Legal or Equitable Estates

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Explain to Lionel and Michael how the legal and equitable estate in 6 and 7 High St. is held and whether or not Lionel could force Michael to sell the freehold estate in the premises.

Before establishing who holds the legal or equitable estate, it’s important to understand what either of these roles incurs. The person in charge of the legal estate is responsible for the maintenance and administration of the land. They have the right to sell or lease the land and are also responsible under Occupier’s Liability, Health and Safety legislation for the safety and welfare of people on the land.

The owners of the equitable estate enjoy the benefits of use and occupation of the land. Michael and Lionel are partners and both hold an equal amount of the freehold, they are considered to be in a co-ownership but will be treated as one owner (s34(6) Law of Property Act 1925). There are two different types of co-ownership: Joint tenancy and tenancy in common. Tenancy in common provides an alternative way co-owners can hold the beneficial interest in their property. Only one of the four unities needs to be present (that of possession) and the tenant in common is only entitled to a notional share of the property. “Joint Tenancy is a method of ownership in which the co-owners are not regarded as having ‘shares’ in the land but as together owning the whole estate.” (Mackenzie, 2012). Joint tenants must also honor all four of the unities (Possession, Interest, Title, Time) and there can be no presumption in favor of a tenancy in common

Taking this into account, I have identified that Michael and Lionel are in a joint tenancy because the stakes the own in 6+7 High Street are considered to be equal. It’s possible to get confused and assume Lionel and Michael are in fact “tenants in common” due to the fact that Michael purchased the freehold at a different date – therefore breaking one of the four unities (time). This is indeed true, however when Lionel purchased his share of the property, Michael was actually selling the initial freehold he owned to Lionel and back to himself. Creating a completely new time stamp as to when the property was purchased. The land registry will have recognized this and therefore they would both be the owners of the legal and equitable estate. (s34(6) Law of Property Act 1925).

It’s very common for business partners who jointly own premises for business purposes, to hold the equitable estate as tenants in common. It’s important to understand this because similarities can be drawn from the case of “Bathurst – v – Scarborow [2005].” To sell land, a contract has to be constructed and must be made in writing – s2 Law of Property (Miscellaneous Provisions) Act 1989. As well as containing all of the heads of terms, this contract must also contain the signatures of all parties – An oral agreement not being good enough to satisfy S2 as is in the case of “Commission for New Towns – v – Cooper (Great Britain Ltd) [1995].” Meaning Lionel can’t simply use Michaels word to sell the freehold. However, if Michael got tragically injured and passed away (Like Mr Barhurst), because they are Joint tenants, his share would automatically go to Lionel.

Although I stated earlier Michael and Lionel are joint tenants, it does not have to remain that way. It’s possible for a joint tenant to sever his interest and convert it into a tenancy in common. “A primary reason for severance may be to avoid the effects of the right of survivorship’’ (Mackenzie, 2012). In other words, they would create separate shares in the property.

Michael and Lionel took out a mortgage and granted interest in the land as security for the loan. When two people lend money secured by the same mortgage, the mortgagee can presume that the equitable interest given as security is held on a tenancy in common. See (Morley V Bird 1798) Thus the money owed to Perry Barr Finance Company is viewed as an identifiable share.

Co-Owned land is always...
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