TRUST OF LAND (TOLATA 1996)

What protection is afforded to beneficial co-owners of property?

This essay will discuss what protection is afforded to beneficial co-owners of property in situations where the trustees or third parties apply to a court for an order to sell land which is subject to a trust of land by reviewing recent provisions that have been introduced to protect beneficial co-owners to see if it has restored balance. First this paper will present the difference between the old Trust for sale and the new Trust of land and critically discussing the benefits brought by this change. Second this essay will critically discuss how the introduction of the Trusts of Land and Appointment of Trustees Act (TOLATA 1996) has extended the powers of trustees of land and provided greater protection to beneficial co-owners of property. Third this paper will critically examine how the courts deal with requests for the sale of land in light of the introduction of the numerous provisions. this paper will conclude its findings. 

After 1925 in all concurrent interest, a Trust for sale was imposed. As the name Lastly suggests is essentially an investment notion, meaning that the trustees were under a duty to sell the property unless they all agreed to postpone sale. The legal owners3 held the property on trust as trustees for themselves and any additional number ofequitable4 owners.5 The trust provided a purchaser with a protected legal title6 irrespective of any undisclosed equitable interest, provided that the purchase money was paid to the legal co-owners. The drawback was the equitable owners in concurrent interests were at risk (in overreaching7 transactions) when their rights were transformed from land into notional rights in money. The trustees could defraud the equitable owners.8 A further aggravating factor was the doctrine of conversion, which notionally deemed a sale to have already taken place, due to the duty to sale under the trust.9 Judges would treat interests as already being in money and not in land. This doctrine was applied very paradoxically10 and unimaginatively. We can see this when we compare Cooper v. Critchley11 with Irani Finance Ltd. v. Singh12 This was stigmatised by Lord Wilberforce as unrealistic.13 Moreover the duty to sale often resulted in one of the co-owners who disputed the sale having to leave the property, under a court-ordered sale.

The Trust for sale operated for seventy years until it was changed by the Trusts of

Land and Appointment of Trustees Act 1996 (TOLATA), following a Law Commission Report.14TOLATA provides more power to trustees to deal with land. The wi der powers of trustees in Trust of land are balanced by trustees considering the beneficiaries in two ways: the first is the "...trustees [should] have regard to the 2rights of the beneficiaries." Nevertheless s.6(5) TOLATA is vague in indicating what beneficial rights trustees should regard? It can be criticised by asking:what are these rights beneficiaries have, that they don‟t have under trust law? Second the trustees must consult the beneficiaries concerned before taking any decision whatsoever relating to the land. This extends to all new trusts, but the trustinstrument can exclude it.

Nevertheless, a consultation requirement (in the form of a Restriction) placed on the register can protect the equitable co-owners in the eventuality of a trustee overreaching without the beneficiaries consent. However, this consultation procedure does not differ from its repealed predecessor s.26(3) which has been criticised by the Law Commission as weak. Trustees also have the power to jointly, delegate powers to a beneficial owner, although the beneficiary to whom delegation can be made cannot give a valid receipt for capital money and thus cannot overreach. This replaces the power of delegation given to trustees for sale under the old regime. Under the Trust for sale co-ownership had a prima facie right to occupy the whole land. In successive interests under the Trust for sale it was really at the trustee discretion whether a life owner or any other beneficiary was allowed to occupy or not. They did not have the right to occupy. This has been considerably changed by s.12. Beneficiaries have the right to occupy land but only provided the purpose of the trust includes occupation of that class of beneficiary. 

Moreover, there must be available and suitable  land held by the trustees for occupation. Furthermore, s.12 appears to statutorily empower the trustee to purchase land from the money in the trust for the purpose of a beneficiary's occupation. Where several beneficiaries have the right under s.12 to occupy trust property, the trustees are given powers to exclude or restrict such rights in relation to some of the beneficiaries, but not to prevent all the beneficiaries from occupying the land. A beneficiary who is permitted to occupy at the expense of another co-owner may be made subject to an obligation to pay compensation to a non-possessing co-owner or forgo some benefit or payment. In the case of co-ownership a deadlock in the rights of occupation and exclusion can arise. Hence, the court's assistance under s.14 application will be needed which produces the danger of the old s.30 harshness creeping back. 

