Nature of Property Rights
In this context, property refers to “real” property (i.e. land and buildings). In the broader sense, property refers to anything capable of being owned. See out separate guides on movable property (e.g. goods), intangible property and intellectual property (e.g. patents, trademarks and copyright).
It is possible for different people to have different rights in land and buildings. Different estates interests and rights in property may have different economic values depending on their terms and conditions and the right which attach.
A single person may have all available rights to property, in which event, he is the sole and full owner. It is possible for the rights of ownership of land to be divided up amongst various individuals (co-owners) who each share in the same type of ownership. It is also possible that ownership is divided into different “estates” or “interests”.
Co-owners may be joint owners, which mean that collectively, they are entitled to the whole and no one person is entitled to a particular share. Alternatively, they may be tenants in common. In this case, each is entitled to an “undivided” share. The shares may equal or in any proportion as may be agreed. In this case, they would be entitled to the rents and benefits of land in proportion to their undivided share.
It is possible for persons to own land successively. All kinds of rights and interests of in property may be created. It is possible to own property for life or for shorter periods. It is possible to create leases and tenancies for periods ranging from days to centuries. In practice, the two main categories of rights or “estates” encountered are freehold estates and leasehold estates. The recent land law reforms have tried to minimise the types of new rights that can be created.
A person’s title to property means the ownership rights that the person has, in respect of it. On the sale of the property, the seller will need to demonstrate that his rights or interest in the land, are sufficiently wide and unaffected by third parties rights so that the buyer can get the practical benefits of what is considered full ownership.
Relativity of Interests
Property interests are relative. A person in possession of the property may exclude all persons, other than those who have a better legal right or title to the property. A person in possession, such as a squatter may exclude others. Those others can’t invoke the rights of the true owner (e.g. registered full owner). The true owner can invoke his own rights and eject the squatter.
A squatter may defeat the rights of the true owner, if the true owner does not take legal action to recover the property, within the 12 years or other time limit allowed under the Statute of Limitations. After this period the squatter may effectively become full owner of the property. It is too late for the true ( registered owner or owner under deeds) to assert his ownership.
Leases and Tenancies
A lease is effectively a contract by which one person, (the landlord), gives an exclusive right of possession of land to another person (the tenant) for a period. A lease is fundamentally a contract so that to a large extent, it can be on whatever terms that the landlord and tenant agree, or sign up to.
There are laws which in some aspects of the landlord and tenant relationship, limits the extent to what comes can be provided. For the most part, Landlord and tenant law creates tenants rights in relation to particular issues. Subject to this, a lease can be structured in whatever way is desired.
The landlord may be a freehold owner or may himself be a tenant under a longer lease. giving exclusive occupation to another of land to another person. In a sense, a lease grants conditional ownership. Each of the landlord and tenant has ownership rights or a so-called “interests” in the property.
The landlord’s right is generally to receive the rental income. The tenant’s right, subject to payment of the rent and compliance with the terms of the lease, is to the exclusive occupation. The tenant can even exclude the landlord from the property. The landlord may have rights of access to the property, to verify compliance with the lease, but this does not give him any right of occupation or possession.
Balance of Rights
The terms of the lease will determine the balance of the economic rights of ownership to the land as between the landlord and tenant. In the case of a typical commercial lease, for a five to thirty year period, the landlord charges the market rent, together with periodic rent reviews and the tenant is entitled to possession. In this type of lease, it may properly be said that the landlord is “owner”, in that he is entitled to the economic benefit of the property, which he might sell at a market value, equivalent to that which a freehold seller of vacant property may achieve.
Tenants under leases of business premises may also have a right to compulsorily obtain an extension to the term of years. Generally, a tenant who has leased and used as a business premise for more than five years will generally have a right to a new lease of between five and 25 years at the termination of his lease or tenancy. This right may be exercised on successive occasions, so that subject to paying the market rent, a business tenant may have to right to continue his lease perpetually.
Many older leases were granted for a long period at a rent which is fixed. Many leases were granted in the 18th and 19th Century which were initially at a rent, which represented the market value of the property at the time. Many leases, up to the mid-1970s were granted of land, on which a building was later built by the tenant (or lessee). A capital sum may or may not have been paid by the landlord when the lease was granted. The rent would have represented a sum equivalent to the rental value of the undeveloped land, or the rental value, net of the capital sum.
Such leases were typically granted for periods of 99 to 999 years or more at rents at less than £100 per annum. Over time, the effect of inflation was to erode the value of the rent so that it became nominal. The terms and conditions of such leases were not typically onerous. In effect, the passage of time caused the tenant’s rights or interest under the lease to become close to a freehold interest. In this case, the tenant’s interest is close to full ownership of the land, while the landlord’s right is only that to collect a nominal rent.
Layers of Interests
There may be multiple layers of leases over the one property. For example, there may be a freeholder owner who has granted a 999 years lease at a ground rent. The tenant or lessee under that lease may have granted a lease for say 200 years at a ground rent. That lessee may have granted a “commercial lease” for 25 years at a market rent. In this case, the tenant under the 200 year would in substance be the economic owner.
