This is an extract of our Property Law Registration And Priority document, which we sell as part of our Property Law/ Land Law Notes collection written by the top tier of University College Dublin students.
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REGISTRATION AND PRIORITY
In the majority of contracts, what is being sold is•
The fee simple
Something equivalent to the fee simple
Interests that amount to a fee simple e.g. property that'll be conferred for many many years
Important for the receivers to understand what the interest is, as most come with restrictions.
Fee simple is the closest to no restrictions at all.
Land Registration system function
➢ To aid understanding of the types of interests that affect certain packages of land
Nightmare scenario in all conveyancing, where:•
Usually result of fraud
Rare we tolerate multiplicity of interests, fragmentation of owners, trusts, co-owners/ joint tenants etc. this is different.
Why is it different? They KNOW they are in a multiplicity of ownership.•
More than one person has a claim to be entitled to the same interest in land for the same period of time.
There is no fraud.
There MUST BE CONFLICT.
➢ An interest is acquired, the land is mortgaged in favour of a financial institution, meaning the land is given as security for the taking out of a loan, the land is sold to a new owner without giving them the knowledge that it is on mortgage.
➢ The previous owner then stops paying, and the institution seeks assets or payments to enforce the security
➢ Cannot get it from the previous owner, because it is not their property anymore
➢ The new owner is not liable for this security as they did not know
➢ The institution Is shafted.
➢ By the time the fraud is discovered, A will have usually
Spent the money acquired
Fled ➢ So an order for damages under contract law is not sufficient
➢ Instead, institution and the new owner are In conflict and one shall win.
➢ Someone, gets shafted > there is no real reason why either have better title, but
- the law must make a choice
➢ This is rare, though.
They can arise accidentally
Where there is a clash
The complexity of land law means that these accidental conflicts DO arise, usually due to shoddy conveyancing.
Lack of knowledge of easements etc.
Carelessness rather than fraud - more negligence
How do we resolve a conflict where there are two people fighting over the same property?
TYPES OF INTEREST
Priority conflicts are solved differently based on the interest >
1. Common law legal rights
2. Equitable interests - trusts
3. 'mere equities' - arise where someone has entered into a contract, but there is a problem with the contract so that it can be set aside in equity (duress etc.). the contract effects and purchaser gets title, but the title has a flaw - if they did not know of the prior agreement - they are equity's darling?
COMMON LAW and EQUITABLE INTEREST CONFLICTS
The general principles that both common law AND equity use -
•A owns a legal fee simple, sells it to B, A subsequently sells it to C
Everyone is fighting over the same thing - the interest in Blackacre
Nobody can give that which he does not have
The second conveyance from B to C is invalid.
A has transferred the land to B - the land is gone from his hands.
The new owner is B and B is now in control of the land, and has not conveyed it to C so C
does not have interest.
The order is the date of the creation of the transaction - and the oldest one is the best
A owns the fee simple, and says he will hold it on trust for B (beneficiary)
The following day he says he will hold the same thing on trust for C
Primary dispute between B and C - who has beneficial interest?
First in time prevails.
It is possible in EQUITY •
It is the same thing as common law, but confusingly the two Latin phrases translate differently.
So if it is an equity v equity dispute, first in time will prevail.
Taylor v Russel AC 1892To set aside this rule, you can show that the older owner has been guilty of gross negligence or fraud.
Meaning if you are at fault, equity will punish you.
Those who seek equity must do equity?
THE BONA FIDE PURCHASER OR EQUITY'S DARLING
This is a conflict remedy.Applies only where the first in time is in equity, and the second in time is an inconsistent legal estate.
➢ A declares a trust in B's favour over a fee simple
➢ In breach of trust, A sells the legal fee simple to C
➢ Is C bound by the declaration of trust in favour of B?It depends on whether they were with or without notice.
1. Was it for value?
2. What did C know at the time of the purchase?If he did not, he is not bound by the principles.
If he DID, he is.
So if C knew that there was an agreement between A and B, the first in time rule will govern the transaction - meaning the agreement between A and B is valid as it was the first.
Tourville v Nash 1734If C had knowledge of B's equitable interest at the time which he PAYED
Where consideration is given.
This is to do with the moral title to the property - when you give over consideration, moral conscience allows you to have it.
Remember - equitable interests, such as trusts, are not the same as mere equities. Mere equities are things in contract law such as duress and undue influence - there are different priority rules. This means that when confronted with a case, you must see if the transaction in question being disputed, is a mere equity or an equitable interest.
TYPES OF NOTICE:
If it is proven that you did not ask a question due to your strong suspicion that the question and therefore knowledge may work against you, this is actual knowledge
It is what you actually know, or what you so strongly suspect that you avoided enquiring about it
• If your agent possesses the knowledge,
• You are liable, and you must sue your agent.
• Whatever your fiduciary knows, you are deemed to know.
• Things that you do not know, but had you made reasonable inquiries that you were under a duty to make, you would have known.
Elements of constructive notice:
Duty to Investigate known encumbrances
Duty to make such inquiries as a prudent purchaser would make.
Hunt v Luck
The rule in hunt v luck.
PRUDENT PURCHASER -Will physically inspect the land
You may encounter others, and if you doyou must ask them what they're doing there and if they have an interest in the land.
failure to do this:You have constructive knowledge and are bound by their interest
➢ So, A holds land in trust for B, and then agrees to hold in on trust for C in breach of the first trust
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