Estates and Interests in Land

1
Estates and Interests in Land

• Future Property
• Legal and other Interests
• Possessory Interests
• Leases

2
Different estates and interests

• Last lecture covered different doctrines of
  estate saw that land is most likely to be
  fragmented between a number of people such as
• The registered proprietor
• A mortgagee
• People entitled to the benefit of an easement
• Possible tenant
• But land can also be fragmented across time
• In a life estate, the fee simple owner retains a
  reversion in fee simple the land returns
  reverts to the original fee simple proprietor

3
Life Estate Continued

• If the grantor of a life estate has died, the
  person entitled to inherit the grantors real
  property will receive the reversion
• The Life tenant is only entitled to hold the
  estate for the time granted
• If the grantor died intestate (made no will) then
  under the Administration and Probate Act 1958
  sets up system for intestate succession to
  property
• Intestate succession is built on circles of
  relationship so the closest relatives of the
  deceased have first entitlement
• Wife/husband (first 100,000 rest to children)
• Parents
• Siblings
• If no-one then reverts to Crown

4
Life Estate Continued

• A person creating a life estate can specify who
  will take the land when the life tenant dies.
• These people will hold an estate in remainder and
  are called remaindermen
• Alienate a string of estates
• To Albert for life and after his death to
  Beatrice for her life and after death to Charles
  and his heirs
• In this case the grantor has no reversion the
  entire fee simple estate has been alienated
• Albert has a life estate vested in possession
  because it is his to use from the very start

5
Life Estate Continued

• The estate described in the example above is a
  fee simple estate in remainder
• Strictly speaking the above estate is not future
  property (although they are often described in
  this way)
• This is because they are vested at the tine of
  the original grant, and were a recognised form of
  property from that time, and could be registered
• Albert could vest in possession
• The others had to vest in interest (and then they
  vest in possession after each successor dies)

6
Future Property

• True future property is more complicated still
• It is possible to create an interest called a
  future contingent remainder
• Eg
• To Albert for life, and after his death to
  Beatrice and her heirs if she publishes her novel
  Life on the Road
• If Beatrice does not publish her novel, the
  estate in fee simple would revert back to the
  grantor.
• That is, the grantors entitlement to reversion
  is contingent upon Beatrice not publishing her
  novel
• And vice versa, Beatrices entitlement is
  contingent on her publishing her novel

7
Contingency

• Another means of control
• The contingency must take effect before the
  preceding estate terminates
• Until her novel is published, Beatrice has a
  future contingent remainder
• Until her novel is published, Albert has a
  contingent expectation of reversion

8
Future Contingent Remainder

• Because the future contingent remainders are
  vested neither in possession nor in interest, it
  can be argued that they are not interests in
  property at all!
• What if you need to decide whether it is an
  interest in land held by a bankrupt person that
  can be taken for the benefit of creditors?
• No binding authority on the point
• Likely the contingent remainder would be an
  interest in the nature of property although not
  vested as an estate in the land

9
Legal Interests

• There are also legal interests in land
• These are distinguished from legal estates (hence
  estates and interests in land)
• A legal interest generally does not carry with it
  possessory rights
• An estate in land does have possessory rights
• Reflects the nature of property property rights
  are the strongest type of right

10
Mortgages

• A mortgage is a legal interest in land
• Created to secure repayment of a loan or advance
  money
• Under the old law, mortgages involved conveyance
  of the fee simple estate to the mortgagee
  (lender) by way of security
• Mortgagor retained an equity of redemption
• The mortgagees entitlement to possession if loan
  not repaid

11
Mortgages

• In contrast, under the Torrens System, the
  registered fee simple proprietor remains
  registered (title is not conveyed to the lender)
• The mortgagee has a legal mortgage registered on
  the Certificate of Title to secure repayment
• If the mortgagor fails to repay, the mortgagee is
  entitled to obtain possession and sell the land
  to recover the debt
• Difference relates to the legal interest in land
  which the owner retains, it is stronger (and
  registered) under the Torrens System

12
Easements

• A right to use the land bit not occupy it
• Eg. A right of carriageway across the land
• A right to string wires/ install pipes etc
• Drainage easement (see title handout)
• Note that if the right is exclusive to the
  grantee, it could be interpreted as a grant in
  fee simple