Section 14 provides that any person can make applications for a variety of orders with an interest in the land. While s.15 provides guidance to the court in what matters need to be considered in determining applications. The Law Commission originally proposed six factors.This was reduced to four by TOLATA. If there is a dispute between co-owners these factors are particularly relevant. Under the old Trust for sale it was open to any person interested in the property, (creditors/banks) to bring anorder for the sale of that property under s.30. The new procedure will not be applicable to cases of a trustee in bankruptcy; they are in a different position which is not affected by the 1996 legislation. Under the old law the archetypical co-owners were the husband and wife, who wouldagree to postpone a sale under a Trust for sale because the purchase would be of a family home. If relations broke down and an agreement to postpone the sale was not wanted by one of the co-owning parties, or a creditor wanted a sale then under the old scheme an application could be made to the court to order a sale. 

However, if the person resisting the sale could prove that the parties had agreed on a collateral purpose, when the corresponding trust was made, the court would not order the sale. A continuing collateral purpose could be shown through the needs of dependent children which would defer a sale. Under the new scheme,some provisions take into account the courts‟ developed positions under the old s.30. Today the court is expected to have regard to:

(a) the intentions of the settlor,

(b) purposes for which property is held,

(c) the interests of any minors

(d) and the interest of any secured creditor.

There is also a provision in s.15 that the court must have regard to the circumstances and wishes of the beneficiaries who are entitled to occupy the land. These will no longer be considered in the context of a Trust for sale with a presumption to sell as in Re Mayo. This

should lead to a greater disposition not to order an immediate sale. The factors in s.15 are not prioritised. When the court is faced with an application for sale, does it take regard to the jurisprudence it has built up over a long period in application for sale, or does it rely on the factors in s.15? It is argued the new rules will be meaningless without the court taking substance from the previous developed positions. Thus it is important to observe how the court is interpreting s.15 in post 1996 cases. 

In Mortgage Corporation v. Shaire. Neuberger J.'s specific question was: did s.15 modify the law from how it had been developed in Citro and Byrne? He advanced eight reasons as to why s.15 has changed the law. Although they can be criticized for not embracing the true meaning of s.15 along with the Law commission proposals, they nevertheless appear to fundamentally change the courts approach in deciding whether a beneficiary or creditors interests should prevail. His approach has been praised for blowing away, the remnants of the harshness for families caused by s.30. However in Bank of Ireland Home Mortgages Ltd v. Bellit was suggested, the departure of one of the co-owners brings the purpose of providing a family home to an end, with the result that the interests of the children will be a small consideration against sale. In reaching the decision to order the sale the court restricted the weight that was to be given to the factors in s.15. Peter Gibson L.J. declared "the collateral purpose of a family home, ceased to be operative once Mr. Bell left the property.‟ This has been described as contentious considering there was a dependent child aged five. The factors drafted in s.15 collapse the welcomed positions developed by the courts under old authority. 

If the decision in Bell prevails the likelihood is that a sale will be ordered notwithstanding the obliteration of the duty to sell under the Trust for sale. Probert has described this case as changing the direction of the wind therefore it has "blown us back to where we started." Whether automatic sales will be ordered unders.14 remains to be determined and will depend on the correct judicial application of old authority with s.15 factors. The Law Commission published the Law Commission Report which recommends the Land Registration Act (LRA) 2002. The Land registration Act 2002, fundamentally replaces the 1925 Act. The new legislation tackled much that was imprecise, cumbersome, perplexing, and problematic with the 1925 system. Many of LRA 2002 provisions deal with procedural matters that, while valuable, establish no new principle in providing protection to third party beneficiary when a sale is sought. One possible avenue of protection has been through minor interests. This is a vital tool in protecting interests of beneficiaries behind a trust. 

This enables a beneficiary behind the legal curtain to make new purchaser aware of his/her existence.

The LRA 2002 now has only two means of registering „minor interests‟. It introduced the new form of restriction, which performs the functions of the previous restriction and inhibition. The criticism of this system is that the first in time prevails, irrespective of whether either is registered as seen in the case of Barclays Bank v Taylor the LRA 2002 provides that the priority of competing minor interests should remain essentially unchanged because electronic conveyancing will ensure that creation and registration occur at the same time. This begs the question of whether beneficial co-owner‟s interests are better protected by the recent changes of TOLATA. What can be said for sure is the Trust of land is certainly a more satisfactory device for holding co-owned land. 

In conclusion, this essay has demonstrated there is no longer the duty to sell a property, but because the most common type of co-owners are co-habiting couples whose rights are identical all the right and provisions of the Trust of land stalemate. It has been argued the consultation rights given to beneficiaries are of limited use and its provisions somewhat toothless. It has been shown where one co-owner has surrendered his right to a creditor; the new regime can have the effect of ordering a sale over interests of the family. This is somewhat of a step backwards from the old law. TOLATA along with the Trust of land are new concepts with little case law. Whether it is satisfactory trust for co-ownership, will depended on whether its provisions and the Act, which creates it, are read in the light of previous judicial decisions on Trust for sale. 

