Servitudes

• Non-possessory interests

  • Profits a prendre

  • Easements

  • Restrictive covenants are not servitudes, but are also non-possessory rights. They restrict the use and occupation of land for the benefit of other land

A servitude is a right to use and enjoy another’s property, not amounting to taking possession.

Easements

Definition

• An easement is a right enjoyed by the owner of one piece of land (called the dominant tenement), the exercise of which interferes with the use and occupation of another piece of land (the servient tenement).

• Exception: legislation creates certain easements in gross – no requirement that it benefit land

Positive and negative easements

• A positive easement gives a right for something to be done –

• Eg a right to walk or drive across land

• A negative easement gives a right to prevent something being done

• Eg a right to receive light to a defined aperture (restricts the height of buildings on the servient land)

Policy questions

• Should easements in gross be permitted generally (legislation passed to allow as in NT etc)?

  • Why should a dominant tenement be necessary?

Should easements by prescription be abolished (policy?)?

[RG] In its final report (no. 22) on Easements and Covenants (2011), the Victorian Law Reform Commission recommended the abolition of easements by prescription and some types of implied easement, and proposed the creation of a process for the imposition of easements in appropriate circumstances by order of VCAT.

Security interests

• Security interest is a property right (of lender/creditor) attached to a debt

• Land commonly used as security because identifiable, permanent and tends to hold its value

Types of security interest

[11.2] Include:

• Mortgages (what we are mostly concerned with)

  • GL: Ownership security: If you give mortgage to bank, security by ownership (you are giving your title to the land) in general law

  • Charge: a non-possessory right over property/ land as security for an obligation. A mortgage under Torrens system is an example of charge. Only in the event you default can the bank retain possession.

• Pledges/pawns

  • Possessory security: the borrower does not transfer title but rather possession – a pledge/pawn – you give the pawn broker possession of your good and if you do not pay back the money they can sell your property.

• Fixed charges

  • Fixed charge: gives the creditor the right to sell the asset on default. CF floating charge

• Floating charges

  • rather than be attached to a specific asset, relates to the assets of the company as a whole – in the event of a default the floating charge will crystallise and enable the lender to secure possession of the assets

• Liens

  • possessory lien: entitles someone to retain possession of the property so as to receive payment for a debt. repairer’s lien: can retain possession of a repaired thing until you pay – no right to sell, but there may be a court process to allow them to sell it?

  • equitable lien: equitable right to a charge over debtor’s property without the right to possession. Vendor’s lien: if you enter a K for sale of land and tfr title to the land before you get the full sale proceeds, if the purchaser can’t come up with the full payment you get a vendor’s lien. You can go to court to get an order to have the purchaser discharge the debt

• Hire-purchase agreements

  • Hire purchase agreement: purchaser attains the right to possess items but ownership only transfers upon the total repayment of the debt.

Reasons for security interests in lending

A security interest enables the lender to enforce the debt against the property secured, often without court action

• Secured creditors rank in priority to unsecured creditors in relation to the property secured

• A very common form of security is the mortgage over an estate in land. Borrower (debtor) is mortgagor; lender (creditor/bank/financial institution ) is mortgagee

• If the borrower defaults, lender can sell the land to recover the debt (up to value of secured property - can sue for any debt remaining as unsecured creditor)

Mortgages vs term contracts

Mortgages v Terms contracts

• Terms contract - a form of vendor financing in which the purchaser takes possession and pays instalments of purchase price plus interest. It is not until after the final instalment is paid that the transfer of land is handed over to the purchaser.

[RG] A mortgage is only one way by which a purchaser of land can finance the purchase. A purchaser of land may also enter into a terms contract with the vendor under which the purchaser takes possession before all the purchase money is paid. The purchaser pays a substantial deposit and repays the balance of the purchase price and accrued interest in instalments.

[11.3] Term contract: purchaser can take possession of the premises on or shortly after signing the K and paying a deposit, and pays the remaining balance of the purchase price plus interest by instalment. The conveyance or transfer is not executed until the purchaser makes the final payment.

Term contracts create a number of problems for purchasers, particularly where the land is subject to a mortgage at the date of the K and the vendor subsequently defaults, or where the vendor him or herself is a purchaser under a term contract.

Rent to buy: this is a term contract.

Term contract: It is a form of vendor financing in which purchaser takes possession and pays instalments of the purchase price plus interest. It is not until after the final instalment is paid that the transfer of land is handed over to the purchaser.

In a mortgage you have to have a deposit of 10-20% of the value. If you can’t get this together, a...

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