D is for Doctrine of Notice.

This is a topic involved with Land Law which I need to look up a little more for my revision,
however what I post today will be largely based on internet research as I find myself without
my trusted Land Law bible (A.K.A. my textbook). So please excuse anything that you believe
to be wrong (or point it out so I might learn from it after looking it up).

There are currently two systems of land conveyancing in England and Wales: Registered and
Unregistered. The doctrine of notice does not apply to registered land.

The doctrine of notice applies to equitable interests made before 1925, and is a method of
protecting third party interests in land.

The doctrine stems from the concept of 'Equity's Darling' (mentioned in my 'B' post). If a
purchaser did not know about an equitable interest having made full inquiries and
investigations, and so did not have actual, constructive or imputed knowledge of the interest,
he/she was known as a 'bona fide purchaser for value without notice' (I will break this down
into simpler terms momentarily), and could therefore acquire the legal title of the property
free of the equitable interests (one example being a holder of an easement, for example
having a right to light over their own property or access to their own home).

Bona fide purchaser for value without notice:

 Bona fide purchaser - the purchaser must act in good faith.

E.g, in the past, purchasers have been known to purposely turn a blind eye to the
investigations, claiming that they did not know of the other interests, so that they might gain
the property without being subject to equitable interests of third parties. If you fail to inspect
the property thoroughly enough, the court will hold that you have constructive notice of those
interests - so, you would be deemed to have notice of all interests, charges and easements that
you would have known about had you made a reasonably thorough inspection.

 For value - the purchaser must have given some consideration for the land - they
would not be a purchaser for value if the land was left to them in a will, or as a gift, or
through adverse possession.
 Without notice - the purchaser must not know of the equitable right actually or
constructively.
Most interests are now protected by entry on a register, meaning the purchaser is deemed to
have knowledge of them & they are therefore binding upon him/her. As a result, this doctrine
applies only to a few interests.
Acts such as the Land Charges Act 1972 and the Land Registration Act 2002 produce a more
coherent system of land registration as they record all of the various land charges, interests
and other rights held over each piece of land.

That, without my bible, is about all I can say about this topic! :)
Description

This section is from the book "Popular Law Library Vol6 Real Property, Abstracts, Mining Law", by
Albert H. Putney. Also available from Amazon:Popular Law-Dictionary.

Section 8. Doctrine Of Notice

As before remarked, the modern abstract owes its existence largely to the doctrine of notice. This
doctrine may be briefly explained as follows:

The principle is well established, that a purchaser of land is chargeable with notice, by implication, of
every fact affecting the title, which could be discovered by an examination of the deeds or other
muniments of title of his vendor, and of every fact, as to which the purchaser, with reasonable
prudence or diligence, ought to become acquainted. If there is sufficient contained in any deed or
record, which a prudent purchaser ought to examine, to induce inquiry in the mind of an intelligent
person, he is chargeable with the knowledge or notice of the facts so contained, and, generally, a
party in possession of certain information will be chargeable with a knowledge of all facts which an
inquiry suggested by such information, diligently prosecuted, would have disclosed to him.16 The
purchaser must be presumed to investigate the title, and to examine every deed or instrument forming
a part of it, especially if recorded, and to make inquiries in pais as well as look at records.

Notice is classed as either actual or constructive, but there is no difference between them in regard to
the legal consequence or effect. In this country it has been uniformly held that the record of a
conveyance, executed in conformity to law, operates as constructive notice to all subsequent
purchasers or incumbrancers, claiming under the same grantor, of any estate, either legal or
equitable, in the same property, provided the conveyance be one which the law requires or authorizes
to be recorded;17 and such purchaser is charged with the duty of exercising diligence in making
proper examination touching the rights and equities of others, where the record shows that others
have such rights, in the lands he is about to purchase.

16 Cambridge Bank vs. Delano, 48 N. Y., 326; Wilson vs. Hunter, 30 Ind., 466.

17 Tilton vs. Hunter, 29 Me., 29; Crockett vs. McGuire, 10 Mo.t 34.

A subsequent purchaser is not chargeable with constructive notice of all instruments of record, by
whomsoever made, but only of such as he in the apparent chain of title, or have been made by some
one in some way connected with property involved in interest, and brought to his notice. Hence, he is
not bound to look for conveyances by or judgments against one in whom the record shows no title.