References

L. Clements, "The Changing Face of Trusts", [1998] 61 Modern Law Review 56

N. Gravells, "Co-ownership, severance and purchasers - The Law of Property (Joint Tenants) Act 1964 on trial?‟ (2000) Conveyancer 461

N. Hopkins, "The Trusts of Land and Appointment of Trustees Act 1996",  [1996] 60 Conveyancer 411, especially pp 418 - 422

Jones & Palmer, "The Trusts of Land and Appointment of Trustees Act 1996", [1997] 1 Web Journal of Current Legal Issues

S. Pascoe, "S. 15 TOLATA 1996 - a change in the law?‟, (2000) Conveyancer 315

M. Percival, "Severance by written notice - a matter of delivery?‟, (1999) Conveyancer  60

J. Ross Martyn, "Co-owners and their entitlement to occupy their land before and after TOLATA 1996‟, (1997)

Conveyancer 254

M. Oldman, "Balancing commercial and family interests under TOLATA 1996, s.15.‟, (2001) 60 Cambridge Law Journal 43 - 45

R. Probert, "Creditors and section 15 of the Trusts of Land and Appointment of Trustees Act 1996: first among

equals?‟, (2002) Conveyancer 61 - 67

M.P. Thompson, "Secured creditors and sales‟, (2000) Conveyancer 329

Answering Problem Questions on Easements: Rights over neighbouring land.

What is an Easement

Although land maybe owned at law by one person, it is possible that others will enjoy rights over that land. These are known as 'Easement', and they consist of right to use, or restrict the use of, the land of another person in some way, such rights which includes: a right of way, a right to water flowing through your neighbour's land.

The Characteristics of Easement

The main Characteristics of an easemnet were laid down in the leading case of Re Ellenborough Park (1956) CH 131. which includes;

1. There must be a dominant and a servient tenement;
The right must relate to two separate plots of land: The dominant tenement is the plot of land whose owner enjoys the right constituted as an easement. while the servient tenement is the plot of land over which the easement is exercised or the land burdened by the easement.

London & Blenheim Estates Ltd v Retail Parks Ltd 1992, an easement cannot exist as an incorporeal hereditament unless and untill they are both a dominant and servient tenement in ownership.
J Paul baker.

2. The easement must accommodate the dominant tenement;
This means the right must be for the benefit of the land and not merely for the benefit of a person in his personal capacity. If the rights can be said to be attached to land then it is assumed that it is for its benefit. Hill v Tupper 1863, Moody v Steggles 1879, Mounsey v Ismay 1865, International Tea Stores Company v Hobbs 1903

3. The dominant and servient tenements must be owned or occupied by different persons
This means that the dominant and servient tenement must be either owned or occupied by different persons. It has long been accepted that you cannot own an easement over your own land.

4. The easement must be capable of forming the subject-matter of a grant.
There must be a capable grantor and grantee, the right itself must e sufficiently definite and the right must be in the nature of an easement. case examples; Phipps v Pears 1965, Crow v Wood 1971

Answering Problem Questions

Introduction

Introduce the issues, the key concepts and why they are important. One of the difficulties with this question is deciding how much detailed law to put in the introduction and how much to state as you deal with each of the claims. It is not wrong to start by setting out the law in detail before applying it to each of the rights in turn and doing so may help avoid duplication and repetition as the answer progresses. However, a detailed statement of the rules at the beginning of the answer will need to be balanced by setting out clearly exactly how those rules apply to each of the rights being claimed. 

Rules

Have any of the arrangements created an easement?

In each case:
1) Is the right claimed capable of being an easement – the four traditional requirements (Re Ellenborough Park [1956] Ch 131)? See Land Law, Section 8.4.
a) Is there a dominant and servient tenement?
b) Does the right accommodate the dominant tenement?
c) Are the dominant and servient tenements owned or occupied by different people?
d) Is the right capable of being the subject matter of a grant?

2) Has the right been acquired by a method that creates an easement?
a) Statute – very unlikely
b) Deed
i) Grant or reservation?
ii) Express or implied?
c) Prescription?
[Prescription needs at least 20 years user, so will not be relevant to answering this question until 2015.] See Land Law, Section 8.5.

3) If necessary, has the right been protected by registration?
a) Legal easements.
b) Equitable easements.
See Land Law, Section 8.2.2 and the relevant Sections of Chapters 15 (registered title) and 16 (unregistered title).

