Residential property update

Residential property law is ever changing, as the past few months have proved. The reforms under the Mortgage Market Review were introduced and effective from
26 April 2014. Some of the main changes are
that customers need to satisfy lenders that they can afford their mortgage and must provide evidence of income in all cases. Customers can borrow an interest-only mortgage as long as there is a credible repayment strategy.

Additionally, advice must be given and, as a result of the changes, the process of obtaining a mortgage is extended. Practitioners are feeling
the effects as their clients experience delays or difficulties in securing mortgages.

The Law Society has announced that all conveyancing professionals will have access to its new portal provided that they pass due diligence tests equivalent to those in the society’s Conveyancing Quality Scheme. The portal, due to launch in 2015, aims to streamline the conveyancing process, reduce the number of
failed transactions and minimise the risk of fraud.

It is likely to be favoured by the public, who are often frustrated when their solicitors are unable
to give them information on the progress of
the chain, and this change should improve transparency and reduce the likelihood of
abortive costs being incurred.

Impact assessment

Over the last few months, several cases of interest to residential conveyancers have been reported.

In Shebelle Enterprises Ltd v Hampstead Garden Suburb Trust Ltd (Court of Appeal 214 EWCA Civ 305), Hampstead Garden Suburb Trust faced a claim from a lessee on the estate to the effect that the construction of a substantial basement with
a swimming pool should not be granted without first obtaining a basement impact assessment.
This was because the lessee contended that
the grant of planning permission for the works
would potentially breach the covenant for quiet enjoyment in the lease.

Constructing extensive basements for leisure use can be of concern to adjoining owners, not only in relation to the possible damage to
nearby buildings but also in relation to possible groundwater movement.

The Court of Appeal upheld a lower court decision that Hampstead Garden Suburb did
not have to acquire the requested assessment to comply with its obligations under the Hampstead Garden Suburb Scheme (which had been set up under the Leasehold Reform Act 1967) and could legitimately decide that such issues are better left for consideration by the local planning authority.

The court stated that the covenant for quiet enjoyment needed to be interpreted in the light of the circumstances pertaining at the time when it was made.

As this scheme of management was operated for maintaining and preserving the character and amenities of the suburb, and not for the purpose of furthering any private interest, Hampstead Garden Suburb fulfilled a public function. Reasonable parties would not have thought that the proper exercise by the trust of its duties under an arrangement such as the scheme could amount
to a breach of the covenant for quiet enjoyment.

This case illustrates that where someone proposes to construct a substantial basement,
a neighbour is likely to find it hard to prevent
works being undertaken by putting pressure
on a common landlord.

Sound waves

Lawrence v Coventry (trading as RDC Promotions) (2014) UKSC 13 illustrates that the categories of easements are not yet closed, as the Supreme Court has accepted a right to transmit sound waves over neighbouring land could
be obtained by prescription through 20 years uninterrupted enjoyment. This case related to noise caused from motor-sports events at a stadium and track on former farmland just outside a village. These uses had gone on for many years and had the benefit of planning permission.

The appellants, who owned a house in the village, objected to the council about the noise and brought claims in private nuisance against the owners of
the track and others.

In this particular case, although the noise nuisance had already been in existence when the appellants bought the property, the appellants were entitled to a remedy.

Again, it is interesting to note the interrelationship between planning law and the law of nuisance as it was no defence to the appellants’ claim against the owners of the track that planning permission was in existence for the particular use.

Nightmare scenarios

There are several cases of interest to practitioners in relation to ‘nightmare‘ conveyancing scenarios. Santander UK Plc v RA Legal Solicitors (a firm) (2014) PLSCS 64 related to a claim by Santander against
a firm of solicitors, who acted for the purchaser
of a property under a mortgage governed by
the CML handbook.

Unfortunately, the seller’s solicitor was acting fraudulently and the completion did not take place. It was held that, in this case, the respondent’s conduct had departed from best practice in various respects and had made inadequate requisitions on title and accepted inadequate replies to them before transferring the completion money. It had neither sought nor obtained the fraudulent firm’s agreement to adopt the Law Society’s code for completion by post.

Had the conveyancer asked and received replies to the relevant requisitions, there would have been a written obligation to hold the purchase money to the order of the respondent, which could have been enforced if completion did not take place.

These failures were serious omissions and the respondents were not excused from their liability under section 61 of the Trustee Act 1925 for acting in breach of trust.

Fraudulent signature

In a rectification case, Swift 1st Ltd v Chief Land Registrar [2014] PLSCS 40 a mortgage was obtained fraudulently from Swift 1st Ltd. In earlier court proceedings, it was held that the property owner had been the victim of fraud and that a legal charge purporting to bear her signature had been signed by a fraudster.

When, as a result of the court proceedings, the charge on the register was cancelled, Swift 1st Ltd wrote to the Land Registry claiming an indemnity under schedule 8 of the Land Registration Act 2002. It argued that cancelling the forged disposition was a rectification and that, as a result, the claimant had suffered loss. The claim was eventually allowed and the claimant was entitled to the requested indemnity.

Although, in this case, there is not any indication that a conveyancer was at fault in failing to spot the error, the case does enforce the benefits of proper anti-money laundering processes in firms.

Adverse possession

Finally, squatters are constantly in the news, but the case of Best v Chief Land Registrar [2014] EWHC 1370 in the Administrative Court is interesting as the squatter was able to succeed in an application for adverse possession of a residential property by virtue of entering a property after it had been lying empty for some years and had been vandalised.

He took possession of the property, repaired the roof, made the property wind tight and watertight, and made various improvements with the intention of using the property as his permanent residence, although he did not move in for some years.

The Land Registry cancelled the claimant’s application for title on the grounds that he had committed a criminal act by living in a residential building, contrary to section 144 of the Legal Aid Sentencing and Punishment of Offenders Act 2002.

On a claim for judicial review, it was held that the claimant was entitled to be registered as proprietor of the property and that the criminal trespass did not preclude the entitlement.

When property prices are rising significantly in London and the south-east in particular, this case reveals a possible alternative, but unorthodox, means to start on the property ladder. SJ

Glenda Ferneyhough is a partner at SA Law