Good Intentions

My wife asked me whether I was going to write ‘something Christmassy’ this month. She suggested dealing with whether Father Christmas had an implied easement to come down the chimney on Christmas Eve. I dismissed her suggestion – very politely, of course! She is not a conveyancer; my wife is a children’s lawyer. A conveyancer would not have asked such a question. As every conveyancer knows it would not be an implied easement but a prescriptive easement based on long use; the two are not the same. An implied easement is implied into a deed, usually a sale of part and is based on the presumed intention of the parties. The rules on implied easements are often expressly excluded by the terms of the contract but where they are not they can be very useful to property owners – and indeed their conveyancers – where a necessary easement has been excluded from a transfer. Readers may recall the case of Dickinson v Cassillas [2017] EWCA Civ 1254 where the Court was able to imply rights into a transfer of a plot on a housing estate and, in particular, a right to go onto neighbouring land to read an electricity meter. That must have been the intention of the parties, thought the judge.

Mention of ‘the intention of the parties’  reminded me of two separate occasions recently where I have been asked recently by course delegates about problems caused by Form A restrictions.

The Form A restriction is something we see almost every day. It reads:

No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.

It is classically entered by Land Registry in cases where co-owners are tenants in common. Remember, that in all cases of co-ownership there is a trust of land; the co-owners hold the land on trust for themselves and under section 27 of the Law of Property Act 1925 two trustees are needed to overreach the interest of a beneficiary. And by ‘overreaching’ we mean that the interests of the beneficiary are removed from the land and transferred to the proceeds of sale and thus will not bind a buyer which otherwise they might.

Both problems were caused by a husband and wife wishing to remortgage. In the first case, the husband had a bad credit record, so the mortgage adviser suggested transferring the land into the wife’s sole name so that a loan could be obtained. The transfer to the wife’s sole name and the remortgage by the wife were dealt with together by the conveyancers and sent to Land Registry for registration. Land Registry promptly refused to register the new mortgage. Why?

The order of events on registration would have been the discharge of the existing mortgage, the transfer to the wife and then the new mortgage. But when the wife was registered, the Form A restriction was held to remain on the register and so the wife couldn’t ‘dispose’ of the land by herself under the wording of the Restriction – and ‘disposition’ includes a mortgage. But there had been a transfer by two trustees, said the Conveyancer, so why would the Restriction remain?

What the conveyancer had forgotten was how the interest in the land owned by the husband would be affected by the rules relating to overreaching. For overreaching to occur on a transfer there has to be a transfer to a ‘Purchaser’ as defined by the LPA 1925 – and this means someone who has given money (or something worth money) in return for the transfer of the property. As already stated, overreaching works by transferring the interest of the beneficiary to the money paid on the trnafer. But there had been no consideration for the transfer to the sole name of the husband and so no overreaching of the husband’s interest. So the wife now held on trust for herself and her husband so the Restriction was still needed to protect a subsequent transferee taking subject to his interest.

What the conveyancer should have done was to make it clear in the transfer into the sole name of the wife that the transfer was also intended to transfer the husband’s equitable interest under the trust to her – assuming that that was the intention, of course. This would have made it clear to Land Registry that the wife was now sole beneficial owner free from any rights of the husband and so the Restriction was no longer necessary.

But, of course, being wise with hindsight was all well and good; but how could it now be resolved was the pressing problem the conveyancer had. Once again we come back to the intentions of the parties to the transaction, here the husband and wife. Did they intend that the wife would continue to hold the land on trust for herself and her husband or was it intended that all of the husband’s interest in the land should pass to his wife by the transfer? This could easily be ascertained by a quick telephone call and of course that was their intention. So the conveyancer could now give a Statement of Truth to Land Registry that the trust had come to an end by virtue of the transfer and so the wife was sole owner of the land. An application could thus be made for the Restriction to be removed.

The other case was based on a similar situation, although in that case it was a transfer to the husband only, with the same result- and the same advice.

Can I finally give all my best wishes for  Christmas and the uncertainties that 2018 may well bring to all conveyancers everywhere.

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