Course ManualDiploma in Legal Studies

Desmond Gerard Greenwood, SolicitorEdwin Fong, Solicitor

LAND LAW AND CONVEYANCING

PRACTICE

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Contents

Overview 4

Chapter 1: Landholding in Hong Kong: Nature and Types of Property 61.1 Introduction 61.2 The Meaning of Property 81.3 The Doctrines of Tenure and Estates 91.4 The Meaning of Land 101.5 The Right to Airspace 101.6 FixturesandFittings 101.7 Formalities 131.8 SmallHousePolicy 20

Chapter 2: Leases 222.1 Introduction 222.2 ElementsofaLease 232.3 Types of Leases 272.4 ClausesorCovenantsinLeases 282.5 TerminationofLeases 292.6 Landlord’sRemediesforBreachofCovenant 302.7 TheGovernmentLease 38 Chapter 3: Private Control of Land Use 433.1 Introduction 433.2 Easements 443.3 LandCovenants 49

Chapter 4: Co-ownership 584.1 Introduction 584.2 FormsofCo-ownership 594.3 CreationofCo-ownership 614.4 SeveranceofaJointTenancy 634.5 TerminationofCo-ownership 66

Chapter 5: Mortgages 70

5.1 Introduction 705.2 Nature of a Mortgage 705.3 CreationofMortgages 715.4 Types of Mortgages 71

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5.5 Contents of a Mortgage 725.6 Mortgagee’sPowersandRemedies 735.7 RightsofMortgagor:Redemption 795.8 Tacking:AdjustingRightsbetweenMortgagees 825.9 Discharge of Mortgages 82

Chapter 6: Priority: Protection of Property Rights 856.1 Introduction 856.2 TheSystemofRegistrationinHongKong 856.3 PriorityofNon-registrableInterests:DoctrineofNotice 92

Chapter 7: Acquiring Title to Land: Introduction to Conveyancing 947.1 Introduction 947.2 DescribingLandforLegalPurposes:Sectioning andSub-sectioning 957.3 OverviewoftheConveyancingProcess 967.4 StagesinaSaleandPurchaseTransaction 977.5 Summary:CharacteristicsofHongKongConveyancing 1007.6 AdversePossession 100

Chapter 8: From Preliminary Negotiations to the Formal Agreement for Sale and Purchase 1058.1 Introduction 1058.2 ProvisionalAgreementsforSaleandPurchase 1068.3 TheFormalAgreementforSaleandPurchase 108

Chapter 9: Formal Agreement to Completion 1149.1 Introduction 1149.2 TheVendor’sObligationtoShowandGiveGoodTitle 1159.3 DraftingtheAssignment 1269.4 DraftingCompletionStatements 130

Chapter 10: Completion and Post Completion 13110.1 Introduction 13110.2 CompletionbyUndertaking 13110.3 StampingandRegistrationofDocuments 13310.4 ConsentandNon-ConsentSchemes 135

Glossary 137

List of Further Reading 139

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Overview

Studentsembarkingontheirstudyoflandlawforthefirsttimeoftenfindittobeacomplexanddifficultsubject.Thewaytoovercomethisinitialimpressionistorealise

thattherearetwobasicquestionsthathavetobeaskedwhenanalysinganyquestiononlandlaw:

1. Whatisthenatureoftherightsthatapartyholdsinandoverland?2. Aretheserightsenforceableorbindingagainstotherparties?

Thecomfortingthoughtisthatonceanappreciationofthenatureofthedifferentrightsinandoverlandisreached,andtheissuesarisingfromtheenforcementoftheserightsareidentified,theanswersfallintoplaceinthemannersimilartothepiecesofajigsawpuzzle.

Inlandlawitisnecessarytounderstandtherolesplayedbythecommonlawandequity,andhowthetwobodiesof law interact.Thecommon lawrulescanattimes leadto“unfair”resultssotheroleofequitytypicallyoperatestomitigatethisunfairness.Themaximsofequity–forexample“delaydefeatsequity”;“hewhoseeksequitymustdoequity” (thecleanhandsrule);and“equity looksonthatasdonewhichoughttobedone”-playaroleinmanyareasoflandlaw,includingthevariousformalities,proprietaryestoppelandco-ownership.Moreover,themostimportantproductofequity-thetrust-playsamajorroleintheareaofco-ownership.

