#17076 - Introduction To Land Law - Property Law

Introduction to Land Law

• Practice Questions

Q: Imagine a big modern shopping mall. It is owned by a Pension Fund. You occupy a prime site in it: the restaurant. You have invested heavily in kitchen equipment. You have got a 15-year lease. Now the Pension Fund has sold the mall to a new owner. Does that mean that you must now renegotiate your lease?

A: No, you do not need to renegotiate because your lease is a property right and as such, binds the rest of the world (including the third party owner).

Q: Suppose instead that you have a 5-year agreement to provide the electrical maintenance for the mall. Same assumptions as above. Any different?

A: Yes. Because your agreement to provide maintenance is a personal contract, it only binds the parties to the contract, not the third party owner. Therefore you will have to renegotiate with the new owner. But could potentially sue the old owner for breaking contract depending on its terms.

• Theory

• Property interests have objective definitions - even if the edges are sometimes fuzzy

• You cannot create new types of property interests - can only follow the rules of pre-existing categories.

• Doctrine of Tenures (relationship between crown and tenant) - History

• 1066 - William I conquers England and becomes supreme overlord.

• The King owns all land - grants bits of it to followers who become tenants.

• This is done on the basis that services will be owed by the tenants to the King.

• Land was sub-leased from the barons to military to craftsmen to peasants - creating the feudalism pyramid

• Land was never granted by way of an actual transfer of property - only the right to live on the land.

• Absolute ownership remained with the Crown thus separating ownership from possession

• The ‘doctrine of tenures’ outlined the terms and conditions on which the tenant enjoyed occupation of the land.

• In Present Day

• The only tenure of relevance is a freehold tenure (where the buyer of property gains property rights without owing any service to the crown)

• Doctrine of Tenures Upon Colonisation of NZ

• The process of settlement and conquest led to the export and adoption of English land law into the new country.

• The Crown owned the land and could make grants of interests in it to whomever it chose (usually settlers).

• However, Maori Customary Title remained (where it was not extinguished).

• R v Symonds

• Maori customary title does exist

• Maori land can only be brought in the first instance from the crown

• Ngati Apa v AG

• Recognition of common law native title is consistent with the crown’s radical title

• Doctrine of Estates (relationship between tenant and the land)

• Because land is owned by the crown, tenants don’t own the land itself - instead, tenants own an estate in the land

• An estate itself is an abstract thing, entailing certain rights in the ‘bundle of property rights’

• Therefore, different estates can be held in the same piece of land

• The differences between estates were driven by differences in duration

• Estate in Fee Simple

• Achieved when one buys property

• Includes the right to possession for an unlimited amount of time

• Can be inherited by anyone

• Life Estate

• Achieved when person A gives land to person X for life and then to Y

• X gets the right to possession for the rest of their life but not to sell or give away or leave to someone else

• Y gets a fee simple (in remainder) - they cannot possess the land but they can sell it, mortgage it, or leave it in their will to someone else

• When X dies, Y gets the estate in fee simple

• Leasehold Estate (residential tenancy)

• Achieved when a residential tenancy agreement is signed with the person who has a fee simple estate in the land

• Included the right to possession and use for a fixed amount of time - but not the right to sell or mortgage

• Interests in Land - Examples

• Mortgage

• Gives bank a property interest in the land as well as the tenant who is borrowing money from them

• No right to ownership or possession, but the right to sell land if the mortgage is not paid back - a security interest

• Easement - a ‘right of way’ to pass over someone’s land, but no ownership or possession

• Mortgage and easement are both legal interests

• Legal Interests in Land

• Creations of the common law courts - therefore ‘legal’ interests

• The nemo dat principle used to apply (no one gives what they don’t have)

• People had to prove they had legal interest in land (through a deed)

• Subsequently, the legal interest binds the rest of the world - regardless of whether a new transferee of the land had knowledge of the interest

• Registration

• Problem with nemo dat - While the nemo dat principle worked in England where all land was owned by a few families who all knew each other, it caused problems in the more chaotic colonies like South Australia

• Solution - nemo dat rule was abolished, in its place the registration system was created

• Registration system - under the registration system, the contract over property interests between people had no effect, instead the registration of that interest had all the effect. This applied to all common law legal interests in land

• Therefore, deeds don’t pass legal title, only registration

• Issue with registration - there was a large gap in time between the contract to transfer land and the actual transfer itself through a deed

• Legal vs Equitable Interests in Land

• Courts of equity valued the contract rather than the deed

• Therefore, equitable title passed with the contract, and legal title passed with the registration

• If the parties agreed to transfer an estate in land (and value had been paid) but there was a problem with the formalities, Equity held that the title had passed in equity.

• While legal title binds the whole world immediately, equitable title only binds people with knowledge of it - not third parties with no knowledge also seeking the same property interest (this rule was later abolished)

• This means a person is more vulnerable with a mere equitable title, so to turn it into legal title, one must register through a deed

• Trusts

• Definition - an equitable obligation, binding on a person (who is called a trustee) to deal with property over which he has control (which is called the trust property) for the benefit of persons (who are called beneficiaries) of whom he may himself be one, and any one of whom may enforce the obligation.

• Separates ownership from possession

• The trustee and the beneficiary have difference legal titles

• The trustee owns and manages property (but not for their own benefit)

• Beneficiaries benefit from the property e.g. they have possession

• This allows people to hold land for those who are incapable

• Can protect beneficiaries from creditors and tax (as they do not legally own the land)

• Important to remember - a trust is not a ‘thing.’ Rather, it is the relationship between the trustee and the beneficiary

• Types of Trust

• Express Trust - set up between living people (inter vivos)

• Testamentary Trust - an express trust set up in a will

• Trusts by operation of law

• Resulting Trust - where the law assumes people intended to make a trust e.g. if a wife gave her husband money to help pay of the house that he bough

• Constructive Trust - where it would be unequitable for a trust not to be created (even if there was no intention)

• Priority Rules

• Scenario - Imagine a big modern shopping mall. It is owned by a Pension Fund. You occupy a prime site in it: the restaurant. You have invested heavily in kitchen equipment. You have got a 15-year lease. Now the Pension Fund has sold the mall to a new owner. Does that mean that you must now renegotiate your lease?

• Historically - the question would be: is your lease legal, or equitable? (proved through deed)

• Today under the Land Transfer Act - the question is: is your lease registered? (proved though registration)

• Section 51 of Land Transfer Act - when a person registers an estate or interest in land, that interest cannot be set aside and their title is free from all outside unregistered interests (exceptions apply like fraud)

• Priority Rules Today

• Instruments (like deeds) no longer pass title - only registration does

• Equitable interests continue to exist ‘off the resister’

• Only legal estates and interests can be registered - not equitable ones

• Legal interests can mere equitable interests at some point (before they are registered)

• Some interests can only over be equitable interests e.g. restrictive covenants and proprietary estoppels

• The transferee (new owner) of a registered estate or interest takes subject to other registered interests but free from everything else.

• Unregistered (equitable) estates and interests are problematic and they are generally not protected

• But may still bind a new owner by the back door – e.g. ‘fraud’.

• May be protected by ‘caveat’ - freezes a title transfer to the parties can argue in court

• Caveats also sit on the register so transferees know about it

• Summary

• The Common Law allows ‘estates and interests’ in land.

• For an individual to have this:

• The interest claimed must fall within a pre-existing category

• The interest must usually have been created by deed.

• Priority contests between legal estates and interests in land used to be resolved through the nemo dat principle (now abolished)

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