Help at hand with unwritten rule on property agreements

It is a generally accepted principle that, without a written agreement, any property-related transaction is not legally binding.

However, if you have not, for whatever reason, recorded your transaction in writing, the doctrine of ‘proprietary estoppel’ may come to your aid. This would essentially allow you to lay claim to someone else’s property if you have invested time and money in that property to your disadvantage.

A classic example would be if you had renovated, or redeveloped, a property on the understanding that you will, at a later date, acquire an interest in it or a right to stay there. If the property owner subsequently reneged on your agreement by denying your interest, you could invoke the doctrine of proprietary estoppel, effectively asking the court to step in and prevent the legal owner from asserting his normal legal rights to the property. Such an action could well lead to a legal confirmation of your interest in the property in spite of there being no written agreement to that effect.

Recent cases have, however, narrowed the concept of proprietary estoppel. In the case of Yeoman’s Row Management Ltd –v- Cobbe, the claimant (Mr Cobbe) and defendant (Yeoman’s Row) agreed verbally that Mr. Cobbe, at his own expense, would seek planning permission to demolish the property belonging to Yeoman’s Row in order to build six houses on the resulting plot under a suitable financial arrangement between the parties. Planning permission was granted at which point Yeoman’s Row wanted to renegotiate the financial terms. Mr Cobbe applied the doctrine of proprietary estoppel, a position upheld by the Court of Appeal. Yeoman’s Row then appealed to the House of Lords which ruled that a valid case of proprietary estoppel had not arisen principally because all the areas that would normally have been covered in a written agreement were not covered in the oral agreement. However, the Court acknowledged that Yeoman’s Row had ‘acted unconscionably’ in reneging on its agreement and awarded Mr Cobbe an amount to reflect his time and expense in obtaining planning permission.

This case established that complete agreement must exist between the parties, together with demonstrable detriment.

Other recent decisions in the lower courts have sought to overcome some of the limits placed on proprietary estoppel. In Herbert v. Doyle, the Court of Appeal envisaged a situation in which a developer would be able to enforce an oral agreement to transfer some parking spaces to him. Although the court did not make an order, it suggested that it would have ordered the transfer under the terms of the oral agreement if he had intended to proceed with his obligations under the agreement – which in this case he did not. In Manton Security v. Nazem, the court went further, requiring a landlord to grant a new 21 year lease to an occupier who had persistently delayed paying rent and had no rights of renewal under the Landlord and Tenant Act 1954. Although the occupier had entered the property at the invitation of the former tenant, the lease had not been transferred to him and the landlord, rather than objecting to the tenancy, started to negotiate the terms of a new tenancy with him. The negotiations were protracted and eventually stalled. During this time the occupier made improvements to the property. The court ruled that the landlord had to grant a new lease as the negotiations had given the occupier the expectation that the lease would be granted and the landlord had not prevented him from making improvements.

All in all, it is much safer to ensure that any agreements relating to property transactions are made in writing rather than relying on oral agreements, using the courts as a backstop. Estoppel, although a useful tool in many cases, is an uncertain remedy.