The doctrine of constructive notice under registration laws has always been regarded as a harsh
necessity, and the statutes which create it have always been subjected to a rigid construction.
Therefore, only the facts as they appear on the face of the record are deemed binding on subsequent
purchasers, and if, from any cause, the real facts are there misstated, as if the wrong land is by
mistake described, or the sum for which a mortgage is given is inadvertently omitted, a subsequent
purchaser in good faith, relying upon what is shown, will not be affected by the error or omission.

That which a person actually sees, or which is specifically brought to his attention, creates an actual
notice of the fact. But the general doctrine of actual notice is much broader than this. Where a
purchaser has knowledge of any fact sufficient to put a prudent man upon an inquiry, which, if
prosecuted with ordinary diligence, would lead to actual notice of some right or title in conflict with that
he is about to purchase, it is his duty to make the inquiry, and if he does not make it, he is guilty of
bad faith or negligence to such an extent that the law will presume that he did make it, and will charge
him with the actual notice he would have received if he had made it.18

Open, notorious and exclusive possession of land imparts notice of the title of the person in
possession, and of every fact which the purchaser might learn by-inquiry.19 But while it is true, that
the law regards the actual occupancy of land as equivalent to notice of the claim of the occupant, to
all persons dealing with the title, yet this is not an absolute proposition, which is to be taken as true in
all possible relations. The known circumstances may be such that the occupancy will not suggest to a
purchaser an inquiry into the title or claim of the occupant, and when the inquiry may be omitted in
good faith and in the exercise of ordinary prudence, no one is bound to make it. Possession out of the
vendor and actually in another person ordinarily suggests an inquiry into the claim of the latter, and a
failure to make such inquiry evinces gross neglect, but the question in all such cases is one of actual
notice, and such notice will be imputed only where it is a reasonable and just inference from the
visible facts.20

As distinguished from constructive notice, actual notice consists in express information of a fact
brought home to a party, or a knowledge of circumstances which should lead him to a knowledge of
such fact. Its existence is always a question of fact, open to rebuttal or explanation, while, on the other
hand, constructive notice is a presumption of law which cannot be rebutted.

Continue to:

 prev:Section 7. Sources Of Information

 Table of Contents

 next:Section 9. Registration

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Notice.html#.UQ7Yf7-clyQ#ixzz2JsHn9Qj4
In property law in the UK, the doctrine of notice is a concept by which a potential purchaser
of real property can take free of any equitable interests in that property; said equitable
interests moving from the land to the money or other consideration that was paid for it.

The doctrine itself stems from the idea of equity's darling - a "bona fide purchaser for value
without notice". If someone who falls into this category of person purchases your land, then they
gain the legal title (ownership at law) of the land and all those people whose interests in the land
is merely equitable (i.e. lodgers, lenders who have an equitable mortgage secured on the land,
holders of easements, etc.) lose all those interests in the land. This means that the
proverbial granny in the attic is out on her ear, and the person next door who has to walk over
your front garden to get to their house no longer can do that. Understandably, taking free of such
interests is quite a drastic step, so the bar of proof that a potential purchaser is equity's darling is
rather high.

Firstly, the purchaser must not have notice of any of the equitable interests in the land. Being able
to satisfy this hurdle is a lot harder than it looks; you cannot just deliberately fail to inspect the
property before buying it. If you do that, a court will find that you had " constructive notice" of
those interests - that is, you will be deemed to have notice of all interests, charges, easements,
and whatnot that you would have known about had you made a reasonably thorough inspection of
the premises. The rationale for this is, of course, is that if you couldn't be bothered to find out
about things like that, then it's your own lookout. If, however, you made a reasonably thorough
inspection of the property and the previous owner contrived to hide evidence of, say, a lodger from
you, and thus you never found out about said lodger, then you will be considered not to have
notice.

Secondly, you must be a purchaser "for value." What this means is that the consideration one
provides to purchase the land must be "valuable" - that is, ineconomic terms (i.e. money) and not
merely nominal consideration. There are no hard and fast rules for determining what constitutes
valuable and nominal consideration; generally speaking, though, simply handing over a few
pounds to secure a valid contract of sale will not constitute valuable consideration. Generally
speaking, though, this element of the doctrine is very often judges as part of the test for good
faith, which is more a matter of impression than hard and fast rules. That being said, though, in
these instances, any offer made to the seller which is realistic (i.e. around the property's market
value) is generally held to be valuable consideration.

