Islands (b) in any other place

Fixed costs for entry of a judgment in a claim for the recovery of land or demotion claim can be claimed under CPR 45.6(1). The fixed costs will vary depending on which category the claim falls within. For categories 1 and 3, if the claimant has claimed fixed commencement costs under CPR 45.5 and judgment has been entered, the total amount to be included in the judgment for the claimant's solicitor’s costs is the:

þ (i) fixed commencement costs, and þ (ii) the sum of £57.25

For category 2, the amount of £79.59 is allowed for the claimant's solicitor's charges for preparing and filing the claim form, the documents that accompany the claim form and the request for possession.

The court can make an award to cover the costs of an advocate in preparing for and appearing at trial under the provisions dealing with fast track fixed costs. These are dealt with in Section VI of CPR 45.

7.4 Fast Track Costs

This is the normal track for all actions in which the value of the claim exceeds £10,000, but is lower than £25,000. Some lower value cases may also be considered suitable for this track.

Generally, the court will provide a set of fast track standard directions. This is unless the parties have already agreed a set of the same or different directions at the directions questionnaire stage. Parties are expected to comply with the directions and there is a strict timetable leading up to a trial date. Expert evidence is allowed in fast track cases, but this is limited to no more than two fields of expertise (e.g. medical and accountancy) and no

© Association of Costs Lawyers Training 2020 95 more than one expert per field of expertise for each party. CPR PD 28 para 13 makes it clear that the court anticipates that expert evidence in fast track cases will be written rather than oral evidence, unless it is necessary in the interests of justice.

Fast track hearings are normally heard by a circuit judge and are not expected to last for more than 1 day. A district judge may hear lower value cases.

Costs in fast track cases are generally dealt with at the end of the trial by a summary assessment. The costs of conducting and attending trial are fixed for the advocates, with costs varying on a sliding scale depending on the value of the claim.

CPR 28. 3 suggests the matters which should be covered by fast track standard directions. These are:

þ disclosure of documents; þ inspection of documents; þ exchange of witness statements; and þ provision and exchange of experts’ reports.

Parties are encouraged/required to follow the provisions of this rule and the timetable provided in CPR PD 28 when they are trying to agree directions for the purposes of the directions questionnaire. The timetable suggested by the practice direction is as follows:

þ disclosure - 4 weeks; þ exchange of witness statements - 10 weeks; þ experts’ reports exchanged - 14 weeks; þ pre-trial questionnaires (listing questionnaire) to be sent by the court - 20 weeks; þ filing of completed questionnaires by all parties - 22 weeks; and þ hearing date - 30 weeks.

All dates in the timetable run from the date of the notice of allocation. This timetable is subject to the proviso that it applies unless the parties agree different directions between themselves (subject to the approval of the court) or the court itself otherwise directs. CPR 28.4 permits the parties to apply to vary the timetable if necessary, although the courts rarely grant such a variation unless there is a very good reason.

As indicated above, there are fixed trial costs for all fast track matters. Fast track trial costs are covered by CPR 45.38 and the table below mirrors the table found within the CPR.

Amount of fast track trial Value of the Claim costs which the courts may award No more than £3,000 £485 More than £3,000 but no more £690 than £10,000 More than £10,000 but no £1,035 more than £15,000 More than £15,000 £1,650

© Association of Costs Lawyers Training 2020 96 CPR 45.37 states that a trial includes a hearing where the court decides an amount of money or the value of goods following a judgment under Part 12 (default judgment) or Part 14 (admissions), but does not include the hearing of an application for summary judgment under Part 24 or the court’s approval of a settlement or other compromise under rule 21.10. CPR 45.37(1) makes it clear that these fast track trial costs cover the cost of preparing for the hearing as well as appearing at the trial of the matter. These figures are not VAT inclusive. CPR 45.38(2) provides that the figures are fixed and that a court may award neither more nor less unless it makes a decision to award no costs at all or CPR 45.39 applies.

CPR 45.39 allows for additional amounts to those in the table in some cases:

þ An additional £345 in respect of a legal representative’s costs of attending trial (but only if such attendance was necessary to assist the advocate); þ Partial costs of defending a counter-claim; þ A minimum of £485 for the trial of a preliminary issue or where there is a split trial (e.g quantum and liability).