Answer Plan:

  Right of way

a) Is this right capable of being an easement?
b) Has it been properly created?
c) Did it require protection by registration? 

A right to pass and re-pass along a privately owned road, or across privately owned land is one form of easement. But a public right of way is not an easement because there's no dominant tenement taking the benefit.
International Tea Stores Company v Hobbs (1903). It was held that the use of the landlord garden for his own enjoyment could not exist as an easement because it was merely the right to walk at will.

Car parking

 a) Is this right capable of being an easement?
b) Has it been properly created?
c) Did it require protection by registration?

London & Blenheim Estates Ltd v Retail Parks Ltd 1992, The claimant who owned a part of a shopping center, claimed that the right of customer to park on a central car park could exist as an exist. the problem here was that the claimant had not got an interest in land at the time when the easement was first claimed.
It was held that an easement cannot exist as an incorporeal hereditament unless and untill they are both a dominant and servient tenement in ownership.
J Paul baker.

Storage

 a) Is this right capable of being an easement?
b) Has it been properly created?
c) Did it require protection by registration?

Wright V Macadam (1949): A tenant was allowed to store her coal in a shed on the landlord's land. This was upheld as an easement although on the facts tha the landlord would not have access to the shed at all.
Compare to this case is the case of Grigsby V Melvile (1973): The claimant had a right to unlimited storage within a celler beneath his neighbours property and it was held that this could not be an easement because it was a claim to beneficial ownership.

License 

A license cannot have an easement but a tenant under a lease can have an easement, even against land retained by his landlord. A license can never bind a third party purchaser, whereas a properly created legal easement can be binding on third parties.

Hill V Tupper; The claimant had a lease of an area that fronted on to a canal. he was given the sole and rights to put pleasure boats on it. It was held that the right was no more than a license as it did not enhance the enjoyment of the land but merely incidental to the business run by the claimant.

Purchaser and Third Party

Under s. 62 Land of Property Act 1925, and as well as under the rule in Wheeldon v Burrows, purchasers can claim the benefit of any rights in the nature of easements enjoyed by the seller before the sale. These rights are refere to as quasi-easement and can be enforced by the purchaser. The rule can be applied whether the land is held on freehold or leasehold.

Right of Support 

a) Is this right capable of being an easement? b) Has it been properly created? c) Did it require protection by registration? In many city and town centres the buildings are physically joined to each other, by a party wall, so as to mutually support each other. If one such building were to be demolished it could cause at least partial collapse of its neighbour. The remaining building has a right of support from the demolished building, and the owner of the adjoining land owes a duty of support to the remaining building. Thus it is necessary for the owner who demolishes his building to provide for the continued support of the remaining building on neighbouring land. The same right of support and duty of support applies if ground is removed too close to a neighbouring building.

The right of support can also apply to ground (as distinct from a building) that is in danger of collapse as a result of excavation on neighbouring land.Thus a right of support also exists in the case of retaining walls that coincide with a property boundary.
If you wish to demolish a building that has a party wall, or if you own the building next door to the proposed demolition, consult a chartered building surveyor for advice before the start of any work on the building.

Right to Light

Rights to light can be a complicated area. In the absence of a restrictive covenant on your neighbour, it may be difficult to argue that he should not have planted those trees that are now blocking your light. It may be more difficult still to argue that he should remove the newly erected building that now blocks your light.
It is important to remember that the right is enjoyed by the land, not necessarily by any particular building or window on it. It is therefore possible to demolish an old building and replace it with a new one and still claim a right to light through the new windows. However, if the windows in the new building are significantly smaller than those in the demolished building, you may have great difficulty in proving that any reduction in light is due to the actions of your neighbour.
For advice on rights to light, consult a chartered building surveyor who specialises in the subject.

Water Rights

These usually take the form of a right to draw water from a watercourse or a spring on a neighbour's land. Problems can arise if you increase the amount of water that you take, or if the natural flow diminishes below a level that will support your needs. If you should stop using the water because you have made arrangements for an alternative water supply, you may have difficulty if you try to draw on the water again after a gap of many years.
For advice, consult a water engineer.

Wells

There are still a few houses in this country that are not connected to a water supply. They are quite likely to enjoy the benefit of an easement that allows them to draw water from a well in neighbouring land.

No right to sun or air

From time to time people have experienced problems relating to the natural elements of wind and sunshine. For example, if a new structure on a neighbour's land obstructs the passage of air to a windmill, or interferes with the extraction of smoke from a chimney, or prevents the sunshine from reaching solar panels. Whenever a landowner has attempted to pursue through the courts a claim to a right to air or sunshine, the case has been lost.