This doctrine may not last much longer in English law; with the Land Charges Act 1972 and
the Land Registration Act 2002 implementing a more coherent system of land registration which
records all the various charges and interests and other rights held in and over each piece of land,
and the moves towards electronic conveyancing of property, this doctrine, which only applies
to unregistered land, could well be on the way out. That being said, though, for registered
land there is a statutory provision in Schedule 3 of the above Act which sets out a limited version
of the doctrine of notice referring to the interests of "persons in actual occupation" of the property.
The Equitable Doctrine of Notice
The purchaser must be bona fide
This means that the purchaser must act in good faith. This part of the rule seems to be duplicated by
the requirement that the purchaser should not have notice of the right, and it is difficult to see what is
added by this phrase. However, Lord Wilberforce in Midland Bank Trust Co. Ltd v Green [1981] AC
513 at p. 528 considered that:

It would be a mistake to suppose that the requirement of good faith extended

only to the matter of notice…good faith is a …separate test which may have to be
passed even though absence of notice is proved

The purchaser must give value

It is necessary for the person who acquires the estate to give value if he is to rely on the
notice rule. Thus a done (or ‘volunteer’) takes a gift of land subject to any equitable
interests that there may be. ‘Value’ includes money, money’s worth and some other
forms of consideration, such as marriage.

A person who acquires an estate for value is described as a ‘purchaser for value.’ This
may seem unnecessarily long-winded, since in ordinary speech ‘purchaser’ means ‘buyer’
and so includes the notion of taking for value. However, for the lawyer, ‘purchaser’ has a
technical meaning of ‘one who takes by act of the parties rather than by operation of
law.’ This means that he has had the property transferred to him in the appropriate way
by the previous owner, rather than having it vested in him automatically by operation of
some rule of law, such as that which vests a bankrupt’s property in his trustee
inbankruptcy or the deceased’s property in his personal representatives. In this sense
then, even a donee is a purchaser and so in a context like this it is necessary to state
specifically that the person acquiring the estate is a purchaser for value.

The purchaser must acquire a legal estate

The purchaser must buy a legal estate, rather than an equitable interest in the land.
Thus if the purchaser is to be safe, he must have acquired the legal estate before he
discovers the equitable interest.

The purchaser must not have notice of the equitable interest

There are three types of notice: actual notice; constructive notice; and imputed notice.

1. Actual notice: This is quite straightforward and applies where the purchaser has
actual knowledge for the existence of the equitable interest. It is not necessary
for the purchaser to obtain this information from any particular source and he
may even discover the truth from a complete outsider (Lloyd v Banks (1868) LR 3
Ch App 488).

2. Constructive notice: When the notice rule was first created by the courts of
equity, clever purchasers soon realised that they could obtain an advantage if
 they declined to make any investigations which might lead to the discovery of
equitable interests. Equity was quick to extend the rule to prevent purchasers
deliberately ‘turning a blind eye’ in this way, as such behaviour was evidence of a
lack of good faith on the part of the purchaser. The means used was to say that
the purchasers would be deemed to know of interests which they would have
discovered if they had asked the usual questions about the property and so were
bound by such interests. This rule is preserved in modern law by LPA 1925, s.
1999(1)(ii).

3. Imputed notice: A purchaser is also deemed to have notice of an equitable

interest if his agent has either actual or constructive notice of it. This rule is
essential, since most purchasers do not conduct their own conveyance. Thus if a
conveyance obtains actual notice of an equitable interest, his purchaser/client is
also regarded as having notice of it (Jared v Clements [1903] 1 Ch 428).

As a result of major changes introduced by the 1925 legislation, the doctrine of notice is
of less importance today, but it can still be of some significance.
Reflections of a Law student (2013) http://reflectionsofalawstudent.blogspot.co.uk/2012/04/d-is-for-
doctrine-of-notice.html

Everything (2013) online <http://everything2.com/title/Doctrine+of+notice> [3rd February 2013]

In brief (2013) <http://www.inbrief.co.uk/land-law/equitable-doctrine-of-notice.htm>