However, the award of any of the above costs is subject to the rule that costs may be reduced (even to nil) if a party (or his legal representative) behaves unreasonably or improperly. In such cases costs are entirely at the court’s discretion.

The court is free to apportion the amount awarded between the parties to reflect their respective degrees of success on the issues at trial.

Where the claim is lost, in order to quantify the cost to be awarded to the successful defendant, the value of the claim is deemed to be the amount specified in the claim form, excluding interest and costs.

By CPR 45.38(4), where the claim is only for a remedy other than the payment of money, the claim is deemed to be £3,001.00 to £10,000.00 giving a fixed advocacy fee of £690.00. Where there is a hybrid claim, that is a claim seeking a remedy other than the payment of money as well as the payment of money, then the value of the claim is deemed to be £3,001.00 to £10,000.00 or the value of the money claimed, whichever is higher.

Under CPR 45.38(6), where a defendant makes a counter-claim against the claimant and that has a higher value than the claim and the claimant succeeds on both matters then the value of the claim is deemed to be the value of the defendant’s counter-claim. Where a defendant makes a counter-claim against the claimant and the claimant succeeds on that claim and the defendant also succeeds on the counter-claim then the court looks at each sum separately and makes an award of the difference of fixed advocacy costs, if any, to the party entitled to the higher award of costs.

Thus, if a claimant recovered £9,000.00 and the counter-claimant £2,000.00, then the calculation is as follows:

Claimant’s costs £690.00

Defendant’s costs £485.00

In relation to litigants in person, the court may award costs in their favour, provided that they can prove financial loss, up to two-thirds of the fixed advocacy costs. If a litigant in person cannot prove financial loss then the court may award to that person an amount in respect of the time spent reasonably doing the work at the rate specified in Practice Direction 46, currently £19 an hour (CPR 45.39 (5)).

7.5 Multi Track Costs

Multi-track cases are those for which neither the small claims track nor the fast track are considered the ‘normal’ track. Multi-track cases are those which are high value (£25,000 or over), complex, involve a lot of detailed expert evidence, have a large number of witnesses (factual and expert) and are anticipated to last for longer than 1 day.

At the direction questionnaire stage, parties are encouraged to agree a set of directions for approval by the court. If parties agree directions, and the court approves them, the parties will follow that agreed timetable up to trial. If it is not possible to agree directions, the court will hold a Case Management Conference (CMC) at which both parties will be expected to attend. The court will then set a timetable for future conduct of the trial. Under CPR PD 29, the court has discretion to order the conference, but one will usually be called where the court feels unable to make directions of its own volition. CMCs are the normal method of actively managing cases on the multi-track and can be called at any time between allocation and trial. CMCs are expected to be attended by someone familiar with the case and with authority to deal with any issues that may arise in the conference (i.e. the fee earner with conduct of the case, not the office junior who has had the file ‘dumped’ on him at the last minute).

In complex litigation, the court may hold what is known as a pre-trial review (PTR). It is a form of CMC and is usually fixed to take place between eight to ten weeks before the date listed for trial. The purpose of a PTR is to:

þ give final directions for the conduct of the trial; þ check all previous directions have been complied with; þ ensure availability of parties, representatives and witnesses; and þ fix a trial timetable, if this has not already been done, or amend the existing timetable if necessary.

Costs in multi-track cases can either be summarily assessed at trial or be subject to detailed assessment after the trial has taken place.

Due to the more complex nature of multi-track cases, directions in these cases are far more flexible and should cater for what all parties need to do to prepare for trial. Parties are encouraged to agree directions which deal with the same issues as under the fast track and any other points at issue between them, such as the contents of statements of case and outstanding requests for further information. Any agreed directions must have the approval of the court before they take effect. CPR PD 29 para 4 suggests some ideas for the sort of directions that the parties might want to consider and also the directions the court might impose in the absence of agreed directions. © Association of Costs Lawyers Training 2020 98

Costs budgeting is now well established as a means of active case/costs management by the courts so as to ensure that costs incurred in the proceedings are proportionate. CPR 3.12 sets out which the scope of the proceedings to which costs budgeting applies, although CPR 3.12(1A) provides that the court may order it to apply to any other proceedings or applications. CPR 3.13 provides that (except for litigants in person or as the court may otherwise order), all parties must file and exchange budgets as required by the rules or as the court otherwise directs. Budgets must be in the form of Precedent H, annexed to Practice Direction 3E.

