The importance of documenting oral agreements when dealing with registered land
Real Estate Associate, Gaye King, looks into the importance of formally documenting oral agreements relating to rights of way over registered land.
A recent High Court case (Pezaro and another v Bourne and another  EWHC 1964 (Ch)) held that a right of way was not extinguished on the grounds of ‘proprietary estoppel’ when a previous owner of the dominant land had orally agreed to its removal. The right of way had been registered at the Land Registry but as neither party had made an application to note their agreement to the extinguishment of the right of way on their respective titles, the Court found that any estoppel created by the oral agreement would not be binding on any new owner of the dominant land. This was clearly bad news for the landowner burdened by the easement, who had understood that it had been released.
What is proprietary estoppel?
Proprietary estoppel has three key factors to consider:
- A promise or assurance by a party giving rise to an expectation by another party that it would have a certain proprietary interest
- Reliance by that party upon that expectation
- Detriment to that party, in consequence of its reliance.
Mrs and Mrs Pezaro owned two properties (“P1” and “P2”), which were both subject to a right of way in favour of a neighbouring property (“P3”) along a path to the rear of P1 and P2 and alongside P2 to the main road. All three properties were registered at the Land Registry titles and each title referred to the right of way. At the time that the Pezaros bought P1 and P2, the owner of P3 (“Mr A”) had not used the right of way and it had been blocked by fencing between P1 and P3. Mr and Mrs Pezaro also acquired part of the garden at P3 from Mr A as Mr and Mrs Pezaro intended to create a development site, which they then sold to a third party.
Mr and Mrs Pezaro decided to redevelop P2 so that an additional house would be built which would involve building over the unused right of way. Mr A orally agreed to give up the right of way at the rear of P1 and P2 but neither Mr and Mrs Pezaro nor Mr A made an application to the Land Registry to show what had been agreed until planning permission had been obtained, by which time Mr A had sold P3 to a third party (Mr and Mrs B). The new owners of P3, Mr and Mrs B, claimed that the right of way still existed and sought to benefit from the use of the same. At this point, Mr and Mrs Pezaro then sought to obtain a court ruling to confirm that the right of way had been extinguished on the grounds of proprietary estoppel by way of the oral agreement with Mr A.
The matter was heard in the High Court and the Court found in Mr and Mrs B’s favour.
The court found that under section 29 of the Land Registration Act 2002, a purchaser for valuable consideration is not bound by an interest unless it is protected under section 29(2) (such as by notification on the Land Registry title). Although Mr and Mrs Pezaro argued that they had an overriding interest, as they were in actual occupation of the right of way, the Court disagreed and stated that actual occupation required more than an obstruction (such as a fence). The Court also note that the Land Registry titles to all three properties still referred to there being a right of way and therefore any future purchaser would know of the right of way and would not have knowledge of the prior oral agreement extinguishing the right of way.
The Court commented that if Mr and Mrs Pezaro had applied to the Land Registry to register the agreement with Mr A at the time the agreement was made, then any future purchaser would have been made aware of the agreement to extinguish the right of way.
The lesson to be learnt
It is therefore very important to formally document any agreement when dealing with land, especially when the land is registered, to ensure that any future purchaser is made aware of prior arrangements or agreements relating to the land. Particular attention should also be made to ensure that any such documents are correctly registered at the Land Registry to ensure that the title is up-to-date.
For any more information on the issues highlighted, please speak to our Real Estate Team.