Real property is mainly land, but the words 'realty' and 'land' are used as if they were the same thing, which is not true. This is because some interests, whilst they may be interests in land, are not 'real' property. An example of this is shown in leaseholds. They are personal and not realty. This is because until 1500 a tenant who was ousted from 'his land' could only recover damages in an action in personam, because leases were considered to be no more than a form of commercial contract. However, after 1500 an ousted tenant could recover the land itself in a 'real' action - an action in rem - that is, an action against the land itself.
Unfortunately, whether a right is real or personal is not always clear-cut.
Discuss and compare the two legal estates in land.
For many years there has been a controversy over the nature of equitable interests, especially the interest of the beneficiaries under a trust. It is thought that there was an overhaul of the area of property law in 1925 with a number of acts being passed. They included the Law of Property Act 1925, the Trustee Act 1925 and the Settled Land Act 1925. The new legislations aim was to reduce the number of legal estates in land and abandon outdated rules.
An estate in land is the right of any landowner to enjoy the land for a particular period of time. Before the Law of Property Act 1925 there were a number of legal estates in land. They included the ‘fee simple’ ‘fee tail’ and ‘life estate’. Section 1(1) of the 1925 act reduces the number of legal estates to two and states that the only legal estates that can legally exist are the ‘fee simple absolute in possession’ and the ‘term of years absolute’. Firstly the fee simple absolute in possession estate is also known as the freehold estate and secondly the estate for a term of years absolute is also known as the leasehold estate.
The fee simple absolute in possession can defined as fee simple meaning ownership rights of the property can be inherited on death. Absolute meaning that there are no limits on the ownership and in possession meaning the owner has occupation of the land and is free to enjoy the land. The word absolute is used to distinguish a fee simple from a modified fee. A modified fee has three main species, they are; a determinable fee that ends automatically when something happens, a fee simple on condition subsequent that is based on a condition and if that condition is broken then the fee simple will cease and a fee simple on condition precedent will start when a certain event occurs.
It is very hard to identify the difference between a fee simple on condition precendent and a determinable fee. However the way they are generally distinguished is through their wording. If the wording sets out a time limit for which the estate was granted then it will be a determinable fee. On the other hand if the words set out a grant subject to the possibility of it being defeated then it creates a fee simple on condition subsequent. The reason the distinction is so important is because a determinable fee can only exist behind a trust where as it is possible that a fee simple on condition subsequent can be created to be absolute.
The courts are very strict when it comes to construing conditional fees than they are when it comes to determinable fees, both based on the same condition. The courts may construe a condition to be void if; it is to vague and there is no precise definition to which to construe the terms of the condition to, if it prevents alienation, if it purports to exclude the operation of bankruptcy laws, if it is a total restraint of marriage and if it is contrary to public policy.
A term of year’s absolute estate is for a limited duration. In the case of Lace v Chantler (1944) it was made clear that there must be a fixed and certain maximum duration. Although there is no requirement that the lease should be in possession to happen because it may begin in the future, but section 149 of the Law of Property Act 1925 does states that it must start within twenty one years, this is also known as a ‘reversionary lease’.
The fee simple is regarded as the largest estate that can exist and has many rights associated with absolute ownership of property. The rights include;
Natural rights that the owner has automatically over the land he owns such as a natural right to an unpolluted free flow of air across the property.
The right of alienation so, therefore the owner can dispose of his land however he chooses to do so. The right of enjoyment allows the fee simple owner to enjoy everything on the land and also beneath and above the land, subject to restrictions by law. Fishing rights allow the fee simple owner to fish in any non-tidal waters upon his land. Statutory restrictions end some rights an owner may have over his land. The statutes are generally for issues of public interest such as the Town and Country Planning Acts.
Today the fee simple absolute in possession is the main type of legal estate that is used.
Explain the rule in Saunders v Vautier (1841) 4 Beav. 115.
In the area of trusts law the case of Saunders v Vautier is a very important case. It concerns a father who died in 1832 and left all his stock in a trust. In his will he said that the trust was left in order for his nephew to benefit from it. It was also clearly stated in the will that the property will not devolve and become he nephews until he reached the age of twenty five years old. However in England during that time the age at which you were recognised as an adult, was when you reached twenty one years, you were no longer seen as a minor. When the nephew, the beneficiary, turned twenty one he asked the courts to terminate the trust and therefore all the property in the trust would be transferred over to him.
The nephew gave the argument that he was the sole beneficiary of the trust therefore there was no concerns to anybody else and since he was recognised by law to have reached the age of maturity then he should be entitled to the trust property four years earlier. The court agreed to terminate the trust and have all the property transferred to the nephew. By doing this there was a variation of the trust. Generally a trustee must administer a trust according its exact terms and not deviate from them. If there is a deviation then it is a breach of the trust and the trustee will be liable personally.
It is however recognised that any beneficiaries who are adults and are also sui juris which means that under no legal incapacity, such as being underage, they are allowed to deal with their equitable interests in any way that they wish to do so. Also all beneficiaries who are at or above the age of maturity are entitled to the property held under the trust and can ask for it to be transferred to them and the trust be terminated. This is exactly what happened in Saunder v Vautier.
This has now become known as the "rule in Saunders v. Vautier."
The rule restated today, entitles beneficiaries of a trust to end the trust and call in the property from the trustee but only if;
- all beneficiaries are sui juris (ie. under no legal incapacity such as being under-age or with a mental incapacity);
- If the beneficiaries are unanimous and constitute the only persons entitled to the trust property.