In Ireland, multiple layers of ground rents were common in the 19th and early 20th century in the context property development. A landowner would grant a parcel of land to a head developer. He might develop common facilities and grant a sub-lease of smaller parts to various other developers. He might build a house and sell it by a long lease. In this way, multiple lease layers may come into being.
The freehold (or “fee simple”) owner in possession has the fullest possible rights ( interest or estate) and it the closest thing to absolute ownership, known to Irish law. It is possible for the freehold estate to be subject to a lease or other rights, such a public or private right of way in favour of a third party. They may have been created by the current freehold owner or their predecessors. The terms of the lease or other right will impact upon the value and extent of the freeholder’s rights.
Landlord and tenant legislation allows the tenant (or lessee) under many of the ground rent types of lease (long term of years with fixed nominal rent) to compulsorily buy the freehold interest. Certain conditions apply. In effect, the obligation to pay the annual rent is commuted to a single capital payment. The freehold ownership is transferred to the lessee and the lease terminates. Where the lease qualifies for freehold purchase, the right can be exercised against the immediate landlord and all landlords of that landlord, up to and including the freehold owner.
Third Party Rights over Land
The rights of a land owner can be diluted by the existence of rights in favour or third parties. Apart form leases, a property may be affected by so called easements or other rights for the benefit of adjoining property and their owners. There might, for example, be a right of way for a neighbouring property, the effect of which is to restrict the use to which a part of the property may be put.
An easements is a right of a third party to use the land for a certain purpose, for the benefit of an adjoining property. It may impact upon the land in a minor way, such as a right of support or right to light. It may be more extensive, such as a right to graze cattle or a major right of way.
The adjoining owner who enjoys the benefit of an easement owns a property like right in relation to the affected land, to use it in accordance with the terms of the easement. The easement attaches to the adjoining land, but it is a property right in itself. This effect of the easement may be a minor or may be very far reaching, depending on its terms and conditions.
Apart from the landlord and tenant relationship is possible for a person to have a limited title to a property. A person might be the owner for his life. This is a property interest. The interest of the person who is due to become the owner, on the death of the life owner, is itself am immediate and present day property interest. For example, that latter person may transfer that present right (carrying future benefits) to a purchaser or it may pass on his death to his successors.
Restrictive covenants are legal obligations that attach to land. They are entered by the owner or his predecessor and they usually involve an obligation not to use the property in a particular way of for a particular purpose. The benefit of the covenant is held by another and usually operates for the benefit of an adjoining property and its owners.
Nominee and Beneficial Owners
A person may the registered owner or named on the deeds, but may hold the property on behalf of another. He is the “legal” owner, but is a trustee. The legal owner may be a bare nominee, who unconditionally holds it for the true owner. For example, trustee may hold the land for a person while he is under age or has suffers from mental incapacity. The beneficial or equitable owner, on whose behalf the trustee holds, may be the “true” owner.
In other cases, the legal owner / trustee may have more active duties and there is no single beneficial owner. There may be several beneficial owners with different types of rights or interests. The trustee may have very wide powers and may indeed decide if and when a potential beneficiary receives an interest in the property. When land is held by a trustee, it facilitates flexibility in the creation of rights of the beneficial or equitable owners.
Licensees are persons who have contractual right to use or occupy a property, but do not have exclusive possession of the property, They do not have the right to exclude all others from the land, that a tenant has. They cannot maintain a trespass claim. They may be able to sue the party who granted them the licence, for breach of contract, if they are denied the promised right..
A lease is a contract, which carries property rights. The tenant has the right to exclude all other persons from the property, including the landlord itself. The tenant’s rights are conditional, on continued compliance with the terms of the lease. The lease can ultimately, be cancelled or forfeited for non-payment of rent and breach of the lease terms. .
It is possible for an owner to contract to give a right to use property, without creating a lease. This is a licence. An example would be the right of a concessionaire to use part of a shopfloor. The distinction between a lease and licence can sometimes difficult to make The labeling of arrangement as a “licence” in order to avoid tenant’s rights under landlord and tenant legislation, will fail if the arrangement, is in substance a lease. . If the arrangement is in substance a lease and gives exclusive possession, then it is likely to be deemed a lease and treated accordingly.
Security over Property
It is possible to grant security interests (mortgages or charges) over a property. The mortgage or charge gives the lender security over land which entitles it to take possession and sell the land to recoup a financial obligation. The lender or mortgagee or chargee has a property right which holds good against all others, including other creditors. The rights hold good, even if the borrower dies or becomes bankrupt.
It is often said that property itself is not owned as such. A person owns an estate or interest in the property. He has a bundle of rights to and in respect of the property. These rights may be minimal or may equate to full ownership. In most cases, one or two persons together (joint owners) , may have all the relevant ownerships. However, this need not necessarily be the case and it is possible to create many concurrent rights in the same property.
It is possible for several persons to have different rights or interests in the same property. It is possible for there to be multiple leases and subleases. Any of the leases may themselves be subject to a mortgage. The land itself may be subject to easements covenants and licences. The economic benefits of these rights vary depending on their particular terms and conditions .