Update: residential property

How to lose an easement without even trying'¦

Earlier this year, the judgment in Lester v Woodgate [2010] EWCA Civ 199 emphasised how acquiescence of quite short duration can give rise to an estoppel, leaving a dominant owner with no right to complain of an interference with their easement.

In 1988, a right of way on foot and with wheelbarrows over a pathway on the neighbour's property had been granted by deed. By 1999, the land over which the right of way had been granted had been converted into a parking area. The adjoining owner with the benefit of the right of way did not object, and took no steps to prevent his neighbour carrying out the works or from using the parking area. Both properties were then sold.

The new owner of the dominant land sought an injunction to reinstate the pathway and prevent parking, and also claimed damages for having been deprived of the use of the right of way. The servient owner, who had bought the property subject to the right of way, argued that the neighbour's predecessor in title had acquiesced in the removal of the pathway, and as a consequence it would be inequitable for the dominant owner to enforce the right of way. The court agreed with the servient owner. Clearly their predecessor in title had relied on the acquiescence of the neighbour's predecessor in title as, when the servient owner purchased the property, no dispute over the parking area was revealed.

The court found that there was no reason why the principles of proprietary estoppel should not apply to a case where a servient owner is alleged to have interfered with an easement over his own land, whereas proprietary estoppel is normally used in cases where a landowner acquires a right over a neighbour's land as a result of the neighbour's conduct. Also, the effect of the estoppel not only barred the grant of an equitable remedy, but prevented the enforcement of the right itself so as to preclude the damages claim as well. Note that this case relied on equitable estoppel rather than abandonment. The acquiescence of the neighbour, so that the servient owner believed that the right would not be enforced, must be distinguished from a dominant owner's delay in enforcing a right. Delay alone might remove the availability of equitable relief, such as an injunction, but would not bar the enforcement of the right, so a claim for damages would still be a possibility.

Owners of land whose title reveals an easement, but where the property is so changed as to prevent its exercise, should take note of this case.

The end of HIPS

The Law Society along with the majority of conveyancers welcomed the news last month that the government has suspended the use of home information packs with immediate effect, allowing sellers to put their properties on the market without the need to pay upwards of £250 for the preparation of a HIP. Primary legislation, however, is needed to kill off HIPs completely.

HIPs were introduced in 2007 in England and Wales to speed up the conveyancing process. To few conveyancers' surprise, the packs were of little use as they often provided incomplete or inaccurate information about the property, having been prepared by HIP providers remote from the transaction.

Before their introduction, HIPs were dogged by difficulties particularly in relation to the 'home condition reports', which were dropped before HIPs went live when it became obvious that neither buyers nor lenders would rely on a very basic survey of the property commissioned by the seller. Energy performance certificates, however, are to remain as they are a requirement of EU law, although the need for a seller to have the EPC available at the time of first marketing has been removed. Commissioning the EPC is now sufficient.

The Law Society would like to see HIPs replaced by a package of comprehensive documents prepared by a solicitor, but in a standard form to control cost. It suggests that in this way prospective buyers will receive better information about the property up front. The Law Society is particularly concerned about the increase in mortgage and land registration fraud and sees the involvement of solicitors as the 'gatekeeper' in the process as being of greater importance now than ever before.

More certainty for new home buyers

It has always been unsatisfactory that buyers of new properties invariably have little idea of the completion date of their purchase, or even the month in which it will take place, when agreeing to buy a property off-plan from a developer. On 1 April, a voluntary code of practice, the Consumer Code for Home Builders, came into force setting out mandatory requirements that all participating developers of residential property must meet. All the home warranty bodies, such as NHBC, have agreed to require their registered builders to adopt and comply with the code as a condition of their registration. The code does not apply retrospectively, so will only benefit home buyers who reserve a new or newly converted home on or after 1 April which is being built by a developer under the insurance protection of one of the home warranty bodies.