Whilst CPR 3.13 (2) appears to expressly exempt litigants in person from needing to file and exchange a budget, consideration should be given to the very recent case of Campbell v Campbell [2016] EWHC 2237 (Ch) in which Chief Chancery Master Marsh ruled that the court has the power to make a costs management order. He also found that a litigant in person can recover costs under CPR 46.5 where they obtain legal assistance from lawyers short of them having conduct of the case. This was a commercial dispute between two brothers. The claimant initially instructed solicitors – during which time a CMC was ordered. However, he then filed notice of change and became a litigant in person. His QC continued to represent him on a direct access basis. Master Marsh noted that, although the sums at issue may exceed £10m, the claim was not automatically exempted from costs management because the value of the claim was expressed in the claim form as “expected to be in excess of £300,000” and no application had been made for a direction that a costs management should not apply. The claimant’s costs budget dated 5 August 2016 provided for future expenditure up to the end of trial of slightly in excess of £315,000, having already incurred costs of £547,621. Though both sides asked the court to make a costs management order in respect of the claimant’s costs and the court’s jurisdiction was not debated at any length, Master Marsh said the court’s jurisdiction was not entirely clear. So he said it might be helpful to set out his reasons for concluding that such a power existed. First, he explained, the purpose of costs management, as set out in CPR 3.12(2), was expressed in general terms and “no indication is given that a claim involving one or more litigants in person may not benefit from costs management”. CPR 3.13 expressly exempts litigants in person from the requirement to file and serve a budget, but “the editors of the White Book 2016 suggest that in spite of this exemption, it is open to a litigant in person to file and exchange a budget if they wish”. Further, CPR 3.15(2) provided that the court could manage the costs to be incurred “by any party” and thereafter control the budgets. Master Marsh said, “Unlike CPR 3.13, no indication is given that different provisions apply to litigants in person”. In addition, there was nothing in PD 3E that precluded a costs management order against a litigant in person. This case went on to consider what costs could be recovered.

The rules in force from 6 April 2016 require that, by CPR PD3E para 6(c), where the monetary value of the case is less than £50,000 or the costs claimed are less than £25,000, the parties must only use the first page of Precedent H. Full budgets are therefore only really relevant in high value personal injury and clinical negligence claims. The new rules also changed the content of Precedent H; the version to be used from 6 April 2016 requires that the approved costs of budget drafting and the budget process are set out on page 1. The new Guidance Notes on Precedent H, which only apply to those budgets, make it clear at paragraph 9 that the permitted figure will be inserted once the final budget figure has been approved by the court.

þ the date specified in the notice of proposed allocation sent out by the court pursuant to CPR 26.3 after a defence has been filed or, þ where no date was specified, 7 days before the first case management conference (the CMC).

The intention behind these timescales was to ensure the parties gave each other notice of their intended budget and steps within the proceedings. However, in reality, the courts often found that there was insufficient time for differences to be identified and discussed prior to the CMC and so these timescales have been changed. From 6 April 2016, CPR 3.13(1) requires that filing and exchange of budgets takes place:

þ where the stated value of the claim on the claim form is less than £50,000, with the directions questionnaires; and þ in any other case, not later than 21 days before the CMC (i.e. "clear days" pursuant to CPR 2.8(2)).

Unless the court orders otherwise, if either party fails to file its budget by the required time, it will be treated as having filed a budget comprising only the applicable court fees. Given the drastic nature of this sanction, a number of cases have been decided concerning applications for relief.

The courts have found that the CMC may become overburdened if costs budgeting issues are addressed there. Changes to the directions given from those proposed may have the effect that a party's costs budget may become obsolete before the issue of approval is even reached. For example, consider a situation where permission is not given to the parties to adduce expert evidence in all the fields proposed (or a single joint expert is chosen) or where one party successfully seeks a direction for a preliminary issues hearing. These scenarios may have significant impact upon the budgets drafted. To alleviate the associated problems, in some cases, the courts separate the CMC (dealing with directions) from a separate Costs Management Conference to address costs budgets in isolation. The Technology and Construction Court has developed a set of template directions addressing this, by which the directions given at the CMC will include a set of directions providing for costs budgeting to be addressed as follows:

þ The parties are to seek to agree their respective costs budgets by a specified date; þ Should elements of the costs budget(s) remain not agreed by that date, the claimant is to make an application to the court for a Costs and Case Management Conference (CCMC) to be listed for the specific purpose of approving the costs budgets and making the appropriate orders. þ In the event that such a CCMC is required, each party is to exchange, and lodge with the court, not later than 4.00pm two clear working days before the hearing its points of disagreement on the other party's costs budget.