No right to a view

For some home buyers the view afforded from a particular property may be a major selling point. Unfortunately for those people there is no right to that view. If there was such a right then no neighbouring land owners would be able to develop their land.
If you buy a house overlooking farm land then it is entirely possible that the farmer may sell the land adjoining your own to a developer who will cover it with many more houses, completely changing - possibly ruining - your view. There is nothing you can do about this .... unless you have both the foresight and the money to buy up the farmland to prevent it from falling intro a developer's hands!
If, on the other hand, you live next to a neighbour from hell who realises that by planting a fast-growing coniferous hedge on his side of your common boundary he can cause you considerable annoyance, then you can deal with his hedge under the Anti-social Behaviour Act 2003:

Express and Implied Grant

An easement may be created in a number of ways. One is by express grant . In this case there may be a Deed of Grant that states the terms of the easement, or the grant may take the form of a clause in a conveyance deed or a transfer deed.

An easement may be Implied or simly inferred in favour of the purchaser of land. Easement by implied grant can arise in the following ways; by necessity. Thus a parcel of land will have a right of way of necessity over a road, track or path leading to it if that route is the only means of access between the public highway and that parcel of land.

An easement may also be created by prescription. This happens when someone carries out an act (that is capable of being an easement) repeatedly, openly and without the (potentially servient) landowner's permission for a period of at least twenty years.

If a parcel of land is sold together with an expressly granted easement then that parcel becomes the dominant tenement that has rights over neighhbouring land. At the same time, if the vendor of that same parcel of land reserves a right over the land being sold then it is also a servient tenement burdened with the rights reserved for the vendor's retained land.

If there is a doubt as to whether or not an easement exists then the law tends to favour the existence of the easement. As the Law of Property Act 1925 puts it:

"62.(1) A conveyance of land shall be deemed to include and shall ... operate to convey, with the land, all ... liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of the conveyance ... enjoyed with or reputed or known as ... appurtenant to the land or any part thereof. "

An easement cannot be created as a result of an illegal act. Thus the driving of motor vehicles across common land does not create a private right of way.
An easement is very difficult to extinguish and should be thought of as existing forever. The land of the servient tenement is burdened with the easement. The owner of the dominant tenement should not forget that the owner of the servient tenement has a right to the peaceful enjoyment of his land and the legitimate development of his land, and the performance of the easement should not interfere with the servient owner's peace nor prevent him from exercising his right to develop his land (provided that the development caters for the easement).
An easement is said to "run with the land", i.e. it cannot be sold separately from the land but must be passed on with the land whenever the land is transferred to a new owner.

Adverse Possession (Lecture Note)

Introduction

Where land is unregistered, a squatter can acquire title by their adverse possession over a period of time. This is through a combination of the positive effect of the adverse possession giving them title and the negative effect of the LA 1980, which extinguishes the documentary or paper title¹.

¹ LA 1980, s.17.

Under the law as it was prior to the coming into effect of the LRA 2002 on 13 October 2003, the provisions of the LA 1980 applied in the same manner to registered land as unregistered land except that the estate of the registered proprietor, instead of being extinguished at the end of the appropriate limitation period, was deemed by section 75(1), LRA 1925 to be held on trust for the squatter². This form of trust was abolished under the LRA 2002³ but paragraph 18(1) of Schedule 12, LRA 2002 provides that a squatter who is already a beneficiary under such a trust has a right to be registered as proprietor. So these transitional provisions in paragraph 18 of Schedule 12, LRA 2002, can only operate where the land was registered as at 13 October 2003 and there had been adverse possession for the appropriate limitation period by that date.

² This gave the squatter the right to apply for registration in place of the existing registered proprietor: LRA 1925, s.75(2); Central London Commercial Estates Ltd v Kato Kagaku Co Ltd [1998] 4 All ER 948, 958-959.

³ There is no equivalent to s.75(1), LRA 1925 in the LRA 2002.

                          

Adverse possession – the essentials

You must show that:

• the squatter has factual possession of the land
• the squatter has the necessary intention to possess the land
• the squatter’s possession is without the owner’s consent, and
• all of the above have been true of the squatter and any predecessors through whom the squatter claims for at least 12 years prior to the date of the application (see section 4 The limitation period).

                                  

1. Factual possession

In Powell v McFarlane⁴, Slade J said:

"Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed. Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no one else has done so."

⁴ (1979) 38 P & CR 452. The House of Lords approved this statement of the law in J A Pye (Oxford) Ltd v Graham [2002] UKHL 30.

Where the land was previously open ground, fencing is strong evidence of factual possession, but it is neither indispensable nor conclusive.