There are some situations where Saunders can be argued. Firstly where the trust is postponed until the beneficiary reaches a certain age as in Saunders itself. Secondly where there is a postponement until a certain date where the testator says that the beneficiary will receive the trust after a certain date. Thirdly then testator can put into a letter that capital and instalments are paid and that the instalments are contingent on the beneficiary surviving to the date of the payment. Fourthly if the trustee does not have discretion or power to withhold all or part of the subject from the beneficiary and he is of age and capacity, the trust will usually be terminated.
Lastly the case of Barford v. Street Principle can be used where a trust was given to A for life and A could appoint whoever they wanted by will. From the testator’s point of view, a life interest is given to A with a power of appointment after the death of A. Since A can appoint to their own estate, this looks like it effectively gives them an absolute interest in the property and they can apply during their lifetime to have full ownership of the property.
If a person wants to avoid the operation of the rule in Saunder v Vautierthen a clause must be drafted to avoid the operation of the rule in. Therefore, if a testatrix wants a beneficiary to take a trust at say twenty five years, then there must be a gift over to another person just in case that the person does not reach twenty five years in order to avoid the rule and to comply with the will maker's intention.
This practice is now very common that the courts authority is not even needed; trustees are willing to hand over the property if the conditions of the rule apply without any petition to the court. This is also sometimes referred to as the "doctrine of acceleration."
Compare and discuss what is meant by an equitable interest ‘in rem’ and an equitable interest ‘in personam’.
Trusts originate when assets are transferred to another person with instructions that the assets are used to benefit a third party. For many years there has been a controversy over the nature of equitable rights and especially the beneficiaries’ interest under a trust. It is thought that historically and practically that a beneficiary should take an action against the trustee. A trustee is the person who is appointed to hold trust property and administer it for the benefit of the beneficiary. Therefore an equitable interest should be brought against the person, in personam. The other view is that an equitable right should be brought in rem. This means it should be enforceable against a thing or land itself. This is because it has been said that the equitable interest is the proprietary interest, which is in effect the legal estates and the beneficiary will become the owner of the interest, and therefore the equitable right should be against the land, in rem.
The question is how can the use of the assets and the benefit of another; be guaranteed? Originally it couldn't; the transfer was the end of the matter and, despite the undertaking by the trustee to use the property to benefit others, advantage could be taken of that position. The trustee had been given the legal ownership of the property and beneficiaries who anticipated receiving a benefit from that property could be in difficulty. This predicament was overcome and marks the development of English law.
Historically a beneficiary could not succeed by appealing to the law courts because of the principle of “Stare decisis". The law courts would have taken the view that the legal ownership had been transferred and he had no legal title at all to the assets. Instead the beneficiary appealed to the Lord Chancellor. The Lord Chancellor was known as "Keeper of the Kings Conscience". He could not deny the authority and rights of the common law courts. Although whilst not denying the legal ownership, the Lord Chancellor could exercise his jurisdiction by saying to the trustee that if he did not honour his obligation this would damage his conscience. The Lord Chancellor would therefore feel he should take action to prevent this. He would enforce the beneficial rights of the person who the transfer was intended to benefit. This became known as equity. An equitable right in personam.
The problem is how anyone can defeat the equitable ownership of the beneficiary because the beneficiary will have a personal right against the trustee, in personam and also have a claim for compensation. After this the question people began to ask themselves whether the beneficiary’s rights were personal against the trustee and not against the property therefore there being no proprietary interest. This situation encouraged people to think that equitable rights were in personam and that distinguished legal ownership to being rights in rem.
These beneficial rights become part of the title to the property; therefore there was a split of ownership. There was the legal ownership by the trustee, and there was the equitable or beneficial ownership held for the beneficiary. The trustee will be the legal owner at common law and have rights in rem. He can enforce his rights of ownership against anyone and everyone. The equitable owner or beneficiary has rights in personam i.e. enforceable only against the legal owner. Now under the English law of trusts it is accepted that the trustee is the owner at law and that the beneficiary is the owner in equity.
A scholar called Austin said that beneficiary’s rights should either be a right in personam or a right in rem. It had to be one or the other. This however caused a lot of difficulties in this area of law. Both the terms in rem and in personam can mean different things in different contexts. Presently a right in rem is a “right enforceable against the world with respect to a particular thing”. Therefore today a legal owner has a right in rem against the entire world with respect to the property. Equitable interest in personam tends to come up when the courts can look to equity therefore it is accepted that equity acts in personam.
BIBLIOGRAPHY
Robert Burgess, 1996, Dictionary of Law, Collins, Great Britain
Michael Bridge, 1993, Personal Property Law, Blackstones Press Limited, Exeter
Judith Bray, 2003, Land Law Key Facts, 2nd edition, Hodder and Stoughton, Great Britain
Gray, 2003, Land Law, 3rd edition, Butterworths, Great Britain
Michael Haley, 2004, Nutshells Land Law, 6th edition, Sweet and Maxwell, London
Chris Turner, 2004, Equity and Trusts Key Facts, Hodder and Stoughton, Great Britain
Martin, 2001, Hanbury and Martin Modern Equity, 16th edition, Sweet and Maxwell, London
CDs
Consilio, Law of Equity and Trusts in a Box
WEBSITES
http://www.lawyers-abogados.net/
http://groups.msn.com/thelawsite
p17, J. Martin, 2001, Hanbury and Martin Modern Equity, 16th edition, Sweet and Maxwell, London