The points of disagreement are to include the following (if applicable):

þ points of principle; þ points of detail concerning rates; þ points of detail concerning time; and © Association of Costs Lawyers Training 2020 100 þ any other points of disagreement not included above.

Under the new rules, parties must file budget discussion reports. It is anticipated that these would enable points of disagreement to be identified in good time prior to the CMC. In some cases, the court may order a side-by-side comparison of the parties’ budgets to be filed.

CPR 3.13(2) provides from 6 April 2016 that, in the event that a party files and exchanges a budget under paragraph (1), all other parties (except for litigants in person) must file an agreed budget discussion report no later than 7 days before the first CMC. As CPR 3.14 has not been amended, the effect of not filing such a report is not stated. However, it is possible that an adverse costs order may be made where a dispute concerning approval has to be resolved at greater expense than would otherwise have been the case.

PD 3E para 6A provides that the budget discussion report must set out:

þ those figures which are agreed for each phase; þ those figures which are not agreed for each phase; and þ a brief summary of the grounds of dispute.

Under this provision, parties are encouraged to use the Precedent R Budget Discussion Report annexed to the Practice Direction. Therefore, parties must liaise to record all points of agreement/disagreement to a given costs budget so that the court is presented with a common document setting out the objections.

In accordance with CPR 3.15, the court may make a Costs Management Order (CMO) at a CMC or otherwise at any time in any proceedings (CPR 3.16). By such an order, the court will:

þ record the extent to which the budgets are agreed between the parties; þ record the court's approval, after making appropriate revisions, as to any budgets/parts of budgets not agreed (in relation to the total budget for each phase).

Approval of a budget can be said to create a rebuttable presumption that expenditure of sums within the approved figures will have been reasonable where a CMO has been made. In those cases where a CMO has been made, at the assessment of costs at the end of the case on the standard basis, the court will be bound by the last costs budget approved and will not depart from such unless, as prescribed by CPR 3.18, it is satisfied that there is good reason to do so.

Where parties have filed budgets, but the court has not made a CMO, para 3.1 of Practice Direction 44 will apply. On assessment, the court will have regard to the last approved or agreed budget. Where there is a 20% or more difference between the costs claimed on detailed assessment and those budgeted, the receiving party must provide a statement of the reasons for the difference from the bill of costs and, subject to assessment, the court may restrict the recoverable costs where the paying party reasonably relied upon the budget (notwithstanding that this might be less than the amount reasonably and proportionately incurred).

þ have reasonably relied on the receiving party's filed budget; or þ wishes to rely upon costs shown in the budget in order to dispute the reasonableness or proportionality of the costs claimed

Following approval of a costs budget, in particular where a CMO is made, there is reduced scope for challenges. This emphasises the importance of challenges prior to approval.

In GSK Project Management Ltd (In Liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC) [2015] B.L.R. 715, Stuart-Smith J. suggested that in most cases budgeting reviews can and should be carried out quickly and with the application of a fairly broad brush approach. It was further advanced that only in exceptional cases would it be appropriate or necessary to go through a Precedent H with a fine tooth-comb, analysing the makeup of figures in detail. That particular case was treated as an exceptional one, given the aggregate sum being put forward for approval was so disproportionate to the sums at stake or the length and complexity of the case that something had clearly gone wrong.

There are many other cases that suggest that the court will consider the costs budget in some detail. In both Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB); [2015] 1 W.L.R. 3031 and King v Thipthorp unreported, elements within phases were considered.

In the Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB); [2015] 1 W.L.R. 3031, Warby J. held that because hourly rates and estimated hours are included on the Precedent H, the court is entitled to review these and that, whilst the question of whether the totals are reasonable and proportionate will always be the overall criterion, the court may need to consider rates and estimated hours. The approach will need to be tailored to the case before the court. In King v Thipthorp, unreported, Mr Recorder Stephen Furst QC held that, although it cannot be said that the overall budget figures were disproportionate, it does not mean that the court is precluded from going on to look at the objections raised in relation to individual items claimed in budgets.

In CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC); [2015] B.L.R. 285, the court identified four options where a challenge succeeds:

þ it can order a party to prepare a new budget; þ it may simply decline to approve the claimant's costs budget; þ it may endeavour to set costs budget figures on a phase by phase basis; or þ it may refuse to allow anything more in the costs budget beyond that which has already been spent.

In CIP, where incurred costs were already high, the court took the third option and set costs budget figures on a phase by phase basis. However, the court took into account what it considered would be recovered on assessment in relation to the incurred costs, such that there was an overall budget figure which would remain constant, even if the recoverable incurred costs exceeded those contemplated by the Court (see 83 - 98).

© Association of Costs Lawyers Training 2020 102 The approaches taken above are reconcilable. A general challenge to a costs budget may be dealt with briefly, while an objection to each and every element within every phase is likely to be treated as disproportionate. However, targeted challenges to given elements within given phases is more likely to cause the court to choose to investigate given items. This is in keeping with the approach to budget discussion reports under the regime operating from 6 April 2016 onwards.

The court will be astute to intervene where it considers that a party's budget has been provided with intentions other than the overriding objective in mind. In CIP, the claimant was found to have deliberately manipulated its costs budget so that it was disproportionate to the complexity and value of the claim. Given the order made, as set out above, it seems more likely that, in such cases, the court will intervene robustly to ensure that the outcome does not benefit the party in question.

Costs budgeting case management powers are prospective - the court is empowered to manage steps "to be taken" and costs "to be incurred" and to approve a budget for future costs.

The court does not have power to approve costs incurred before the first budget/CMC. However, this does not mean that incurred costs are to be ignored and parties should not assume that incurred costs cannot impact on the approval given. The very recent Court of Appeal case of Sarpd Oil International Ltd v Addax Energy SA & Another [2016] EWCA Civ 120 should be considered. In that case, Sales LJ said that if parties have a problem with their opponents’ incurred costs then the time to raise that is the first CCMC. So the CCMC can, effectively, deal with incurred costs. He also said that where a judge makes comments or observations on incurred costs at the first CCMC, there needs to be a good reason for the court to depart from that later on. Parties going to the CCMC to debate the budget therefore know that this is the appropriate occasion to contest the costs items in the budgets, including the incurred costs element. The courts may take into account incurred costs in several ways:

þ The court may, in determining the amount of a given phase to which approval is given, take into account the costs incurred to date by setting a figure which impliedly criticises those costs as being excessive and leaving very little for prospective costs: Redfern v Corby BC [2014] EWHC 4526 (QB); [2015] 5 Costs L.O. 583. þ The court may achieve a similar result by approved budget figures in a way which sets a benchmark figure in relation to anticipated recoverable incurred costs so that, if the party recovers more than that figure in relation to incurred costs, the amount for future costs is reduced pound for pound: see CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC); [2015] B.L.R. 285 at 9]-97). Therefore, the amount of incurred costs may in practice become part of the approval process simply because the total amount approved in respect of a given phase or phases is the same as it would have been even if no costs had yet been incurred. þ The court may record comments on incurred costs as a head taken in isolation. Experience indicates that the courts will make such comments and may be specific in doing so. Courts are often more prepared to focus on stand-alone elements of incurred costs, such as the costs incurred by using leading counsel, rather than junior counsel or excessive use of counsel in the pre-action stage. At present, however, it is too early to judge what impact those comments have on assessment after trial.

© Association of Costs Lawyers Training 2020 103 Although, in the course of its review, the court may have regard to the constituent elements of each total figure, CPR PD 3E para.7.3 provides that the court's approval will relate only to the total figures for each phase of the proceedings.

When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs. It is convenient to consider:

þ First: the overall budget cost; þ Second: issues concerning rates; and þ Third: issues concerning phases in relation to issues other than rates.

CPR PD 3E para 7.3 refers to approval of each phase, but this does not mean that the courts ignore the overall amount for which approval is sought. In Willis v MRJ Rundell & Associates Ltd [2013] EWHC 2923 (TCC); [2013] 6 Costs L.R. 924, Coulson J. refused approval of budgets in the sum of £897,369.67 plus VAT and £703,130.37 in the context of a professional negligence claim for £1.1 million, commenting that, simply by reason of the sums alone, they were disproportionate. He also commented (at 14) that one test of proportionality is whether the trial is likely to be an end in itself, or merely a lesser part of the process which the parties will use in order to put themselves in the strongest position to argue that, subsequently, the other side should pay all or most of their costs.