                           

 2. The intention to possess

What is required is "not an intention to own or even an intention to acquire ownership but an intention to possess"⁵. This means "the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as reasonably practicable and so far as the processes of the law will allow"⁶.

⁵ Buckinghamshire County Council v Moran (1988) 86 LGR 472, per Hoffman J, approved by House of Lords in J A Pye (Oxford) Ltd v Graham [2002] UKHL 30.

⁶ Powell v McFarlane (1977) 38 P & CR 452, 471-472, per Slade J, approved by House of Lords in J A Pye (Oxford) Ltd v Graham [2002] UKHL 30.

Where the squatter has been able to establish factual possession, the intention to possess will frequently be deduced from the acts making up that factual possession but this deduction will not always be made, as Slade J explained in Powell v McFarlane⁷:

"In my judgement it is consistent with principle as well as authority that a person who originally entered another’s land as a trespasser, but later seeks to show that he has dispossessed the owner, should be required to adduce compelling evidence that he had the requisite animus possidendi in any case where his use of the land was equivocal, in the sense that it did not necessarily, by itself, betoken an intention on his part to claim the land as his own and exclude the true owner."

⁷ (1979) 38 P & CR 452, 476, cited with approval by Lord Hutton in J A Pye (Oxford) Ltd v Graham [2002] UKHL 30, [2002] 3 All ER 865; [2002] 3 WLR 221; [2003] 1 P&CR 128.

Use of land for access purposes is an example of an equivocal act. Such use over time might give rise to an easement by prescription but is not, by itself, sufficient to establish an intention to possess the land.

                                 

 3. Possession without the owner’s consent

In Buckinghamshire County Council v Moran⁸, Slade LJ explained:

"Possession is never ‘adverse’ within the meaning of the 1980 Act if it is enjoyed under a lawful title. If, therefore, a person occupies or uses land by licence of the owner with the paper title and his licence has not been duly determined, he cannot be treated as having been in ‘adverse possession’ as against the owner of the paper title."

⁸ [1990] Ch 623, 636.

                                      

 4. The limitation period

4.1 The normal period

Section 15(1), LA 1980 states:

"No action shall be brought by any person to recover any land after the expiration of twelve years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person."

The right of action accrues, and so the limitation period starts to run, from the start of the adverse possession⁹.

⁹ LA 1980, Sch 1, paras 1 and 8.

4.2 Extended periods

The time limit of 12 years is extended to 30 years for the Crown. This then is the relevant limitation period when the owner is a company that has been dissolved; the property of such a company vests in the Crown or one of the Royal Duchies as bona vacantia¹⁰. You should, therefore, carry out a company search where the owner is a company.

¹⁰ Companies Act 2006, s.1012. If time starts to run against a company which is then dissolved before the 12 years have expired, the limitation period will become 30 years from the start of the adverse possession.

The limitation period is 30 years for any spiritual corporation sole (bishops, vicars and certain other office holders in the Church of England) LA 1980, Sch 1, para 10.

. The 12-year period applies, however, to corporations aggregate, such as the Church Commissioners, a diocesan trust, or one of the Oxford or Cambridge colleges. Where the land is foreshore owned by the Crown, the period is 60 years (LA 1980, Sch 1, para 11). The normal 12-year period applies to foreshore owned by parties other than the Crown.

The normal limitation period may also be prolonged by disability of the person entitled to recover the land  (LA 1980, s.28), by fraud or deliberate concealment of a cause of action, and by mistake (LA 1980, s.32). A person is to be treated as under a disability while an infant (ie under the age of 18), or of unsound mind (LA 1980, s.38(2)). We shall assume that none of these factors apply unless the evidence indicates otherwise.

Where the land is held on trust the estate of the trustees continues, even after the expiry of the limitation period against them, until the rights of action of all the beneficiaries have been barred¹⁶. Where there is some indication that trustees hold the land on trust for beneficiaries other than themselves, we are unlikely to be able to register with anything other than a qualified title unless the squatter can establish details of the trust and can prove that the rights of action of all the beneficiaries have been barred. Arguably the fact that the estate of the trustees continues in this way means that an application cannot be made where the limitation period relied on starts to run (i) after the death of the owner and while their estate is being administered, (ii) after the bankruptcy of the owner and while their property is being administered by the trustee in bankruptcy or (iii) (being a company) while the owner is being wound up. In each of these cases the owner is subject to a form of trust¹⁷.

¹⁶ LA 1980, s.18(3).

¹⁷ Ayerst v C & K (Construction) Ltd [1976] A.C. 167.