13
Profit á Prendre

• Right to take the fruits of the land including
  crops, gravel, stone etc
• We will cover this in more detail in a later
  lecture

14
Other Interests

• There are many interests in land that are not
  legal interests, but are classified as equitable
  interests
• A common example is a restrictive covenant which
  are promises under seal (that is deeds) not to
  use the land in some way
• Preserve a view over landscape
• Conservation Covenant Trust for Nature property
  covenanted under the Victorian Conservation Trust
  Act 1972.
• They run with the land, binding later owners

15
Interests that are not Proprietary

• Agreement that does not create a proprietary
  interest can be created
• Generally take the form of licences
• They are contractual permission to do something
  in relation to the land
• If it is breached, then equity will not generally
  award a remedy
• It can be difficult to distinguish a licence from
  a lease.

16
Leasehold

• A lease is an assignment of the exclusive
  possession of land for a term
• Two essential elements
• Exclusive possession, even to the exclusion of
  the person granting the lease
• The period or duration of the lease (the term)
  need not be fixed but must be calculable at the
  time the lease is made
• Leasehold is described as an estate less than
  freehold although not technically correct
• Only the lease of Crown land could be considered
  less than freehold

17
Forms of Lease

• There are four forms of lease
• Tenancy for a term of years a lease for a fixed
  term (even if the term is less than a year)
• Periodic Tenancy a lease for a recurring period
  (eg month to month). Usually specified in the
  lease agreement, but if not then it is presumed
  to correspond with the frequency of rental
  repayments
• Tenancy at will when land is occupied on terms
  that either party may terminate at any time. They
  are not assignable, but difficult to distinguish
  from a licence.
• Tenancy at sufferance when the tenant holds over
  without the landlords assent or dissent. If the
  tenant continues to pay rent it will become a
  periodic tenancy in the absence of any other
  agreement

18
Residential Tenancies

• Governed by the Residential Tenancies Act 1997
• Only applies to premises are used primarily as a
  residence
• The act excludes some residence styles such as
  an educational institution
• Provides for fixed term or periodic tenancies
• Provides for Residential Tenancy Agreement
• Disputes relating to residential tenancy may be
  taken to VCAT

19
Licences (compared to Leases)

• Difficult to distinguish in many circumstances
• Must return to the essential characteristics of a
  lease
• Exclusive possession
• Determinable period
• Other distinguishing factors of leases
• Lease can be assigned/sublet
• Legislative safeguard for tenants (Residential
  Tenancies Act)
• A licence is only a personal interest

20
Rights under a Licence

• Rights are limited to the licence agreement
• If person who issues the licence terminates it,
  the licencee can only sue for damages (not
  possession)
• Licence can generally be terminated at short
  notice
• Licences have few legislative safeguards

21
Equity and Trusts

• Unregistered, Inchoate and Informal Transactions

22
Legal vs. Equitable.

• The past couple of lectures have considered the
  legal interests in land
• There are 2 other sets of interests that might
  never appear on the register
• Paramount interests protected by s42(2) of the
  Transfer of Land Act. Eg. A lease of land for
  less than 3 years will not appear on title, but
  transfer will be subject to it
• Equitable interests which might not be
  registered such as an equitable mortgage,
  interest of a beneficiary under a Trust (these
  can be protected by a caveat

23
Equity revisited

• Equity (in contrast to Common Law) emerged as
  judge made law in the Common Law system
• Relieve the harshness of law if it is
  determined that strict application would not be
  wholly fair in the particular circumstances
• Not restricted to compensation. Can order
  specific performance or injunction if damages
  seem inadequate

24
Availability of an Equitable Remedy

• Often the background to a dispute in equity
  involves partial or incomplete transactions and
  the reliance on good faith by one of the
  parties
• As stated, if compensation is inadequate,
  specific performance or injunction can be ordered
• Equitable interests in land cannot be registered
  on the Certificate of Title
• Usual means to protect an equitable interest is
  to lodge a caveat to protect that interest which
  will appear on the Certificate of Title