LandlawinHongKonghasbeencloselylinkedtolandlawinEngland.Thesourcesofbothareasoflandlawisthetenurial(fromLatinteneremeaning“tohold”)principlethatalllandisheldof,orfrom,another.Thelanditselfbelongstothesovereign.Individualsownestatesandinterestsinland.Despitethesimilarityinthesourcesoflaw,EnglishandHongKonglandlawhaveinpracticemovedindifferentdirections.ThisprocessbegansoonaftertheformationofHongKongasacolonyin1842.TheHongKongGovernmentadoptedapolicyofgrantingonlyleaseholdestates(withthenotableexceptionbeingSaintJohn’sCathedral),whichstandsinmarkedcontrasttotheEnglishsystem,wherefreeholdtenurecontinuestobetheultimateinprivateownershipofland.

HongKong land lawpersists as a case law systemwithoccasional, albeit significant,modifications by legislation. By contrast, the English system can be described as alegislativesystemwithoccasional importantadaptationsbythecourts.MuchEnglishlegislationhasnocounterpartinHongKong.

OfparticularimportanceisthefactthatthereisnoHongKongequivalenttos1(6)oftheLawofPropertyAct1925(LPA),whichpreventsatenancyincommonsubsistingatlaw.InEngland,wherelandisconveyedtotwoormorepersons,thelegalestatemustbeheldonaninseverablejointtenancy.ThepositioninHongKongiscompletelydifferent.

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Overview

Far frombeingprohibitedat law, themajorityof conveyancing transactions inHongKong involve the transferofundivided shares (tenancies in common) inmulti-storeybuildings.Alegaljointtenancycanbeseveredsoastocreatealegalinterestincommon.ThisiscrucialinHongKongasapersonwhoconsidershimselftobean“ownerofaflat”actuallyisatenantincommonofthewholebuilding.Thelegalestateinvolvedistheresidueofthegovernmentlease.Aflatownerco-ownsittogetherwithalltheotherunitholders.Whenhewishestosellhisflat,hedoessobysellinghistenancyincommon.Itmakeslegalandpracticalsense,then,thatwhatheistransferringisalegalestate.

The importanceofmulti-storeybuildings inHongKong land lawandconveyancing isalsoillustratedbytheenactmentinHongKongofs41oftheConveyancingandPropertyOrdinance(Cap219)(CPO),which,interalia,enablespositivelandcovenants-suchaspaymentofmanagementfeesandmaintenanceorrepairofbuildings-tobeenforcedagainstsuccessorsintitleoftheburdenedland.TheCPO,asitsnameindicates,isthemainsourceoflegislationonlandlawandconveyancinginHongKonganditisessentialthat studentshave their ownhard copiesof this pieceof legislationandbecomeasfamiliarwithitaspossible.

Finally,itisworthnotingthattheexistingsystemofprotectionofpropertyrightsinHongKongisvastlydifferentfromthatinEnglandandWales.HongKongstillhasnosystemofregistrationoftitle,norhasitadoptedtheEnglishsystemoflandchargesregistrationforunregistered land.Under the LandRegistrationOrdinance (Cap128) (LRO),HongKonghasasystemofregistrationof instruments. Ingeneraltermsaninstrumentisadocumenthaving legaleffect.Theequitabledoctrineofnoticeapplies inHongKong,buttherelationshipbetweenitandtheregistrationofinstrumentsundertheLROisfarfromsimple.Thepositionissettochange,though,whentheLandTitlesOrdinance(Cap585),enactedin2004,finallycomesintoeffectandtheregistrationoftitlereplacestheregistrationofinstruments.

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Chapter 1Landholding in Hong Kong: Nature and Types of Property

Uponcompletingthischapteryoushouldbeableto:

1. Explainthemeaningofproperty.2. Distinguishrealpropertyfrompersonalproperty.3. Distinguishmovablepropertyfromimmovableproperty.4. Explainthedoctrineoftenureandthedoctrineofestates.5. Describethenatureoffreeholdandleaseholdestates.6. Defineland.7. Explainthelimitsplacedonaclaimtoairspace.8. Applytherulesontherighttoairspace.9. Definefixturesandfittingsandexplainthesignificanceofthedistinction.10. Explaintherulesonthedistinctionbetweenfixturesandfittings.11. Outlinethelevelsofformality.12. Describehowalegalestateinlandmaybecreated,transferredordisposedof.13. Outlinetheexceptionsfortherequirementforadeed.14. Explaintherequirementforwriting.15. Outlinetherequirementsforanenforceablecontractforthesaleofland.16.Explain,inoutline,thedoctrineofpartperformance.17. Explain,inoutline,thedoctrineofproprietaryestoppel.

1.1 IntroductionIn this chapter we will look at the various types of property and, in particular, themeaningofland.Section3oftheInterpretationandGeneralClausesOrdinance(Cap1)(IGCO)defines“property”inHongKongandthisdefinitionincludes“land”.

