Property Law Essay Example
Property rights are of two types namely legal and equitable rights. The competing interests of the parties involved arise from these rights such that there will be legal interests and equitable interests. Legal interests always have priority over equitable interests. In the scenario provided, the parties with competing interests are Albert, Barry, Denise and Farah Pty Ltd.
Albert owns the house in Groomsdale in Queensland. He takes a loan from his father, Barry, under the agreement that Albert’s solicitor, Carmichael, would draft a loan agreement and mortgage to complete the transaction. Before Carmichael could prepare the documents, Albert asked for the money from his father and immediately took out another loan from Denise. The agreement between Denise and Albert was that the certificate of title would be kept in Carmichael’s safe. The effect of these two transactions is that they both sought to create a mortgage over Albert’s property creating a charge over the property. The Land Titles Act 1994 (Qld) provides that a mortgage may be created by registering an instrument of mortgage.1 The Act further states that the instrument of mortgage must be validly executed and must also have a description of the land being mortgaged.2 The alternative to registering a mortgage is through creating an equitable mortgage where the parties sign the mortgage instrument and instead of registering the instrument, the mortgagee takes possession of the title documents.3 Based on the facts of the case, no mortgage instrument was signed between Albert and Barry. Further, the certificate of title was not sent to him to protect his interests in the property. Consequently, there are no equitable interests that can be said to have resulted from the loan given by Barry.
The law provides that an equitable mortgage has to be preceded by the signing of a mortgage instrument and the deposit of the certificate of title to the mortgagee.4 In Barry’s case, no such procedures were followed. He gave the money to Albert without signing the mortgage instrument or ensuring that the certificate of title was in his possession. As a result, Barry has no interests in the property, which is Albert’s house in Groomsdale. There was no legal or equitable mortgage that was created and, as a result, he can only claim his money from Albert without asserting any interests in the property.5
Denise, on the other hand, also gave a loan to Albert. However, from their transactions, it seems that Denise and Albert signed a mortgage instrument and agreed that the certificate of title would be kept in Carmichael’s safe. In this case, an equitable mortgage can be said to exist. This means that Denise has equitable interests in the property by virtue of the loan given to Albert, the absolute owner.
The next part relates to the sale of the property by Edward. Once Carmichael had placed the certificate of title in his safe, Edward took the certificate and forged a number of documents. He then entered into a verbal agreement for the sale of the property with Farah Ltd to sell the property. The transfer documents were forged by Edward to appear as if Albert had actually signed the documents which was not the case. Farah Pty Ltd went ahead to lodge the documents at the Titles Office for registration. The question here is whether Farah Pty Ltd has acquired any interests or right in the property. The Property Law Act 1974 (Qld) establishes the requirement that any contract for the sale or transfer of an interest in land must be in writing. The Act further provides that legal interests in land must be set out in a document or a deed which is in writing and signed by the person who is to be bound by the interest being created. In the current case, Edward (acting as Albert) entered into a verbal contract for the sale of land with Farah Pty Ltd. According to the provisions of the Property Law Act 1974, such a contract is not enforceable. If there had been an enforceable or valid contract for the sale of the property, the mere fact that the two parties entered into the contract might have granted Farah Pty Ltd an interest in the property.6 Even if that was the case, a further issue arises as to whether such a contract would have been valid bearing in mind that Edward had forged Albert’s signature.
There are instances where fraud committed by a legal interest holder such as Albert can lead to the creation of an equitable interest such as through the execution of the transfer forms.7 In this case, however, it is not the legal interest holder who was involved in the transaction. Edward had forged the documents for the sale of the land and also forged Albert’s signature on the transfer forms. In such a situation, the question remains whether Farah Limited acquired any interests in the property. Although a registered interest takes precedence over an unregistered one,8 even if the transfer documents lodged by Farah Pty Ltd would be registered, the transaction is null and void due to the fraud committed by Edward. In such a case, Albert would have the right to go to court and have the transaction set aside because of fraud.9 This means that Farah Pty Ltd acquired no interests in the property. It can only sue Edward to recover the money paid for the transaction.
In this case, the persons with interests in the property are Albert and Denise. Albert has a legal interest in the property while Denise has an equitable interest in the property arising from the equitable mortgage created. For Barry, no equitable mortgage was created as no mortgage instrument was signed.
Stewart Cameron, Mortgages (The University of Sydney, 2014).
The Property Law Act 1974 (Qld)
The Land Title Act 1994 (Qld)
1 Section 72 of the Land Titles Act 1994 (Qld).
2 Ibid Section 72(1)(a) and (b).
3 Section 75(1) of the Land Title Act 1994 (Qld).
5 Stewart Cameron, Mortgages (The University of Sydney, 2014) 16.
6 Lysaght v Edwards (1876) 2 Ch D 449.
7 Northern Counties Fire Insurance Co. v Whipp (1884) 26 Ch D 482.
8 Section 178(1) of the Land Title Act 1994 (Qld).
9 Smith v Jones (1954) 1 WLR 1089.
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