25
Protecting equitable interests

• s89(1) of the Transfer of Land Act if a caveat
  is put in place, transfer of property is
  forbidden
• Any person claiming an estate or interest in land
  under any unregistered instrument or dealing by
  devolution in law or otherwise may lodge a
  caveat in an appropriate approved form forbidding
  the registration of any person as transferee or
  proprietor of and any instrument affecting such
  estate or interest either absolutely or
  conditionally

26
Caveat

• Ensures transferees interests are protected
  between purchase and settlement
• Freezes the register, absolutely or
  conditionally, until the unregistered transaction
  is registered or otherwise dealt with
• Anyone attempting to lodge a transaction for
  registration is prevented from doing so, and the
  caveator is informed of the attempt
• Caveator has 30 days to justify caveat in court
• The person attempting to register an interest can
  challenge the caveat in court
• While unchallenged, the caveat retains priority
  for the transaction which it protects

27
Example purchaser of property

• Land under contract of sale is the most common
  example of an equitable interest in land
• Purchaser should ensure that a caveat is
  registered between signing the contract and
  settlement of purchase price and transfer of land
• If the vendor were to refuse to complete the
  transaction, the equitable remedy would be
  specific performance (ie complete the
  transaction)
• Equitable remedy available because monetary
  damages would be inadequate compensation each
  land parcel is unique

28
Equitable interest in Trust

• Equitable interests also arise in circumstances
  where the owner of land acts or behaves in a way
  that make them trustees of there legal estates or
  interests for other people
• The other people are said to have an equitable
  interest in the land.
• In the example of a vendor and purchaser it is
  widely held that the vendor becomes the trustee
  of it for the purchaser until the transaction is
  settled
• Not settled there is little agreement on the
  kind of trust that this is.
• Also, trust is based on a relationship. Two
  strangers (with conflicting interest!) could
  hardly be in a trust relationship

29
Potential problem with equity

• Again in the vendor/purchaser situation
• If in Equity, the purchaser owns the property
  (although not in law) when the contract is signed
  and deposit paid the following may eventuate
• If a building is destroyed, the purchaser is
  bound to pay full price still
• Important for purchaser to ensure against loss

30
Safeguarding purchasers interest in Victoria

• There are safeguards in Victoria against the
  above situation
• Standard form contract of sale contains a clause
  that property is to be in the same condition when
  the purchaser takes possession as when the
  contract is made
• Purchaser is entitled to inspect before
  settlement
• This will not apply if the standard form contract
  is not used

31
Other equitable interests

• Some other commonly recognised equitable
  interests in land are
• Equitable mortgage by deposit a lender holding
  the duplicate certificate of title or the title
  deeds as security for repayment of a loan
• Equitable mortgage A lender holding an executed
  but unregistered mortgage as security for a loan
• Restrictive covenant prevents owner from some
  activity taking place on the land. The person who
  benefits from this has an equitable interest
• Equity of Rectification or an Equity to be
  Restored to the Register a person who has a
  right to have a mistake or fraud corrected in a
  document, or on the Land Title Register has an
  equitable interest by the correction

32
Other Equitable Interests

• Equitable lease (eg) if a legal estate or
  interest in land is to enure to a person through
  a transaction but, while the transaction has been
  partly performed, the formalities of the
  transaction are incomplete, that person obtains
  Equity in the relevant land
• Beneficiary under a trust has an equitable
  interest in that land
• Unpaid vendors lien A vendor of land who
  transfers it to the purchaser without receiving
  the full purchase price retains an equitable
  interest in the land as security for the unpaid
  balance

33
Torrens Protection

• Unless an equitable interest is protected by a
  caveat, it can easily be defeated by someone else
  registering an incompatible dealing
• Deliberate feature of the Torrens System
• Philosophy is that people should take reasonable
  care to protect their interests which is no more
  than one would expect a prudent person to do

34
Other Equitable Interests

• In addition to the interest of a purchaser under
  a contract of sale, there are many other types of
  equitable interests which we will look at next
  week
• Express Trusts
• Resulting Trusts
• Constructive Trusts
• Estates and Interests which would generally be
  legal created through equity
• In addition to these, there are a range of
  interests called mere Equities which could be
  equitable interests, a separate category of
  property or might not be property at all?