A distinction is made between real and personal property. Property is real if thecourtscanrestorethepropertyitselfbyarealaction(anactionin rem)toadisposedowner.Therearetwotypesofrealproperty:corporealhereditamentsandincorporealhereditaments.Ahereditamentisarightthatiscapableofpassingtoheirsbywayofinheritance.Theformerinclude,inthemain,landandbuildingsandallotherthingsthatarepartoforattachedtoland.Thelatterincludesuchrightsaseasementsandprofits.

Personal property is thatwhich canbe recoveredby a personal action (an action in personam). This gives the court the choice of ordering the item in question to bereturnedoranequivalentsumofmoneyawardedinstead.

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Chapter 1Landholding in Hong Kong: Nature and Types of Property

ItisimportanttonotethatinHongKong,landlawisnotconcernedwithrealproperty.ThisisbecausevirtuallyalllandinHongKongisleaseholdproperty.Leaseshaveauniquecharacterandaretechnicallyclassifiedaschattelsrealtoreflecttheirhybridnature.So,inHongKong,itisthedistinctionbetweenpersonalpropertyandchattelsrealthatisimportant,ratherthanthedistinctionbetweenrealandpersonalproperty.

ItshouldalsobenotedthatsomeHongKongordinancesindicateadistinctionbetweenmovable and immovable property rather than a distinction between chattels realandpersonalpropertyrespectively.However,thewordingofthedefinitionoflandascontainedins2oftheCPOshowsthattheterms“land”and“immovableproperty”arealmostidentical.

HongKonglandlawislargelybasedonEnglishlawwithbothderivingfromthesamesource. However, while there are many similarities between the two jurisdictions,theyhavemorerecentlymovedindifferentdirections.OnemajordifferencebetweenHongKongandEnglandisthefactthatmostpeopleinHongKongliveinmulti-storeybuildings, which creates special circumstances requiring a different legal approach.Thisismostevidentintheareaoflegislation.Youwillseeexamplesofthisasweworkthroughthecourse.Forinstance,intheareaoflandcovenants(seeChapter3),s41oftheCPOremovesmanyoftherestrictionsofthecommonlawstillpresentinEngland,whileintheareaofco-ownership(seeChapter4)HongKongdoesnothaveequivalentlegislationtotheTrustsofLandandAppointmentofTrusteesAct1996.

ThereisnoabsoluteownershipoflandatcommonlawineitherEnglandorHongKong.Insteadanindividualownsabundleofrightsandobligations,whichwillsubsistforaperiodoftime.Itisimportantforyoutobeabletoidentifythedifferenttypesofrightsin land andwhether or not they are enforceable against third parties.Wewill startwithleases,thenstudyeasements,landcovenants,mortgages,co-ownershiprightsandlicences,aswellasotherlesscommonrightsassociatedwithlanduse.

Inthelatterpartofthistextwewilldealwithconveyancing,thatisthetransferoftitleinlandbywayofsaleandpurchase.Theselleriscalledthevendorandthepartyacquiringthelandiscalledthepurchaser.

Asmentionedabove,itisimportanttonotethatlandlawinHongKongisnotconcernedwithrealproperty.ThereisnofreeholdlandinHongKong,exceptforStJohn’sCathedral,andtheleaseholdestateisthemostimportantestateinHongKong.

UnderArticle7of theBasic Law,all land inHongKongbelongs to thePRCwith theHKSARGovernmentresponsibleforthemanagement,useanddevelopmentofthelandandforleasingofthelandtoindividuals.

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Chapter 1

1.2 The Meaning of PropertyAtcommonlaw,“property”wasanythingthatcouldbeowned.InHongKong,s3oftheIGCOdefinespropertyasincluding:

“…(a)money,goods,chosesinactionandland;and(b) obligations, easements and every description of estate, interest, andprofit,presentorfuture,vestedorcontingent,arisingoutoforincidenttopropertyasdefinedin(a).”

1.2.1 Real property and personal property

Itusedtobeatcommonlawthatonlycertain legalactionswereavailabletoforceadefendanttoreturnpropertytoitsrightfulowner.Thesewereknownasrealactions,oractionsin rem.Initiallytheseactionswereonlyavailablefortherecoveryoffreeholdland,andsosuchpropertybecameknownasrealproperty.Freeholdestateslastforanindefiniteperiod.ThereisnofreeholdlandinHongKong(StJohn’sCathedralexcepted).Hong Kong land, therefore, does not fall within the traditional classification of realproperty.

Real property can be subdivided into corporeal hereditaments and incorporealhereditaments.Ahereditamentisarightthatcanbeinherited.Corporealhereditamentsincludeland,buildings,minerals,treesandotherthingsattachedtotheland.Incorporealhereditamentsincludesuchrightsaseasementsandprofits.