Timing is one of the issues the new code addresses. The code provides that the buyer must be given 'reliable and realistic information' about when the construction of the property will be finished and the date of legal completion and handover of the property. The detailed guidance for developers that accompanies the code states that the sale contract should include the anticipated date by which the developer will give the buyer notice of legal completion. The buyer must also be told about their right to terminate the contract where there is 'unreasonable delay in finishing the construction' of the property or in serving the notice of legal completion. A clause is suggested for inclusion in the developer's contract, which gives the buyer a right to terminate if the developer fails to serve notice within a given number of months after the anticipated date stated in the contract. The guidance suggests that this should be six months for houses and 12 months for flats '“ if contracts are exchanged early on in the construction process before the roof is completed and the building weatherproof '“ or a period of two months for houses and four months for flats if exchange takes place at a more advanced stage of construction.

Further information about the code and a list of participating home warranty bodies can be found at www.consumercodeforhomebuilders.com.

A recent Court of Appeal decision in North Eastern Properties Limited v Coleman & Quinn Conveyancing [2010] EWCA Civ 277 also addressed the issue of a buyer's rights when construction is delayed beyond the anticipated completion date. In this case, the buyer was purchasing a number of flats in a block in the course of construction, where it had been indicated that the block was due to be finished in December 2007. The developer's obligation in the contract was to 'erect and finish the flats with all due despatch'. The flats were still not finished in May 2008, at which point the buyer was told that a further month was needed to complete their construction. The buyer immediately served notice to complete on the developer, requiring completion within ten working days.

When the flats were finished a month later the developer served notices on the buyer that the flats were ready. The buyer failed to complete and argued that the contract had been rescinded. Both the High Court and the Court of Appeal held that a notice to complete could only be served on or after the contractual completion date. The developer was entitled to specific performance as there was no completion date under this contract until notice had been served by the developer that the flats were finished.

The decision did, however, confirm that, even where the development is not regulated by the new code, a buyer will not be locked into a contract indefinitely where there is extreme delay. If a breach is so serious that it amounts to a repudiatory breach, the buyer has the option to accept the breach and be discharged from the contract. In such circumstances, the buyer should serve notice on the developer specifying a reasonable period for completion. This case gave little guidance as to what is a reasonable period, but clearly ten working days was not. The court also noted that the buyer had not previously complained of delay.

Unhappy buyers must make it very clear that they are dissatisfied at ongoing delays before claiming that the developer has committed a repudiatory breach.

Cohabitees: prepare for the worst

In the recent case of Kernott v Jones [2010] EWCA Civ 578 (see Solicitors Journal 154/22, 8 June 2010), Lord Justice Wall heralded his judgment in the Court of Appeal as 'a cautionary tale, which all unmarried couples contemplating the purchase of residential property as their home, and all solicitors who advise them, should study'.

In this case cohabitees bought a house as joint tenants. When the relationship ended, the man moved out and bought another property in his sole name, for which he was solely responsible. The woman remained in occupation of the jointly owned property with their children and was solely responsible for it. After they had been separated for 12 years, the man severed the joint tenancy and claimed his share of the property.

Both the district judge and then the deputy High Court judge hearing the first appeal altered the shares in the property to 90 per cent to the woman and ten per cent to the man on the basis of what was 'fair and just' taking into account their respective financial contributions and in particular the fact that after separation the woman had paid the mortgage and received virtually no financial contribution from the man for the maintenance and support of their children.

However, in the Court of Appeal, the principles laid down by the House of Lords in Stack v Dowden [2007] UKHL 17 were followed more rigidly. The Court of Appeal found that there was no evidence to displace the presumption of equal beneficial shares.

The burden of proof is on the party trying to show that there was a common intention that the proportions in which the beneficial interest in the property is held should be different from the legal interest. The Court of Appeal rejected the submission that an intention to vary beneficial interests may be imputed as it was not open to the court to impose a 'fair' solution in the absence of any clear evidence of the parties' intentions.

This case emphasises again the importance of cohabitees entering into an express agreement as to the beneficial shares in the property they own jointly, rather than finding themselves in court many years later with the almost impossible task of giving the court sufficient evidence to substitute something that resembles a 'fair' solution in place of a presumption of equality.

The case also serves as a reminder of the importance of explaining to joint buyers the potential consequences of how they chose to hold a property if the relationship were to break down and a dispute arise as to how the sale proceeds should be divided.