Monash Law Students’ Society ! STUDENT TUTORIAL PROGRAM 2015 ! Property Law A SKETCH NOTES ! ! ! ! ! DISCLAIMER – PLEASE READ BEFORE CONSULTING THESE NOTES ! 1. The following SketchNotes have been prepared and provided by a law student as a skeleton or sketch of the course material for this unit; ! 2. It is the responsibility of users to make note of any changes to course content; ! 3. SketchNotes may exclude some topics, cases and legislation and may therefore be inconsistent with current Faculty of Law course content or recent developments in the law; ! 4. Neither the Law Students' Society nor its sponsors endorse or take responsibility for the quality or accuracy of these SketchNotes; ! 5. SketchNotes should not be solely relied upon; ! 6. SketchNotes are to provide users with a basis from which they can create individual and extensive notes for their own assessments; ! 7. SketchNotes are not to be replicated, either in part or in full, during Faculty of Law assessments for this unit; ! 8. SketchNotes are designed to be used as a teaching aid in the Student Tutorial Program; ! 9. For copyright reasons, SketchNotes are not to be printed or altered by users; ! 10.It is against the Monash Law Students' Society's policy to provide further materials to law students in relation to course content for this subject. Student may not make any such request to the Monash Law Students' Society or it its student tutors; ! 11.It is against the Monash Law Students’ Society’s policy for students to contact tutors directly via email. Any requests for further assistance outside of tutorials must be made to Pearl Jin at [email protected] Questions regarding course content should be made to the relevant Faculty lecturers or tutors; ! 12.The aim of the Student Tutorial Program is to facilitate collaborative learning and increase student exposure to practice problems. It's role is not to substitute Faculty teaching or provide a way for students to pass assessments without engaging in course content; ! 13.If you have any questions, please do not hesitate to contact Pearl Jin at [email protected] ! ! Name: Angie Wong ! Year studied Property A: Semester 1, 2014 ! Lecturer: Pam O’Connor ! Cases included in these SketchNotes, but not included in the 2015 reading guide: ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Re Edwards (2011) 81 NSWLR 198 Attorney-General (Cth) v RT Company Pty Ltd (No 2) (1957) 97 CLR 146 P & A Swift Investments v Combined English Stores  AC 632 Clos Farming Estates v Easton  NSWSC 525 North Sydney Printing v Rowley (1976) 1 ACLR 392 ! Cases included in the 2015 reading guide, but not included in the SketchNotes: Bazley v Wesley Monash IVP Pty Ltd  2 Qd R 207 Cargill v Gotts  1 WLR 441 Whild v GE Mortgage Solutions Pty Ltd  VSC 212 Waltons Pty Ltd v Maher (1988) 164 CLR 387 ANZ Banking Group v Widin (1990) 102 ALR 289 McBride v Sandland (1918) 25 CLR 69 Maddison v Alderson (1883) 8 App. Cas. 467 Regent v Millett (1976) 133 CLR 689 ! ! ! ! ! ! ! ! ! THE CONCEPT OF PROPERTY Justifications for and Criticisms of Private Property - Justifications for the institution of private property have been varied and numerous. - No single theory has rendered a complete and acceptable analysis although those theories discussed below provide a useful dimension to some of the wider considerations in legal issues concerning concepts of property. ! First Occupation Theory - The first to possess or occupy will have ownership. Locke’s Labour Theory - The right to the fruits of one’s own labour. ‘Personhood’ Theory (Hegel) - Private property is necessary for self-realisation through external expression of will and personality – it is essential for human freedom. Economic Efficiency Theory (Posner) - Private property provides an incentive for the more efficient use of resources and promote maximum economic productivity. Utilitarianism (Bentham) - Private property produces incentive to promote aggregate welfare. ! Characteristics of Property - Ownership entails the right to use, right to exclude and right to alienate. - Property rights can still be recognised even if they derive from their own system of law (Mabo (No 2); cf. Blackburn J in Milirrpum). - Property rights are rights in rem, and are enforceable against the whole world. Thus, property rights are superior to contractual rights (King v David Allan). ! Recognition of New Forms of Proprietary Interests - Courts are reluctant to recognise new forms of proprietary interests as they can be enforced against the whole world. ! Restrictive Covenants - A restrictive covenant is a negative agreement – an obligation on someone not to do something. - In equity, restrictive covenants run with the land and are enforceable against subsequent purchasers if notice is given (Tulk v Moxhay). Property in a Spectacle - The law does not recognise proprietary rights in a spectacle (Victoria Park Racing; Lenah Game Meats). Native Title - In Mabo, the HC re-characterised the Crown’s title so that native title could exist concurrently. ! ! When the Crown acquired sovereignty, it acquired radical title to the land. This only extinguishes native title if the Crown decides to do something with the land – e.g. granting a parcel of land to a settler. Property in the Human Body - In Moore, the court held that Moore could not maintain an action in conversion as he did not have any proprietary interest in his spleen after its removal. • The cell line and the original cells are factually and legally distinct. - ! ! ! ! THE DOCTRINE OF FIXTURES - A fixture is a chattel that is so attached to the land it becomes a part of the land. The doctrine of fixtures only applies in the absence of clear statutory or contractual guidance. Thus, it’s crucial to begin by looking at whether there is an express stipulation of whether something is a chattel or fixture. ! Relevance of the Doctrine - Fixtures pass to purchaser. Chattels will only pass if expressly mentioned in contract of sale. - Stamp duty calculations include fixtures, not chattels. - Mortgagee’s security includes fixtures, not chattels. - On the owner’s death, fixtures pass to those entitled to the real estate. - S38 of Interpretation of Legislation Act 1984 (Vic) provides that ‘land’ includes fixtures. ! Tests for Determining a Chattel or Fixture - There is not one single test for determining whether a chattel is a fixture. (Conti J in NAB v Blacker) - Two considerations: • Degree of Annexation • Object of Annexation - Recent cases have focussed more on the object of annexure. ! Presumption - If the chattel is attached, there is a presumption that it is a fixture. Onus lies on party contending it is a chattel to rebut. (NAB v Blacker) • The more securely attached, the stronger the presumption. - If chattel is resting on its own weight and not attached, it is presumed to be a chattel. Onus lies on party contending it is a fixture to rebut. (NAB v Blacker) - Both presumptions are rebuttable. They simply allocate onus of proof. ! Degree of Annexation NAB v Blacker - Will removal cause damage to land or building? ! ! - ! • If yes, points towards fixture. The mode and structure of annexation – In what way is the chattel attached? Would it cost more to remove it than the article’s worth? • If yes, points towards fixture. Object of Annexation Consider all the circumstances to determine the objective intention with which the article was put in place. - Was the article attached for the better enjoyment of the article, or for the better enjoyment of the land or building? (AG v RT Company) • If attachment is for benefit of the thing itself, then that points to it being a chattel. - The nature of the article. (see Belgrave) - Was annexure permanent or temporary? • If permanent, points to fixture. - Purpose of annexure. ! ! Removal of Fixtures - S154A PLA - Subject to the terms of the lease, a tenant who installs fixtures in leased premises retains the ownership of them. - The tenant is entitled to remove them during the time the tenant is in possession, but not afterwards unless the landlord consents. ! Residential Tenancies Act 1997 - s64(1): subject to the terms of the lease (or another agreement between the LL & tenant), a tenant must not install fixtures without the landlord’s consent. - S64(2): If the tenant has renovated or altered the premises or installed fixtures with or without the landlord’s consent, he must restore the premises to their previous condition or provide the LL with an amount equal to the reasonable cost of dong so. ! THE DOCTRINE OF ESTATES ! Tenure and Estates - The doctrine of tenure states that the ultimate title to all land is vested in the Crown (Mabo); the citizen merely holds land ‘of the Crown’. - The doctrine of estate allows a person to have an estate in land, which means they will have exclusive possession of land at some point in time for a period of time. ! Estates - There are two types of estates: freehold and leasehold. - Freehold estates are of an uncertain duration. Leasehold estates have a certain duration. ! Freehold Estates ! ! - ! Fee simple: The largest interest there is and is most synonymous with ownership. This is a fully-fledged proprietary interest. Fee tail: Rights of fee tail resemble those of fee simple. Though rights of fee simple were much more limited as the estate had to pass to specific descendants. Life estate: Created when an interest in land is granted to a person for the duration of someone’s life. • Life estate for the life of a person other than the grantee = life estate pur autre vie Future Interests Life Estate & Remainder - A remainder is the grant of a future interest to a person not previously entitled to the land. - Can be alienated. E.g. A grants to B for life and then to C in fee simple = C is the remainderman and will have a fee simple upon B’s death ! Life Estate & Reversion - A reversion is created when the holder of an estate grants a lesser estate in possession to some other person, but the grantor does not dispose of the whole of the estate. E.g. A grants B a life estate = A is the reversioner as fee simply will revert back to A when B dies. ! Doctrine of Waste - This doctrine was designed to reconcile the conflicting interests between the life tenant and those who hold future interests, as the activities of the life tenant may harm the land. - The life tenant must act reasonably in maintaining the land. - Ameliorating waste: conduct by the life tenant which alters the character of the land, but enhances its value. • Technically amount to waste, but court will provide no relief. - Permissive waste: life tenant fails to keep property in a satisfactory state of repair. • Life tenant not liable for permissive waste unless instrument creating the estate imposes obligation to repair. - Voluntary waste: positive act occasioning injury to the land. • Liable unless instrument creating estate makes the life tenant ‘unimpeachable for waste’. - Equitable waste: Despite being ‘unimpeachable’, equity may hold life tenant liable if he/she commits such wanton acts of destruction. ! ADVERSE POSSESSION ! Concept and Principles of Possessory Title - Title in land is relative, and will be assessed relatively to others’ title. ! ! - ! Possessor of land, even a wrongful possessor, gains a right in land which can be enforced against the world at large, except against someone with superior title. (Toohey J in Mabo) It is not a defence to a claim by a person bringing an action to assert/ defend possessory title, to please jus tertii (that a third party has a better right to possession than the plaintiff). (Perry v Clissold) Adverse Possession (AP) - If you adversely possess land for 15 years or more in Vic, the law will recognise that you have full documentary title. - S60 – 62 TLA – the squatter can apply to be registered as owner once the documentary titleholder’s interest has been extinguished. - This doctrine applies to both GL and TS (s42(2)(b) TLA) land. ! Limitations of Actions Act 1958 (Vic) - s8 – after 15 years of AP, owner’s right to sue for recovery of land is barred. - s18 – title of the owner is extinguished when the limitation period expires. ! When does time start to run? - Time starts when the cause of action accrues to the owner. (s8 LAA) - This occurs when: • Owner is out of possession (dispossessed or discontinued possession) (s9(1) LAA); and • Land is in AP (s14(1) LAA) - Dispossess = acts of squatter inconsistent with rights of ownership by documentary titleholder. - Discontinuance = property abandoned ! What constitutes AP? - To establish AP, factual possession and an intention to possess must be shown. - Note that there can still be AP even if the use of land is not inconsistent with owner’s future intentions. (Buckinghamshire; Pye) ! Factual Possession - Factual Possession must be “open, not secret; peaceful, not by force; adverse, not by consent of the true owner” (Mulcahy v Curramore per Brown CJ) - “Broadly 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.” (Whittlesea) - Factual possession requires an appropriate degree of physical control over the land. (Buckinghamshire) - Point to as many actions as possible to indicate the squatter is exercising an appropriate degree of physical control as if he/she owned the land. ! Animus Possidendi (Intention to Possess) ! ! - ! - The squatter needs to show an intention to possess for the time being. (Buckinghamshire; Pye) An intention to own the land is not required. (Pye; Whittlesea) Intention is assessed objectively, from the words and conduct of the squatter. Thus, this analysis inevitably overlaps with factual possession. This is about the squatter’s intention, not the owner’s. (Pye) Multiple Squatters - Both an owner and squatter can have a cause of action against successive adverse possessors, so long as the limitation period of 15 years has not passed. - If there is AP by multiple squatters and the AP has been continuous, the owner’s title will be extinguished after 15 years from when the first squatter took possession. (Mulcahy) • If the possessory title has been transferred or abandoned, and possession is continuous, time will run in favour of the last squatter. The first squatter will have no cause of action. - However, if AP is discontinued, then the documentary titleholder’s interest is restored and time starts running again from the day the last squatter takes AP. (Mulcahy; s14(2) LAA) - If a subsequent squatter dispossesses a previous squatter, the time continues to run against the titleholder. However, time will also start to run against the previous squatter, who will have 15 years from the time of dispossession before his possessory interest extinguishes. ! How to stop time from running? Asserting Superiority of Title - The person with better title can assert their superiority by instituting formal court proceedings or making a peaceful but effective entry onto the land. - S16 LAA provides that formal entry onto land is not enough. You must retake possession. ! Squatter’s Admission of Superior Title - Mere oral admission is not enough. (Buckinghamshire; Pye; Whittlesea) - S25 LAA states that acknowledgement of superior title must be done in writing by the squatter or the squatter’s agent. - S24(1) LAA – if there is an acknowledgement in writing, a new cause of action accrues from the date of acknowledgement. ! Part Parcel Claims - AP claims can be made over boundaries of land where encroachment onto neighbouring land has occurred. - Before the limitation period expires, the owner may apply to obtain an injunction to restrain trespass caused by the encroachment. - Courts will consider the following when deciding whether to exercise their discretion in granting an injunction (Jaggard; Break Fast Investments): • Is the injury to P’s legal rights small? • Is the damage capable of being estimated in monetary terms? ! ! • • ! Can the damage be adequately compensated by a small money payment? Would is be oppressive to the D to grant an injunction? Special Cases Leases - Time doesn't start running until the end of the fixed term lease as that’s when the LL has the right to regain possession and the cause of action will accrue. - In the case of an oral periodic tenancy, the cause of action accrues to the LL at the end of the first period unless the tenant pays rent (s13(1) LAA). Rent is sufficient acknowledgement of superiority. - Time starts running one year after a tenancy at will is created, unless determined earlier (s13(1) LAA). ! Future Interests - 10(2) LAA – time starts running either: • 15 years from the date the squatter took possession; or • 6 years from the date of the death of the life estate holder whichever period is longer ! Exceptions - Crown land (s7 LAA) - Public Transport Corporation and Victorian Rail Track (s7A LAA) - Council land (s7B LAA) - Water authorities (s7AB LAA) - Common property (s7C LAA) ! ! LEGAL AND EQUITABLE INTERESTS ! - Proprietary interests exist both in CL and in equity. However, equity trumps law. Development of the Trust - Trusts are a device developed by the laws of equity which enables title to be split between two or more people. - X conveys estate in fee simple to A on trust for B in fee simple • X is the person who creates the trust • A is the trustee • B is the beneficiary • When this transaction is viewed under the CL it’s viewed very different from when viewed under equity. • CL (including GL and TS): ➢ A gets the estate ➢ B gets no property rights ➢ B has no remedy if A did not honour the terms of X’s grant • Equity: ➢ A gets the legal estate – legal title holder ! ! ! ➢ B gets the equitable estate in fee simple ➢ A holds the legal estate subject to Bs’ equitable interest Rights of the Beneficiary - Right to possess land and the right to enjoy rents & profits of the land. - Beneficiaries can compel the trustee to recover possession of the land from a third party. - Beneficial estates are alienable. ! Express Trusts - Needs to be in writing (s53(1) of PLA) - Can be done inter vivos or devised. ! LEASEHOLD ESTATES ! Types of Leases Fixed Term - This sort of lease has a fixed duration and will cease when the term expires. ! Periodic Tenancy - These are leases that consist of a number of shorter definite periods. Those periods could be a month, a week or a year. - In the absence of an agreed period, it can be measured on the basis by which rent is paid. - Notice for termination is usually the period of tenancy itself. Though with a yearly tenancy, CL states that you have to provide 6 month’s notice. ! Tenancy at Will - Tenant is in possession with consent of the LL but doesn’t pay rent. - No party needs to give notice for terminating. - Does not confer any proprietary interest in land. It is merely a licence allowing the tenant to remain in possession. • Note that it is different from a contractual licence – it is stronger as the tenant has the power to kick trespassers off land. ! Tenancy at Sufferance - Arises when the tenant ‘over holds’ without LL’s express consent or dissent, and pays no rent. - LL can recover possession at any time without notice. ! Characteristics of Leases Exclusive Possession - Exclusive possession means the ability to control the property to the exclusion of all others. (Street v Mountford) - Look at the substance rather than the form of the lease. This is an objective inquiry. (Radaich) - Indicators of exclusive possession include: • Physical control of entry (Radaich) ! ! • ! Right to quite enjoyment – right to uninterrupted tenure for the duration of lease Certainty of Duration - The date of commencement and termination of lease must be known before the lease commences. (Lace v Chantler) - This also applies to periodic tenancies as each period has a certain duration. (Prudential) - Leases for life may have certain duration – in Mexfield, legislation converted leases for life to 90 years. - However, Lord Neuberger voice his dissatisfaction of this requirement in Berrisford v Mexfield. (Note: UK case) ! ! Leasehold Covenants Express Covenants - Parties are free to determine the terms of their agreement but there are generally certain terms that are always included. - LL covenants include: • Allow the tenant quiet enjoyment of the property (uninterrupted exclusive possession). • LL to make structural repairs - Tenant covenants include: • Requirement to pay rent • Tenant to make non-structural repairs • Use premises for specified purposes only • No assigning or subletting without LL’s consent ! Implied by Statute - Residential Tenancies Act (RTA), Retail Leases Act (RLA) and Transfer of Land Act (TLA) imply covenants into leases. • TLA will only imply covenants into legal leases. - S67 TLA implies terms into registered leases, including the lessee’s obligation to pay rent and to keep the property in good and tenantable repair. - An S71 TLA state that subleases are subject to the same rights and obligations as the original tenant. ! Implied by CL - Implied by CL custom or usage. - Implied to give business efficacy to the contract/lease. - Implied by law irrespective of the parties’ intentions. - These terms won’t apply if an express covenant deals with the same matter. ! Implied Obligations of the LL - Implied covenant that the property is in a condition fit for human habitation at the commencement of the lease. • Only an obligation if a furnished rental. ! ! ! - Implied covenant for quite enjoyment. Implied covenant not to derogate from the grant. Quite Enjoyment - An obligation that the LL allow the tenant to have exclusive possession of the property free from interruptions. - Test: The implied covenant of quiet enjoyment is breached where the ordinary and lawful enjoyment of the tenant is substantially interfered with by the acts of the LL or persons claiming under him. (Hawkesbury) - This covenant is prospective in nature, so it only applies after the lease has been entered into. ! Not to Derogate from Grant - Lessor should not act in a way which negates the purpose of the grant. (Aussie Traveller) - Test: If the grant was made for a particular purpose, the lessor is under an obligation not to use the land retained by him/her in such a way as to render the land granted ‘substantially less fit’ for the particular purpose for which the grant was made. (Aussie Traveller; Nordern) - Restricted access to the leased premises may constitute a substantial interference. (Purple Tangerine) - The LL can be responsible for the actions of other tenants if their actions cause a derogation from the grant. (see Aussie Traveller) - This covenant is also prospective in nature. ! Implied Obligations of the Tenant - In the absence of express terms, the tenant must use the premises in a tenant-like manner. - Duty not to commit waste. - Yield up possession and move out at end of tenancy. ! Assignment of Leases - In almost every lease, there will be a covenant which prohibits assignment or sub-letting. The prohibition can be absolute or qualified. - Under the CL, LL could arbitrarily refuse consent for assignment or subletting. - S144 of PLA now states that consent can’t be withheld unreasonably and no fine is to be paid for the consent. - S144 will not operate if there is an express term in the agreement which is to the contrary. - Note that s144 only applies to leases not governed by RTA or RLA. ! Enforceability of Lease Covenants After Assignment - Some covenants remain binding on the original LL or tenant even after they have assigned their interest. ! Assignment of Reversion ! ! - ! - The purchaser of the reversion is called the assignee of the reversion who becomes the owner of the freehold. No privity of contract between assignee and tenant, only privity of estate. S141 PLA states that rent and benefit of lessee’s covenants that ‘have reference to the subject matter of the grant’ (i.e. touch and concern the land) run with the reversion. S142 PLA states that obligations and burdens of the lessor’s covenants that ‘have reference to the subject matter of the grant’ (i.e. touch and concern the land) run with the reversion. These provisions apply to leases under the TS (s136 PLA). Assignment of Lease - If the original contract states that covenants are to continue only when the tenant remains a tenant, the tenant will not be liable after they have assigned their interest. - However, if no such covenant, some of the terms may remain binding on the original tenant. - On assignment of a lease, only covenants which touch and concern the land (Spencer’s case) are binding, so long as there is privity between the LL and assignee. - This principle applies to covenants imposing obligations on both LL and tenant. ! Touch and Concern the Land - A covenant will touch and concern the land if it affects the LL acting as a LL or the tenant acting as a tenant. - A covenant to pay rent and other covenants which enable the LL to enforce the former will touch and concern the land. (Gumland) - 3 Step Test from P & A Swift approved by HC in Gumland: • Covenant must be beneficial for the reversioner or tenant for the time being only. • Covenant must affect the nature, quality, mode of user or value of the land. ➢ Does not have to affect all, one is sufficient. • Covenant must not be personal in nature. ❖ The fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three requirements above are satisfied and the covenant is connected with something to be done on, to or in relation to the land. ! ! RESIDENTIAL TENANCIES ACT When does it apply? - Applies to LLs and tenants under a ‘tenancy agreement’ (s5), where a tenancy agreement means an agreement in any form under which a person lets premises as a residence (s3). - Does not apply to fixed term leases exceeding 5 years, which doesn’t allow for early determination before the end of 5 years. (s6(1)) ! ! - - ! - However, it does apply to leases exceeding 5 years if (s6(2)): • tenant has a right or an option to purchase; and • tenancy agreement is not of a kind referred to in s13; and • tenancy agreement is entered into after the commencement of s28 of the Consumer Credit (Vic) and Other Acts Amendment Act 2008. Applies to premises if primarily used for residential purposes even if trade, profession or business is also carried out on premises. (s7) Does not apply: • to premises which form part of a building in which other premises are let for the purpose of trade, profession or business. (s8) • if premises was LL’s primary residence and fixed term is less than 60 days. (s9) • to premises ordinarily used for holiday purposes. (s10) • to premises included in or on other premises let for the purpose of farming or grazing. (s11) • to agreements arising under terms of employment. (s12) • to agreement created between parties to a contract of sale or mortgage of the premises. (s13) • to premises or room situated in a motel or licensed under the Liquor Control Reform Act 1998. (s20(1)) ➢ Note it does apply if situation in motel and is of a fixed term exceeding 60 days. (s20(2)) • to rooms situated in premises used as a school or for education and training purposes, or any residential premises ancillary to a school or institution providing education or training. (s21) • to agreement if leased to provide temporary crisis accommodation. (s22) • to premises or rooms situation in a health or residential service, or any premises ancillary and primarily used to accommodate medical, nursing and other staff or patients’ family members. (s23) Note that you can’t contract out of the Act. (s27) General Requirements - LL must not refuse to let premises or instruct his agent to refuse to let premises on the ground that the potential tenant intends to live with children on the premises. (s30(1)) - S39 – 49 deals with rent, including limit on rent in advance (s40), notice of rent increase (s44) and how to complain about excessive rent (s45). ! Rights and Duties - Tenant’s general duties contained in s59 – 64. - LL’s general duties contained 65 – 68. - If duties are not adhered to, a breach of duty notice can be issued for duty provisions under s208, requiring remedy of breach or compensation. - Note the definition of ‘duty provisions’ under s207. - Tribunal can order compliance or compensation if notice is not complied with. (s209 – 212) - Regulations for repairs and maintenance: ! ! • • • ! S3 defines urgent repairs Tenant can arrange for urgent repairs if he has taken reasonable steps to get LL to carry out repairs but is unable to do so (s72). LL will be liable to reimburse tenant for the reasonable cost of repairs or $1000, whichever is less (s72(2)). LL can give tenant repair notice (s78), and tenant may be liable for costs if LL repairs damage (s79). Termination of Tenancy Agreement - Termination can occur multiple ways (see s216 – 229) - Tenant can give LL notice to vacate for reasons listed in s235 – 242. - LL can give tenant notice to vacate for reasons listed n s243 – 266. - Tenants can challenge a notice to vacate (s321B). ! Regaining Possession - LL can apply for possession order if notice to vacate has not been complied with by the tenant (s322) ! ! ! THE BORDERLINE BETWEEN CONTRACT AND PROPERTY: CONTRACTUAL LICENCES - Contractual rights are only enforceable against the parties to the contract. Whilst property rights are enforceable against the whole world. Contractual licences are often described as the borderline. Types of Licences - A licence arises when permission is given by one person to another to do an act on the licensor’s land which would otherwise constitute trespass. ! Bare Licence - An informal licence which can be implied or expressly created. It does not grant any proprietary interest. - These can be revoked at the will of the licensor and for any reason whatsoever. ! Licence Coupled with a Grant - Strongest form as it is a licence to enter onto land to exercise a property right over the land or chattels on the land. For example, profit a pendre and easements. - This licence is irrevocable and can be enforced against third parties. - Licence may be assigned to another along with the property right to which it is incidental. ! Contractual Licence - Contractual right to enter onto land, giving consideration to use or occupy it for a particular purpose. - Licensee has no exclusive possession. The licence does not have to be have a certain duration. ! ! ! Revocation of Contractual Licences - Is there an express or implied agreement not to wrongfully revoke the licence? - If the licensor wrongfully revokes a licence, the licensor may be sued for damages for breach of contract. (Cowell) - In some cases, equity may grant an injunction to restrain wrongful revocation of a licence where there is an express or implied promise not to revoke and specific performance is available. (Heidke) - Factors to consider in deciding whether to grant an injunction: • Are damages an adequate remedy for the licensee? (Heidke) • Would an injunction be tantamount to ordering specific performance where a court would not otherwise do so? Would specific performance be available? ➢ Would grant of injunction cause undue hardship on the licensor? ➢ Would grant of injunction force parties into a continuing relationship requiring ongoing supervision? ➢ Did party seeking injunction come with clean hands? • Was there an express or implied term that the licensor would not revoke, or revoke only for specified causes? ➢ If yes, court is more likely to award an injunction. (Heidke) - Even if its too late for an injunction, remedies in tort may turn on whether equity would have granted an injunction. (Sigma) ! Enforceability Against Third Parties - Generally, contractual licences are unenforceable against third parties. (King v David Allen) - Exception 1: If a third party has so conducted himself so to make it inequitable for him to deny the rights of the licensee, then equity may impose a constructive trust, which will give effect to the licensee’s rights. (Ashburn Anstalt) • Notice of the rights is not enough. The person must’ve done something more. (Ashburn Anstalt) • For example, paying a lessor price for the land; providing additional oral undertaking. - Exception 2: ‘A licensee not in occupation may claim possession against a trespasser if that is a necessary remedy to vindicate and give effect to such rights of occupation’. (Laws J in Manchester Airport) • Note that Manchester is a UK case and this approach has not been approved by Aus courts. (see Georgeski) ! EASEMENTS ! An easement is a proprietary interest enjoyed by the owner of one lot (dominant tenement (DT)) which burdens another lot (servient tenement (ST)). ! Characteristics of an Easement ! ! - ! An easement must meet the following four requirements from Re Ellenborough Park: 1. There must be a dominant and servient tenement. 2. The easement must be for the benefit of the dominant tenement. o It must be reasonably necessary to facilitate the convenience and better enjoyment of the DT as land as opposed to personal benefit of the owner. (Clos Farming Estate v Easton) o DT and ST need not be adjoining, but they do need to be close enough for the DT to benefit from the ST. 3. The dominant and servient tenements must not be owned and occupied by the same person. o This is part of the broader rationale that you can’t acquire rights against yourself. o Requirement can be satisfied if both DT and ST is owned by the same person but not occupied by the same person. 4. The easement must be capable of forming the subject matter of a grant. o Easement can’t be expressed in terms too wide or vague. (Ellenborough; Riley) o It can’t be too strong as to amount to joint occupation. (Copeland v Greenhalf) o It can’t confer mere rights of recreation. It must possess a quality of utility or benefit. (Ellenborough) Creation of Easements Express Easements - For GLL, you would need a deed to create an easement. However, equity may recognise one in some cases where there is no deed. - For TSL, the burden on the ST may be recorded on the title of the ST. (s72(1) TLA) - However, even if unregistered, the easement will be enforceable against the registered proprietor of the ST as it is a paramount interest. (s42(2)(d) TLA) ! Scope and Construction of Express Easements - Some change in the degree of use is permissible, provided it doesn’t go beyond what was contemplated by the parties at the time the easement was created. - However, change which substantially increases the burden upon the ST is not permissible and can be subject to an action in nuisance. (Westfield) - The scope of an easement depends upon the terms of the grant which are construed in light of surrounding circumstances at the date of the grant and the parties’ original intentions. (Westfield) - Courts are unwilling to consider extrinsic evidence in construing scope. (Westfield) ! Implied Easements Implied Reservations ! ! - ! Courts are very reluctant to imply a reservation of an easement as its contrary to the CL implied covenant not to derogate from the grant. Only two ways to imply a reservation, but these arguments rarely succeed: • Easements of necessity (North Sydney Printing) • Intended easements/common intended easements Courts will only imply an easement of necessity if it is absolutely necessary – can’t be for mere convenience. Courts may imply easement if it’s necessary to give effect to the common intention of the parties. Implied Grants - Grants can also be implied by necessity or common intention. - Courts aren’t as reluctant to find such implications but there is still some degree of unwillingness. - Implied grants may also be found if the 3 Wheeldon v Burrows requirements are satisfied. Though this is only applicable if there is a quasi-easement. • Easement must be ‘continuous and apparent’ ➢ Easement should be visible and discoverable, and the use of it should be more than intermittent or occasional. • Must be necessary for the reasonable enjoyment of land ➢ Suggests the right has to be inherently capable of being an easement. • At the time of the grant, the quasi-easement must be used by the grantor for the benefit of the land sold. ➢ Requires the easement to have actually been used as an easement. - This rule can also be used in situations where the vendor simultaneously sells the DT and ST. ! Statutorily Implied Subdivisional Easements - Subdivision Act s24(2)(e) creates easements by registered plan, even though their nature and location is unspecified. - Easements shown on a plan of subdivision are created when the plan is registered. (Subdivision Act ss 12, 24(2)(d); s98 TLA) - Conditions for implied easement in Subdivision Act s12(2) (see Body Corporate for application of legislation): • Easement is necessary for the reasonable use and enjoyment of the lot (DT) • Easement is consistent with the reasonable use and enjoyment of the other lots (STs) and the common property ! Long User/Prescription - Provided you can show you’ve been using an easement like right for 20 years or more without force, without secrecy and without permission, then you may be able to establish an easement by prescription. (Sunshine) - There needs to be acquiescence rather than consent. - Easements by prescription can be implied on both GLL and TSL. (Sunshine) ! ! ! Extinguishment of Easements - By agreement - By abandonment – positive intention not to use the easement again • If its registered, you’d need to apply to the register to delete the easement. It will continue to burden ST until removed from the register (Riley). - By increased and excessive burden to the ST arising from changed use of the DT. (see Westfield) - By statute • Subdivision Act ss 36(1), 23: there can be a compulsory removal of easement under planning laws. ! MORTGAGES ! A mortgage is a security interest, which is a proprietary right attached to a debt that the creditor obtains. Types of Mortgages General Law - Mortgage of GLL is regarded as a true mortgage as it needs to be made by deed and takes effect as a conveyance of legal title. - Ownership transfers from mortgagor to mortgagee. The mortgagor only has a contractual right to redeem the land on final payment of mortgage. - In the event of default, mortgagor would lose proprietary interest in the land. ! Equitable Mortgages – GL - Equity regarded the mortgagor as the owner of an equitable fee simple – equity of redemption. - Mortgagors could create subsequent mortgages, but they would only operate in equity. - Equitable mortgages aren’t as good as legal mortgages as they are enforceable against the whole world except against subsequent bona fide purchasers for value without notice. ! ! ! Torrens System - Mortgages over TSL act as charges over the legal fee simple, so title is not actually transferred from mortgagor. - Upon registration, the mortgagee acquires a registered legal interest in the land in the form of a statutory charge. (s74(2) TLA) - As no transfer of title with TS mortgages, mortgagors are able to create multiple mortgages over one property. ! Equity’s Protection of Mortgagor - Clogs on the equity of redemption - Doctrine of unconscionability ! ! ! Statutory Protection of Mortgagor National Credit Code (NCC) - This is a code designed to protect consumers in relation to their credit transactions that parties can’t contract out of (s191). - NCC operates concurrently with State law. Where there is an overlap of timeframes, the longer period of time will apply. ! What mortgages does the NCC apply to? - A credit contract is a contract under which credit is provided. (s4) - NCC applies to a credit contract if the debtor is a natural person or strata corporation (s5(1)(a)) and the credit is wholly or predominantly provided for: • Personal, domestic or household purposes (s5(1)(b)(i)); • To purchase, renovate or improve residential property for investment purposes (s5(1)(b)(ii)); • To refinance credit that has been provided for purchase, renovation or improvement of residential property for investment (s5(1)(b)(iii)) - S5(4)(a) – predominate purpose means a purpose for which more than half of the credit is intended to be used. - S6 provides a list of credits to which the NCC does not apply: • Short term credits – doesn’t exceed 62 days • Credit without express prior agreement • Pawnbrokers • Trustees of estates • Employee loans - NCC applies to mortgages secured under a credit contract obligation (s7(a)) and the mortgagor is a natural person or strata corporation (s7(b)). - S13 presumes that the NCC will apply to a mortgage unless the debtor, before entering into the contract, declares that the credit is provided for a purpose that is not a Code purpose. • Declaration under subsection 3 will be ineffective if the credit provider knew or ought reasonably to have known that the credit was provided wholly or predominantly for a Code purpose. ! NCC Key Provisions - s42: mortgage must be in writing and signed by mortgagor - S44: mortgage must identify the property, otherwise it is void. A mortgage also can’t be charged over all the property of the mortgagor - S45 – 47: restricts mortgages over certain property (e.g. future property) - S48: prohibits third party mortgages – only property of he parties that are entering into the contract can be mortgaged - S49: mortgages are void fi they secure an amount more than the debt owed - S50: lists prohibited securities - S51(1): mortgagor can’t assign or dispose of property without mortgagees consent Further Protection ! ! If the debtor is unable to meet obligations because of illness, unemployment or other reasonable cause, debtor may apply to the credit provider to change contract (s72). - If creditor doesn’t change the contract, debtor may apply to court for an order (s74). - Court may reopen unjust transactions (s76). S76(2) lists all the considerations that the court can consider when deciding whether the transaction was unjust. - Under s77, the court may order: • The contract to be set aside; • Relieve the payment of the debt either entirely or in part; • Order mortgagee to take steps to discharge mortgage - On application by a debtor or guarantor, if the court thinks rates or interest is unconscionable, it has the power to reduce or change those rates (s78). Enforcement Proceedings - Creditor mustn’t take enforcement proceedings until the debtor has been given a default notice allowing 30 days to remedy the default (s88). - Default notice must contain prescribed information set out in s88(3). - Requirements are addition to State law. Postponement - The creditor must reply in 21 days either agreeing to negotiate postponement or giving reasons for refusal (s94(2)). - If postponement is negotiated, a default notice under s88 or demand for payment under s90 is taken as not to have been given (s95(1)). - The debtor may apply to the court for postponement (s96). - ! Rights of Mortgagee on Default - In the event of default by mortgagor, mortgagee has a: • Right to sue on the personal covenant; • Right to take possession (s78, 81 TLA) • Right to sell land (s76, 77 TLA) ! Right to Sue on Personal Covenant - Right to sue for damages under contract for breach. ! Right to Take Possession - Normally provided for in the contract itself. - Mortgagee has same rights and remedies as a legal mortgagee would under the GL (s81 TLA). - S78 TLA states that mortgagee may take possession by receiving rents and provides (s78(1)(a)) or bring an action in ejectment (s78(1)(b)). - If mortgage is over a leased residential property, s268 RTA provides that the mortgagee has to give notice to vacate, giving the tenant 28 days to vacate. ! Right to Sell - Most common action on default. ! ! ! ! When does power of sale arise? - s76(1): when there’s been a default in payment for a month or any other time fixed by the contract, the mortgagee may serve a notice to pay/ observe covenant in writing. - S77(1): once the notice has been served and the default hasn’t been rectified within one month, the mortgagee has a right to sell the property. - In relation to mortgages covered by the NCC, s88 gives 30 days for the mortgagor to comply with notice. Longer time period will be adopted (30 days or one month) ! Mortgagor’s Duty - s77(1) mortgagor’s obligations when exercising power of sale: • Must be done in good faith • Must have regard to the interests of the mortgagor and other persons. - s77(3) provides the obligations the mortgagee has in accounting for the profit of any sale in the following order: • Direct profits to cover the costs in exercising the sale (e.g. real estate agents) • Profit to discharge debt • Direct profit to paying off other secured creditors (e.g. subsequent mortgagees) • Once the above is done, surplus proceeds goes to the mortgagor. Good Faith - Whether a mortgagee has acted in good faith is assessed subjectively. (Guss per Ashley J) - Good faith imports a ‘subjective element of honesty, fairness and lack of fraud of collusion’. (Goldcel per Murphy J) Have Regard to Interests - In relation to this second limb, Ashley J in Guss recognised two approaches that can be adopted: ➢ duty to take reasonable steps to obtain a proper price (Lush J in Henry Roach Petroleum) ➢ duty to take reasonable steps to obtain the best price available at the time - objectively assessed: (per Murphy J Goldcel) - The latter has been preferred by recent cases. (Nolan) - Although you have to take into account the interest of others, you don’t have to put those interests before your own. (CoA in Nolan) - Factors in deciding whether reasonable steps were taken to obtain the best price: • Was there independent valuation of the property obtained? ➢ If yes, points to reasonable steps taken. • Was there more than one valuation by qualified independent valuers? ➢ If yes, points to reasonable steps taken (Vasiliou) • Did they advertise in the right market? ➢ Advertising the property for sale is not a requirement, though it would point to mortgagee taking reasonable steps (Vasiliou). ➢ However, if advertisements placed in wrong/unreasonable market, points away from mortgagee taking reasonable steps. ! ! Did the sale occur at an appropriate time? Was there adequate time allowed for marketing campaign and advertising? Note that these obligations do not apply to the right to take possession as obligations under s78 are different (Baranov). • • - ! Interests Acquired by Purchaser - On registration of the transfer, the purchaser from the mortgagee’s sale acquires the mortgagor’s title free of the mortgage (s77(4) TLA). - Provided the purchaser is not fraudulent (s42(1) TLA), the purchaser’s registered title can’t be set aside even if the mortgagee’s power of sale was exercised unlawfully. - If transfer is not yet registered, mortgagor may be able to get an injunction to prevent the sale. ! ! SALE OF LAND Formal Requirements for Passing Interest in Land General Law Land - Legal title will pass on the execution of a deed of conveyance (s52(1) PLA). - S53 PLA requires the deed to be in writing and signed by the grantor. ! Requirements of a Valid Deed - s73 PLA requires the individual executing the deed to sign or mark it. - There is no need for an official seal, it’s enough that the deed is expressed to be sealed (s73A PLA). - Delivery requirement is satisfied by some conduct of the person executing the deed to indicate the intention to be bound by the terms contained in that deed. ! Torrens System Land - s40(1) TLA provides that transfer of land occurs when the instrument has been registered. - S40(2) states that registration of an interest has the same effect as the execution of a deed. ! What if formalities are not met? - At some time before after signing the contract of sale but before settlement, equity might recognise the passing of title to the purchaser once there is a specifically enforceable contract of sale. - This rule applies to all interests in land. - To be specifically enforceable, a contract for sale of land must either be: • In writing as required by s126 Instruments Act 1958; • An oral contract supported by sufficient acts of part performance ➢ Acts of part performance must be unequivocally