When the costs on each side are much higher than the amount claimed/recovered, the latter is almost inevitable. In the more recent case, CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC); [2015] B.L.R. 285, the court indicated that, in circumstances in which the claim was for £18m but the court suggested a more realistic figure was £12 million, combined budgets of £12 million would be at the upper level of what it would consider to be proportionate (see 41-44). This does not mean that approval shall necessarily be refused where the sums in the budgets are, combined, higher than the sum in issue.

Approvals of costs budgets in subsequent cases such as GSK Project Management Ltd (In Liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC); [2015] B.L.R. 715 and King v Thipthorp unreported, demonstrate that, even after making deductions, the courts may choose to approve budgets which, combined, exceed the sum in issue. However, the court must have regard to the factors listed in CPR 44.3(5) (Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB); [2015] 1 W.L.R. 3031 at 66). The Guidance Notes to Precedent H specifically confirms this at paragraph 3. CPR r.44.3(5) provides that costs incurred are proportionate if they bear a reasonable relationship to:

þ the sums in issue in the proceedings; þ the complexity of the litigation; þ the value of any non-monetary relief in issue in the proceedings; and þ any wider factors involved in the proceedings, such as reputation or public importance.

Therefore, the principal sum in issue remains a relevant factor.

© Association of Costs Lawyers Training 2020 104 In Yeo v Times Newspapers Ltd [2015] 1 W.L.R. 3031, Warby J. held at 65-66, that Precedent H allows the court to review hourly rates and estimated hours by requiring these to be stated on the form and that, whilst the question of whether the totals are reasonable and proportionate will always be the overall criterion, the court may need to consider rates and estimated hours. The approach will need to be tailored to the case before the court.

In CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC); [2015] B.L.R. 285, the court took the view that some of the hourly rates advanced were disproportionate since they significantly exceeded the Guideline rates (see 55-56).

Insofar as hourly rates are concerned, CPR PD 3E, 7.10, in effect from 6 April 2016, states that:

"It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget."

This leaves it open to the court to reject the overall figure in a phase on the basis that the rates are too high, without seeking to fix the rates themselves.

Both prior to and following 6 April 2016, the rules do not impose any limitations on the court's power to remove or reduce elements from a given phase in a cost budget. Thus, challenges to excessive hours or disbursements, such as the excessive use of partner time or of leading counsel, are open to be paid. Such challenges were successful in relation to budgeted hours and the use of counsel in King v Thipthorp unreported.

In accordance with CPR PD 3E, 2.2 when a CMO is made, save in exceptional circumstances, the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved budget.

Where costs are incurred on a successful challenge to another party's budget, those costs would be recoverable and, in King v Thipthorp unreported, the party challenging the other parties’ budgets recovered its costs, ordered on a summary basis.

Generally, in accordance with CPR PD 3E, 2.2, all other recoverable costs of the budgeting and costs management process other than initial completion of Precedent H shall not exceed 2% of the approved budget.

CPR 3.17 requires that, when making any case management decision, the court must have regard to any costs budgets of the parties and take into account the costs involved in each procedural step (whether or not a CMO has been made).

We have seen earlier in this handout that CPR 3.13(2) provides that litigants in person are not required to file a costs budget or any budget discussion report (consider, however, the case of Campbell v Campbell [2016] EWHC 2237 (Ch) as detailed previously). PD 3E para.7.8 provides that litigants in person are entitled to receive a copy of the costs budget of the other parties. This is true even in cases where the litigant in person doesn’t file and serve a budget. It is unclear from the rules and guidance whether the other parties are

Whether a person is a litigant in person should be straightforward in the case of natural persons, but where the litigant in person is a legal person, such as a company, the position is less clear. CPR 46.5(6)(a) provides that in relation to costs, a company may be a litigant in person. In RH Tomlinssons (Trowbridge) Ltd v Secretary of State for the Environment, Transport and the Regions [2000] B.C.C. 576 it was confirmed by the courts that because of this rule it is possible that a body corporate may act without a legal representative. However, since under CPR 39.6 such a party requires permission before it can be represented at trial by someone other than counsel or a solicitor, it is not entirely clear whether a company is entitled to be treated as a litigant in person prior to the first hearing at which the issue of permission is addressed.

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