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Notes and Questions 12.5
1Read Pritchard v. Briggs [1980] Ch 338, either in full or as extracted at www.cambridge.org/propertylaw/, and consider the following:
(a)According to the Court of Appeal, how does a right of pre-emption differ analytically from (i) a right to purchase under an unconditional contract and
(ii)an option to purchase? What reasons do they give for concluding that these differences justify their conclusion that a right of pre-emption is not a property interest, whereas the other two are? How convincing are these reasons?
(b)How does a right of pre-emption differ from a right to purchase under a conditional contract for sale? Does it make any difference whether the fulfilment of the condition in the conditional sale contract is dependent on the volition of the seller, or the volition of the buyer, or outside the control of both of them? Should it?
(c)According to each of the members of the Court of Appeal in Pritchard v. Briggs at what stage, if any, does a right of pre-emption become a property interest? Consider what problems are caused by each of their analyses.
(d)Is the Court of Appeal right to equate a right of pre-emption with the hope of a person who is a beneficiary in the will of a living testator? Consider what Mummery LJ says about this in Dear v. Reeves below.
2Read Dear v. Reeves [2001] EWCA Civ 277, either in full or as extracted at www.cambridge.org/propertylaw/, and consider the following:
(a)What would Mr Reeves’ trustee in bankruptcy gain by exercising the right of pre-emption? What was the likelihood of his being given the opportunity to do so?
(b)Is the reason given in paragraph 31 for distinguishing Pritchard v. Briggs compelling? Pritchard v. Briggs concerned enforceability of the interest, whereas Dear v. Reeves concerned the alienability of it: does this throw any light on whether it might be justifiable to treat a right of pre-emption as a purely contract right for the purposes of registering interests in land, but as a property interest for bankruptcy purposes, so as to ensure that it passes to the trustee in bankruptcy and does not remain in the bankrupt’s own hands? See in particular what Mummery LJ says at paragraph 40: would these factors be relevant to the issues that arose in
Pritchard v. Briggs?
3Read Spiro v. Glencrown Properties Ltd [1991] Ch 537 and Bircham & Co. Nominees (No. 2) Ltd v. Worrell Holdings Ltd [2001] EWCA Civ 775, either in full or as extracted at www.cambridge.org/propertylaw/, and consider the following:
(a)Is the Court of Appeal decision in Bircham consistent with the reasoning of Hoffmann J in Spiro? Is it consistent with the objectives of section 2 of the 1989 Act?
(b)Consider the practical effects of the decision in Bircham: is it likely that writing satisfying section 2 will ever come into existence when a right of pre-emption is exercised? If not, does this matter?
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(c)What is the effect of section 115 of the Land Registration Act 2002 on this decision? (see above).
(d)Examine the reasons Hoffmann J gave in Spiro for regarding himself as justified in departing from the ‘irrevocable offer’ analysis of options to purchase. Are they valid reasons?
Extract 12.6 Law Commission and HM Land Registry, Land Registration for the Twenty-First Century: A Conveyancing Revolution (Law Commission Report
No. 271, 2001)
R I G H T S O F P R E - E M P T I O N
5.26. In the Consultative Document we gave the following critical explanation of the present legal position of rights of pre-emption:
A right of pre-emption is a right of first refusal. The grantor undertakes that he or she will not sell the land without first offering it to the grantee. It is similar to but not the same as an option, because the grantee can purchase the property only if the grantor decides that he or she wants to sell it.
The precise status of a right of pre-emption was uncertain until the decision of the Court of Appeal in Pritchard v. Briggs, an uncertainty that that decision has not wholly dispelled. In some cases, it had been held that it was merely a contractual right and could never be an equitable proprietary interest. In others, the right was held to create an equitable interest in land from its inception. There are also a number of statutory provisions which were enacted on the assumption that rights of pre-emption created interests in land.
In Pritchard v. Briggs a majority of the Court of Appeal expressed the view that a right of pre-emption did not confer on the grantee any interest in land. However, when the grantor chose to sell the property, the right of pre-emption became an option and, as such, an equitable interest in land. It should be noted that the remarks of the Court of Appeal were only obiter and have been recognised as such. They have been much criticised, and this criticism has not escaped judicial attention. Not only was there no previous authority for ‘this strange doctrine of delayed effectiveness’, but if it is correct its effects can be unfortunate:
(1)It can lead to something ‘which a sound system of property law ought to strive at all costs to avoid: the defeat of a prior interest by a later purchaser taking with notice of the conflicting interest’, as indeed happened in Pritchard v.
Briggs itself. For example, if A grants B a right of pre-emption which B immediately registers, and A then mortgages the land to C, it seems likely that C will not be bound by the right of pre-emption because the execution of the mortgage probably does not cause the pre-emption to crystallise into an equitable interest. C could therefore, in exercise of his paramount powers as mortgagee, sell the land free from B’s right of pre-emption.
(2)Although the person having the benefit of a right of pre-emption may register it at the time it is created . . . the right is effective for the purposes of priority
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only from the moment when the grantor demonstrates an animus to sell the land, not from the date of registration.
5.27.In the Consultative Document, we recommended that a right of pre-emption in registered land should take effect from the time when it was created and not, as Pritchard v. Briggs suggested, only from the time when the grantor decided to sell. This recommendation was supported by 96 per cent of those who responded to the point. It was clear from the tenor of the responses that the result in Pritchard v. Briggs was not well regarded because of the practical difficulties to which it gave rise.
5.28.The Bill provides that a right of pre-emption in relation to registered land has effect from the time of creation as an interest capable of binding successors in title . . .
In other words, it takes its priority from the date of its creation. If the dicta in Pritchard
v.Briggs do represent the present law, then the Bill changes the law in its application to registered land. The change is therefore prospective only. It applies to rights of preemption created on or after the Bill comes into force.
Notes and Questions 12.6
1What precisely was obiter dicta in Pritchard v. Briggs: the unanimous conclusion that the right of pre-emption was not a property interest, or the majority conclusion that it becomes a property interest at the time when the grantor decides to sell?
2The Law Commission and Land Registry report gives, in effect, two grounds for criticising the decision in Pritchard v. Briggs (i.e. the two numbered points in paragraph 5.26). The first is question-begging: it is only contrary to property law principles for a right of pre-emption to be defeated by a subsequent property interest if a right of pre-emption is itself a property interest. This is the question at issue here, not something that can be assumed in an argument seeking to convince us that it should be a property interest. The second requires closer scrutiny: consider what practical ill-effects would follow if an interest is registered before it becomes a property interest, and will only become a property interest on the happening of a future event.
3A better test for deciding whether rights of pre-emption ought to be classified as property interests might be to consider whether people might have good commercial and/or social reasons for wanting them to be enforceable not only against the original parties but also against anyone who subsequently acquires an interest in the land. If we apply this test, should rights of pre-emption be classified as property interests?
4The wording of section 115(1) of the Land Registration Act 2002 which implements this recommendation closely follows the wording of the recommendation itself: