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Topical conveyancing
issues Hannah Mackinlay
LLB MA Solicitor
www.propertylaw.guru
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Home Surveys Pending approval
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Exchange and
completion
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General
Boundaries &
Adverse
Possession
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SDLT &
Additional Rate
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Building Schemes
The Court of Appeal has considered whether restrictive covenants
which were imposed over 100 years ago were enforceable as part
of a building scheme. In a decision which seems to be easier to
reconcile with previous authority in this area, the Court of Appeal
overturned the decision of the High Court and held that a building
scheme did not exist.
While the decision turned on the specific facts, the case provides
a useful practical example of the factors the court will take into
account to ascertain whether a building scheme has been
established. (Birdlip Ltd v Hunter and another [2016] EWCA 603.)
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2. Contracts signed by one party only
The Court of Appeal has held that a contract for the sale of
land which named a husband (H) and wife (W) as the
purchaser, entered into without W's consent and signed
only by H, was valid even though H had no authority to
contract on W's behalf. In the absence of ratification by W
and of any indication that H had executed the contract
conditional upon W being a joint purchaser, the contract
remained binding on H alone. (Marlbray Ltd v Laditi and
another [2016] EWCA Civ 476.)
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3. Joint ownership
The Court of Appeal has held that oral assurances, asserting that financial
contributions made by one party to the other "towards the house" were, on
the facts, sufficient for an interest in the property to arise by proprietary
estoppel.
On the facts, it was reasonable for the respondent to understand that the
payments she made would result in a share in the property and she had
relied upon the assurances to her detriment by making the payments. If she
had been told that the payments were not towards an interest in the
property she would not have made them, but would have invested her
money elsewhere.
The Court of Appeal followed the guidance in Thorner v Majors and others
[2009] UKHL 18, in which the House of Lords had considered the elements
necessary to establish a proprietary estoppel. (Liden v Burton [2016]
EWCA Civ 275.)
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4. Misrep. in replies to enquiries 1
The High Court has dismissed a claim for damages for misrepresentation where it
was alleged that property sellers had given fraudulent replies in the Seller's
Property Information Form (SPIF).
The court considered what comprised a notice, a communication, a discussion and
a neighbour for the purposes of question 3 on the SPIF. The court held that these
terms should not be construed too widely so as to oblige sellers to disclose
speculative and remote information. A degree of certainty that an event was likely
to happen and would affect the property was required before an obligation to
disclose arose.
The court also considered that a possible effect on value alone was not enough to
require disclosure. The phrase "affecting the property" required the possible future
event to have some effect on the property itself, or the use or enjoyment of the
property. (Thorp and another v Abbotts and another [2015] EWHC 2142 (Ch).)
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5. Misrep in replies to enquiries 2
The High Court has considered a claim for fraudulent misrepresentation
and held that a buyer was entitled to have its deposit returned because
of an untrue representation made recklessly or fraudulently that there
were no service charge arrears, when in fact there were such arrears.
The buyer was also entitled to damages for deceit of £395,948.
Although turning on its facts, this case provides a useful reminder of
how the courts will deal with fraudulent misrepresentation in a routine
commercial situation. The damages awarded by the court were for costs
incurred in the prospective purchase which had been wasted as a
consequence of the misrepresentation, that is, professional and survey
fees and other costs relating to the proposed structuring of the
purchase, rather than any form of punitive damages. (Greenridge
Luton One Ltd and another v Kempton Investments Ltd [2016]
EWHC 91 (Ch).)
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6. Removal of unilateral notices protecting "off-
plan" buyers
The High Court has directed the Land Registrar to remove
unilateral notices registered by buyers in relation to "off-plan"
agreements for lease so that the site could be sold. The court
left open for later determination the question of whether the
buyers could claim a buyer's lien when the flat that was the
subject matter of their agreement for lease had not been built
at the date of exchange. (Alpha Students (Nottingham) Ltd
(In liquidation) v Eason and another [2015] Case No. 2015-
008993.)
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8. SDLT - Lease Extension Additional Rate
Trap
If the person seeking the lease extension owns another property anywhere
in the world, the new lease will unfortunately be subject to the additional
3% rate, it seems.
This is because at the end of the day of completion of the lease the buyer
will own two properties. Unfortunately the exemption for replacement of the
main residence cannot apply under a strict reading of the guidance since
for it to apply the new dwelling has to be a replacement of another
dwelling, where in fact it is the same dwelling!
It has been suggested that it that is the case then there may be some tax
planning possible such as potentially granting a reversionary lease if the
term of the existing lease exceeds 21 years - this reversionary lease will
not be subject to the additional rate.
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9. Ground rent trap 1 An interesting news article in the Guardian on the 22nd October 2016 :
"You’ve just bought your first flat, and were told by your solicitor that the ground rent is £250
a year. So, on moving in, you are staggered to be presented with a bill for £8,000 a year.
But that’s not the end of the nightmare. In the small print of the lease is a tortuously worded
clause stating that this will double every 10 years, so that in 35 years it will have soared to
£128,000, and in 95 years it will be £8m – for a one-bed flat that you bought for £58,000."
In February 2011, solicitors acting for a previous owner of the flat who had died agreed to a
request for a deed of variation to extend the lease term by 99 years.
But also hidden in the document was a clause that meant this extension did not, as one might
have assumed, start from 2011, but from 1961, when Blythe Court was built. The lease
variation also doubled the ground rent every 10 years from an initial £250 in 1961.
Hogan Lovells, in a blog headlined “Beware the hidden costs of ground rents,” said the
ground rent wording was introduced in 2014 by a deed of variation. “The initial £250 ground
rent is backdated to 1961 and doubles every 10 years. Since 1961, it has doubled five times
and is now £8,000 a year ... This compounding means that in 2021 the rent will increase to
£16,000, and by the end of the lease it will be over £8m.”
Herring, the buyer, told Money that his solicitors “had overlooked the small print that Mr Paine
had put in,” and he later received a five-figure compensation payout.
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10. Ground Rent trap 2
Another interesting point is where the ground rent exceeds £250. The issue is that if the rent on a long
leasehold property is over £250.00 per annum, then the lease (under the 1988 Housing Act, Schedule 1,
paragraph 3A) becomes an “assured Tenancy”. The resulting issue is that assured tenancies (now Assured
Shorthold Tenancies) are able to be determined for non-payment of rent – and this creates a situation which
could worry a lender as well as the client.
The Landlord would be able to forfeit the lease for non-payment of rent using the accelerated Section 8
procedure.
They could try to take advantage of the rules of Assured Shorthold Tenancies (AST’s) which allows a
Landlord to claim possession of a dwelling where there are 3 months of arrears (e.g. on a yearly rent, if the
tenant had not received a demand in January, by April, the Landlord could arguably serve a Section 8 notice
for possession). That said, they would still need to serve a notice for non-payment of rent before any hearing
and by paying any outstanding rent, the possession claim would fail.
The conflict is that a lease over 21 years (as in this case) is classed as a long lease under the Commonhold
and Leasehold Reform act (Section 76 (2) (A) and NOT an AST. This conflicts directly with the 1988 Housing
Act, Schedule 1, 3a which states it MUST be an AST if the rent is over £250 per annum (£1,000 in London).
At the time of preparing the notes I am not aware of any authority on this point - but a client who accepts a
high ground rent must be warned about the risk of non-payment of the ground rent, and so should the lender.
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11. Liability of landlord to tenants and their subtenants
The Supreme Court has considered whether an intermediate landlord (K) was in breach of the statutory
covenant to keep the structure and exterior of a dwelling-house in repair under section 11 of the Landlord
and Tenant Act 1985 (LTA 1985). K had sublet his second floor flat to E under an assured shorthold
tenancy. E tripped and injured himself on some uneven paving when taking rubbish out to the communal
bins. Under the terms of the headlease, the freeholder was responsible for keeping the communal areas
in good condition, subject to being given notice of the defect. Neither the intermediate landlord nor the
freeholder had received notice of any defect.
The Court of Appeal held that the intermediate landlord was in breach of the statutory obligation to repair
even though he had received no notification of the uneven paving. The Supreme Court overturned that
decision, on the basis that the paved area did not fall within the scope of the repairing obligation imposed
by section 11 of the LTA 1985.
While the Supreme Court's decision was on the specific facts, the court also considered the
circumstances in which a tenant has to give its landlord notice of disrepair for section 11 to apply.
The Court of Appeal's decision put intermediate landlords at risk of liability for failing to carry out repairs,
even where they were unaware that any works were needed and repairs were actually the responsibility
of another party. While the Supreme Court decision leaves some room for liability to fall on an
intermediate landlord who does not know of disrepair, landlords may now feel that they are in a much
more comfortable position. (Edwards v Kumarasamy [2016] UKSC 40.)
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12. Bad maths in service charges won’t be fixed by the courts
The Supreme Court held that the natural meaning of the clause requiring the tenants to pay
the service charge to the landlord was clear. The reasonable reader of the clause would
understand that:
• The first part of the clause required the tenants to pay an annual charge to
reimburse the landlord for providing the services.
• The second part of the clause identified how that service charge was to be
calculated and that was a fixed sum which increased at a compound rate of 10% per
annum.
The fact that this meant that by 2072 each tenant would be paying a service charge of over
£550,000 per annum did not justify departing from the natural meaning of the clause.
This decision demonstrates how the court should apply the principle of commercial
common sense when interpreting written contracts. Commercial common sense is not a
relevant consideration where the natural meaning of the language is clear, even if this
results in commercially detrimental consequences. The court will not step in to save a party
from a bad bargain. It also confirms that there is no special principle of interpretation that
service charge clauses are to be construed restrictively. The usual principles of
interpretation apply. Arnold v Britton and others [2015] UKSC 36.)
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13. Barking dogs
On 9 March 2016, the Court of Appeal decided that, on the facts,
a licensor was the occupier of a property and was liable for
nuisance at the property. The court considered relevant case law
about when a landlord can be liable for nuisance at its land, but
decided that those circumstances did not apply.
The case involved barking nuisance at a house occupied by a
daughter under a bare licence from her mother. (Cocking and
another v Eacott and another [2016] EWCA Civ 140.) EG 23-
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14. New Con29A
• Since the summer
• Local authorities reportedly unprepared
• But do clients know what it all means to them?
• ‘Searches’ - next SLC handout in production…
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