The Implication of Easements in Favour of a Charge Holder

19th June 2019 Commercial Litigation

In Taurusbuild Ltd and Others v McQue and another [2019] UKUT 81 (LC) HHJ Behrens, sitting a judge of the Upper Tribunal has implied an easement into a mortgage of part in circumstances where the charged property would have been worth significantly less without the implication of the rights of way claimed.

Generally speaking, easements are implied in 2 scenarios: the rule in Wheeldon v Burrows (1879) 12 Ch 31 which, on a disposition of part, implies in favour of a buyer all quasi easements over the retained land that are necessary for the reasonable enjoyment of the part that has been disposed of (known as the dominant land), have been used and are used at the point of disposition by the seller for the benefit of the dominant land and are continuous and apparent. If it can be shown that parties did not intend a particular easement to be granted then it will not be created under the rule in Wheeldon v Burrows.

The second alternative is provided by virtue of section 62 of the Law of Property Act 1925 which provides that a conveyance of land shall be deemed to include and shall operate to convey with the land all easements which are appurtenant to the land conveyed. Section 62 applies unless a contrary intention is expressed in the relevant conveyance and a conveyance includes the creation of a mortgage or charge.

In this case, Mr and Mrs Ward owned Dinsdale Hall and 2 The Halls, registered separately under different title numbers. Access to 2 The Halls was possible via a rear roadway, over which an express right of way had been granted. However, a more convenient route was available in front of Dinsdale Hall which led to 2 parking spaces which had been used by occupiers and visitors to 2 The Halls albeit without any express right to do so.

Mr and Mrs Ward obtained planning permission to convert the hall into residential apartments and secured finance over both properties to fund the project. Prior to completion of the redevelopment, the Wards ran into financial difficulties. 2 The Halls was repossessed by the lender and sold to Mr and Mrs McQue. Receivers (acting on behalf of a different lender) later sold Dinsdale Hall to Taurusbuild Limited.

Mr and Mrs McQue subsequently sought to register rights in favour of 2 The Halls to use two parking spaces and a right of way across the front of Dinsdale Hall to access those spaces. The application was opposed by Taurusbuild and referred to the First Tier Tribunal. The Tribunal found that the mortgagee exercising its power of sale was unable to grant the rights Mr and Mrs McQue were seeking as the land owned by the mortgagee in possession did not include any part of the access road or the parking spaces and so the lender had no power to create an easement. Nevertheless the tribunal found that it was equitable to grant both the right of way and right to park to Mr and Mrs McQue. Taurusbuild appealed.

The Upper Tribunal dismissed the appeal and held that Mr and Mrs McQue were entitled to an implied right of way over the front access road and to park in two parking spaces. The Upper Tribunal determined that the access and the right to park were reasonably necessary to the enjoyment of 2 The Halls and that the Wards had demonstrated an intention to use that access for the benefit of 2 The Halls by virtue of their application for planning permission, the layout of the site and the fact that a letterbox was situated at the front of the property.

Further, the Upper tribunal concluded that the right had been implied into the mortgage taken out by the Wards in 2005 over 2 The Halls pursuant to the rule in Wheeldon v Burrows despite the fact that both the dominant tenement (the property with the benefit of the right) and the servient tenement (the property subject to the right) were in the same ownership. The judge concluded that when receivers appointed by the other lender took possession of Dinsdale Hall, the properties ceased to be owned by the same parties and the mortgagee’s agents had visited the property regularly using the front access and parking space once the mortgagee had taken possession.

As the transfer to Mr and Mrs McQue did not exclude the provisions of section 62 of the Law of Property Act 1925, the implied easements were transferred to the McQues when the mortgagee sold 2 The Halls to them.

Notwithstanding the fact that easements cannot be created when both the dominant and servient tenements are in common ownership and possession, the judge concluded that was not fatal to the claim. Whilst this constitutes a significant departure from other cases as it has implied rights of way for the benefit of a lender, it remains to be seen whether this decision will be followed given the Upper Tribunal’s apparent disregard for the requirements set out in Wheeldon v Burrows.

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Peter Barnard is a Partner located in Manchesterin our Commercial Litigation department

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