Time does not run against one beneficiary while another beneficiary is in possession of the land¹⁸. LA 1980, Sch 1, para 9. See Earnshaw v Hartley [1999] 3 WLR 709 for the operation of this provision in the context of beneficiaries under an intestacy.

4.3 What stops time running?

For the purposes of the LA 1980, a period of adverse possession can be brought to an end by a signed, written acknowledgement of the owner’s title by the squatter¹⁹ and a written acknowledgement by the agent of the squatter is as effective as one signed personally by the squatter²⁰. A written offer by the squatter to purchase the land from the owner is treated as an acknowledgement²¹.

¹⁹ LA 1980, ss29(2) and 30(1). An oral acknowledgement may be evidence that the squatter did not have the necessary intention to possess: Pavledes v Ryesbridge Properties Ltd (1989) 58 P & CR 459.

²⁰ LA 1980, s.30(2).

²¹ Edginton v Clark [1964] 1 QB 367.

If the squatter remains in possession after the acknowledgement then time may start running again. But it will not start running if the acknowledgement results in a change in the relationship between the squatter and the owner (for example, the grant of a lease or a licence) so that the possession is no longer adverse.

Once the limitation period has expired, any subsequent acknowledgement does not revive the owner’s right of action²².

²² LA 1980, s.29(7).

A demand for possession from the owner does not stop time running²³. Nor does the mere issuing of proceedings which are later dismissed²⁴, or the making of related applications or objections to Land Registry²⁵.

²³ Mount Carmel Investments Ltd v Peter Thurlow Ltd [1988] 1 WLR 1078.

²⁴ Markfield Investments Limited v Evans [2001] 1 WLR 131.

²⁵ J A Pye (Oxford) Ltd v Graham [2000] Ch 676 at 699-703; upheld on appeal to the House of Lords, where this question was not considered: [2002] UKHL 30.

4.4 Successive squatters

The squatter can pass on their interest in the land, for example to a purchaser or under a will or intestacy. The purchaser etc needs immediately to follow the original squatter into possession and hold for the remainder of the 12 years²⁶.

²⁶ LA 1980, Sch 1, para 8(2).

If a second squatter dispossesses the first, the second acquires the benefit of any time that had already run against the owner. However, the first squatter will retain the right to recover possession from the second, until the full limitation period has run from the date when they were dispossessed. So if B dispossesses A (the owner) in 1986 and is then dispossessed by C in 1994, A loses the right to recover possession from C in 1998 but B could still bring possession proceedings against C until 2006. One way a second squatter can show that they did not dispossess the first squatter is by obtaining a transfer of all the first squatter’s estate, right or interest in the land. However, such a transfer is not essential for the purposes of registration. Time stops running if a squatter abandons the land before the limitation period has expired. If a second squatter later takes possession time starts running afresh against the owner.

                              

Leasehold

  

Adverse possession of leasehold land

As soon as the squatter takes possession of land that is leased, time runs against the tenant.

However, where the lease is unregistered Land Registry will refuse an application for first registration. This is because the tenant, although no longer able to recover possession of the land from the squatter at the end of the limitation period, can still surrender the lease to the landlord⁵⁴.

⁵⁴ Fairweather v St Marylebone Property Co Ltd [1963] AC 510. This is not the case where the lease is registered and the limitation period expired before 13 October 2003: Spectrum Investment Co v Holmes [1981] 1WLR 221; Central London Commercial Estates Ltd v Kato Kagaku Co Ltd 1998] 4 All ER 948.

Time does not run against the landlord until the lease expires – unless the adverse possession started before the lease, in which case time will continue to run against the landlord during the term of the lease.

Non-payment of rent before the lease expires is irrelevant. However, if a stranger wrongfully continues to receive the rent of leasehold land for 12 years, provided that the lease is in writing and not granted by the Crown and the rent is at least £10 a year, the landlord’s title becomes statute-barred and, where the estate in registered and the transitional provisions apply, the stranger becomes entitled to be registered⁵⁵.

⁵⁵ LA 1980, Sch 1, para 6.

  

Encroachment from leasehold land

- Encroachment from leasehold land by a tenant squatting on an unregistered freehold estate and seeking first registration of a leasehold title

If the squatter is the lessee of adjoining land, the encroachment will usually be presumed to amount to an accretion to their lease. The additional land will be included in the surrender to the landlord when the tenancy ends⁵⁶.

⁵⁶ See Smirk v Lyndale Developments Ltd [1974] 3 WLR 91 and the authorities cited therein. The Court of Appeal approved what was said by Pennycuick V-C on the encroachment by a tenant point: [1975] Ch 317, 337. See also Tower Hamlets v Barrett [2005] EWCA Civ 923.