Personal property is that which can be recovered by a personal action or action in personam.Theactualiteminquestionmayitselfnotberecoveredbutinsteadasumofmoneymaybeawarded.Personalpropertyincludeschattels(chosesinpossessionsuchasclothingandotherpersonalarticles),chosesinaction(suchasforadebt)andaleaseor tenancy.

MostHongKonglandisleasehold,ortogiveititstechnicalname,“chattelsreal”.Thisreflectsthehistoryofleasesthatinitiallywereonlycontractsbetweenthelandlordandtenantandonlypersonalproperty.However,overtimeitbecameclearthatatenantcouldnotoperateherpropertywithouthavingcertainpowers,suchastherighttokeepother persons off her property. The lease, therefore, has evolved intowhat the lawrecognisesasbeingmorethanmerelypersonalproperty,andhencetheclassificationaschattelsreal.

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1.2.2 Movable and immovable property

As pointedoutabove,itisthedistinctionbetweenchattelsrealandpersonalpropertythatisimportantinHongKong.SomelegislationinHongKong,suchass3oftheIGCO,ratherconfusinglyusetheterms“movable”and“immovable”propertytodistinguishbetweenpersonal property and chattels real respectively.However, thedifference isnegligibleasthestatutorydefinitionsofimmovablepropertyandland,aswillbeseenbelow,arevirtuallythesame.

1.3 The Doctrines of Tenure and EstatesThe doctrine of tenure wasnever introduced inHongKongbuttitle to land remainsfirmlyrootedinthetwinconceptsoftenureandestates:tenurereferstothefactthatnopersoncanownland–sheholdslandofanotherandis,therefore,atenant.

Underthedoctrineofestatesatenantdoesnotownlandbutshedoesholdtheabstractentity,the“estate”.Thisisaninterestinlandofaparticularduration.Thetechnicalwayofexpressingthatanestateis“owned”bysomeoneinlawistosaytheestate“vestsin”oris“vested”inthatperson.Tovestanestatemeansto“clothe”someonewiththerightsthatattachtothatestate.

1.3.1 Freehold and leasehold estates

Thetwoimportantestatestodayarefreeholdsandleaseholds.Theformeraregrantedforanindefiniteperiodand,asnotedabove,arerealproperty.Asalsonotedabove,theonlylandinHongKongthatisfreeholdisStJohn’scathedral.AllotherlandinHongKongisleasehold,withthemostimportantlegalestateinHongKongbeingthegovernmentlease(seeChapter2).

1.3.2 Legal estates and equitable interests

Section2oftheCPOdefinesalegalestateas:

“…(a)atermofyearsabsoluteinland;(b)thelegalinterestinanyeasement,rightorprivilegeinoroverlandforaninterestequivalenttoatermofyearsabsolute;and(c)alegalcharge.”

Part(a)referstoalease,whichwillbediscussedinChapter2,whilealegalchargeisthemaintypeofmortgage(seeChapter5).

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Section2oftheCPOthengoesontodefineanequitableinterestasbeing:

“…anyestate,interestorchargeinoroverlandwhichisnotalegalestateorafreehold…”.

1.4 The Meaning of LandSection2oftheCPOdefines“land”toinclude:

“…(a)landcoveredbywater;(b)anyestate,right,interestoreasementinoroveranyland;(bb)thewholeorpartofanundividedsharein landandanyestate,rightinterestoreasementinoroverthewholeorpartofanyundividedshareinland;and(c)thingsattachedtolandorpermanentlyfastenedtoanythingattachedtoland.”

1.5 The Right to AirspaceThecommonlawdefinitionoflandisthatanowneroflandownsairspaceandalllandbelowthesurface,butnotminerals(s3oftheMiningOrdinance(Cap285))nortreasuretrove(s10oftheAntiquitiesandMonumentsOrdinance(Cap53)).However,theairspaceownedislimitedtotheheightnecessaryfortheordinaryandreasonableuseoftheland(Bernstein v Skyviews[1978]QB479).

In Kelsen v Imperial Tobacco [1957]2QB344, thedefendants committeda trespasswhereanadvertisingsignfixedtotheirpropertyprojectedeightinchesintotheairspaceaboveasinglestoreyshopownedbytheplaintiff.Theevidenceshowedthattheplaintiffhadnointentionofusingtheflatroofinanyparticularwayandhadnotsufferedanyserious injury. Nevertheless, the court ordered the defendants to remove the signswithin28days.

1.6 Fixtures and FittingsAsnotedabove,landincludes“fixtures”-thingsattachedtothelandorpermanentlyfastenedtoanythingattachedtotheland(s2oftheCPO).