referable to the agreement that has allegedly occurred. ➢ Giving and taking of possession usually regarded as strong evidence of part performance. ! ! - ! There must be no bar to specific performance if equity is to recognise passing of title (consider discretionary factors). Equitable Doctrine of Conversion - In the period after signing the contract of sale but before settlement, the equitable doctrine of conversion states that the vendor becomes in equity a “trustee for the purchaser” and the “beneficial ownership passes to the purchaser”. (Jessell MR in Lysaght v Edwards) - In this period, the vendor has a charge or lien on the land as security of the unpaid purchase money – vendor’s lien. Vendor also has right to retain possession of land until the purchase money is paid. - The principle recognises that on the execution of the contract, the court will imply a constructive trust to protect the vulnerable purchaser (Bunny Industries). - Note that the trustee and beneficiary relationship will only arise if specific performance is available. The purchaser must’ve been ready, willing and able to perform their side of the bargain (Bunny Industries). - However, the HC in Tanwar casted doubt on whether this doctrine actually existed as they thought the issue could be resolved purely through applying the principles of contract law. ! Statutory Regulation of Land Sales - s31(2) of Sale of Land Act 1962 (Vic) states that purchasers have 3 business days to terminate the contract of sale. This is known as the cooling off period. • The cooling off period does not apply o land used primarily for industrial or commercial purposes and land which is more than 20 hectares and used primarily for farming (s31(1)). • If the purchaser wants to terminate, within 3 business days he must sign and serve a notice to the vendor in accordance with this section (s31(2)). • The purchaser is entitled to any money that has been paid except for $100 or 0.2% of the monies paid, whichever is greater (s31(4). • Cooling off period exceptions are listed in s31(5). • If this section applies, then any attempt to exclude or modify it will be void (s31(8)). - S32 imposes obligations on vendors for the purpose of protecting purchasers. • This section deals with pre-sale disclosure. • It is an offence to knowingly or recklessly provide false information. (s32(6)) • If there is no disclosure, then the purchaser may be able to rescind the contract before accepting title and becoming entitled to possession or to rents and profits of the land. (s32(5)) • The purchaser can’t rescind if the vendor has acted reasonably and honestly. (s32(7)) • A provision seeking to modify or exclude this section is void. (s32(8)) ! ! ! Passing of Risk - s34 of SLA provides that the purchaser can rescind the contract before he is entitled to possession where the dwelling house is so destroyed or damaged as to be unfit for occupation. - The purchaser may be covered under the vendor’s insurance in relation to the land sold during the period between the making of a contract and the purchaser becoming entitled to possession. (s35) - It is no defence to a claim by the purchaser against the insurer that the vendor has suffered no loss because vendor is entitled to the purchase price. (s35(2)) • This section was the response to Ziel Nominees v VACC where the court held that the purchaser of property damaged by fire was not entitled to rely on the vendor’s insurance because the vendor suffered no loss. - If the land has been damaged or destroyed but before the purchaser becomes entitled to possession the vendor restores the damage, then the purchaser can’t rely on ss 34 or 35. ! Legal Leases CREATION OF LEASEHOLD INTERESTS ! ! General Law Land - s52(1) PLA: “All conveyances of land or of any interest therein are void for the purposes of conveying or creating a legal estate unless made by deed”. - This does not apply to leases or tenancies or other assurance not required by law to be made in writing. (s52(2)(d) PLA) - S54(2): “Nothing in the foregoing provisions of this Division shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonable obtained without taking a fine”. • Lease can’t exceed 3 years • Needs to take effect in possession – tenant must take possession immediately • Best rent – market rent • Without taking a fine – fine is a premium paid to the LL for grant or renewal that goes beyond reasonable expenses - Provided s54(2) requirements are met, a parol lease will be an effective legal lease despite not being in writing. - Note that s54(2) also applies to TSL. ! Torrens System Land - s66(1) TLA: only leases exceeding 3 years can be registered - s66(3): registrable leases must state date of commencement and expiration, so it must be of a fixed duration. ! ! - ! Leases for less than 3 years and periodic tenancies are unregistrable. However, provided s54(2) PLA requirements are met, a legal lease may still exist. If there isn’t a registered lease, but the tenant is in possession and paying rent, the court may imply a periodic tenancy as a legal lease under CL. Enforceability of Unregistered Leases Under TS - s42(2)(e) TLA: the registered owner takes subject to “the interest of a tenant in possession of the land” as this is a paramount interest. (option to purchase is an exception) - Without s42(2), an unregistered lease wouldn’t be enforceable against subsequent bona fide purchasers. ! Equitable Leases - When legal formalities of leases aren’t met, an equitable lease may arise provided there’s a specifically enforceable agreement for the lease. - Requires: • Agreement in writing; or • Sufficient note or memorandum in writing to comply with s126 of Instruments Act; or • Oral contract plus acts of part performance • Note – there can be no discretionary bars to specific performance - As a minimum, the contract requires agreement on the property to be leased, rents payable, names of parties, commencement and duration, as well as the fact that the lease provides for exclusive possession. - Equitable leases arise on the same terms as the legal lease. (Walsh) - It is possible to have an equitable lease as well as an implied periodic tenancy. (Chan v Cresdon) • Although equitable leases are preferable as it would give more protection, periodic tenancies are handy if there are bars to specific performance. ! Equitable vs Legal Leases - There are clear advantages of having a legal lease as it has the largest sphere of enforceability. - If you are relying on an equitable lease, you will always have to rely on the court’s discretion in the equitable jurisdiction. - In the event the leasehold is assigned, the tenant would want a legal lease because equitable leases don’t create a privity of estate. Thus, this would affect the enforceability of covenants against the new LL. ! !
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