8.2.3 Encroachment from leasehold land by a tenant squatting on registered land which was registered on 13 October 2003, there having been 12 years adverse possession by that date, the tenant accepting that the presumption applies that the encroachment amounts to an accretion to their lease

Where the presumption that the encroachment amounts to an accretion to the lease applies, the tenant squatter cannot be the beneficiary under a trust under s.75(1), LRA 1925 and therefore cannot apply for registration under paragraph 18 of Schedule 12, LRA 2002. However, you can apply on form FR1⁶¹ for first registration of the leasehold title they had acquired by 13 October 2003. This is provided that there is more than seven years of the squatter’s documentary lease term still to run⁶². It is also provided that the title has not been subsequently lost through registration of a registrable disposition of the registered estate for valuable consideration at a time when the leasehold estate was not an overriding interest⁶³.

⁶¹ LRR 2003, r.23.

⁶² LRA 2002, s.3(3).

⁶³ LRA 2002, s.29.

Protection prior to registration of the squatter

We will not register a squatter's title to unregistered land unless there is evidence of adverse possession for at least 12 years. Furthermore, in the meantime the squatter cannot lodge a caution against first registration (subject to what is said in the next paragraph). The squatter will be claiming to be the owner of a legal estate in land arising out of possession, and a caution cannot be lodged by virtue of ownership of a freehold estate in land⁶⁵, which is the estate to which the squatter has title⁶⁶. This is not to say, however, that the squatter will necessarily lose the benefit of the adverse possession on first registration of the paper title. The first registration will be a mistake if it takes place after the paper title has been extinguished, and so the squatter should be able to apply for alteration⁶⁷ (the registered title being closed) and for first registration of their own title⁶⁸. If the first registration takes place before the paper title has been extinguished but the squatter stays in adverse possession, then once there has been 10 years adverse possession in total⁶⁹, they can apply to be registered as proprietor of the registered estate under Schedule 6, LRA 2002.

 ⁶⁵ LRA 2002, s.15(1)(a) & (3)((a)(i).

⁶⁶ Rosenberg v Cook (1881) 8 QBD 162, 165, per Jessel MR.

⁶⁷ LRA 2002, Sch 4, para 5.

⁶⁸ If the squatter is in actual occupation or the first proprietor has notice of the squatter?s estate, the estate vested in the proprietor will be subject to that estate: LRA 2002, s.11(4)(b) & (c). Alteration of the register will not, therefore, prejudicially affect the proprietor?s title. This means that the alteration will not constitute rectification, and so the proprietor will not be entitled to indemnity in the event that the title is closed: LRA 2002, Sch. 8, para 1(1)(a) & 11(2)(b).

⁶⁹ So that Sch 6, para 1 is satisfied.

The position would seem to be different where the squatter is a successor in title to an earlier squatter who has transferred the possessory estate. If the squatter does not apply for first registration within two months of the transfer of the possessory estate, the title to this estate will revert to the transferor/first squatter, who will then hold it on a bare trust for the squatter⁷⁰. The same reversion would appear to take place if the squatter does apply for first registration but the application is cancelled⁷¹. Thus the squatter will have a beneficial interest in this freehold estate, and so can, if they choose⁷², lodge a caution against first registration on the basis that they are entitled to an interest affecting a legal freehold estate in land⁷³, as opposed to being the owner of such an estate. Note that this reasoning applies equally whether or not the documentary title has been extinguished by the time of the transfer of the possessory estate.

 ⁷⁰ LRA 2002, ss.6 & 7.

⁷¹ Sainsbury's Supermarket Ltd v Olympia Homes Ltd [2005] EWHC 1235 at [67]-[71].

⁷² A person must not lodge a caution without reasonable cause; this duty is owed to anyone who suffers damage as a result of its breach: LRA 2002, s.77.

⁷³ LRA 2002, s.15(1)(b). The freehold estate involved is the possessory estate which is the subject of the transfer by the earlier squatter.

The squatter's right to be registered under paragraph 18 of Schedule 12, LRA 2002, is a proprietary right and so is capable of being an overriding interest. It will not be lost as a result of the registration of a transfer or other registrable disposition for valuable consideration, provided the squatter remains in actual occupation at the time of the disposition⁷⁴.

 ⁷⁴ LRA 2002, s.29(2)(a)(ii); Sch 3, para 2. Whether there must also be actual occupation at the time of registration of the disposition for the right to be an overriding interest is not certain: Thomson v Foy [2009] EWHC 1076.