Last Updated on February 25, 2024 by Ali Hamza
Estoppel in real estate is a way to legally bind the current owner of a property from claiming that your land does not belong to you. It functions as an equitable remedy, typically preventing the use of fraud or illegality to take away land and place it in someone else’s hands against the rightful owner’s wishes and knowledge.
Modern formulation
Estoppel has existed in its modern formulation since 1832 where Lord Denman was petitioned by a tenant farmer who had been ejected from his holding following a notice terminating his tenancy given by one Captain Gordon. The question before the court was whether such an eviction could be validly carried out when it had been done without making any deductions for rent arrears which were allegedly owed by the tenant.
The court found in favor of the tenant and held that Captain Gordon’s notice was not a valid one. The court, however, also stated that if the tenancy ended as a result of surrender by either party then this would be a different matter since estoppel would not apply.
Another case involving an eviction:
In 1852, Lord Campbell CJ decided another case involving an eviction carried out under notice to quit given by one Binns MP to his tenants at Pains wick House who were also related to him by marriage. In this case it was ruled that where there had been a total voluntary relinquishment of land coupled with an intention to sever all connection with the property, estoppel would not apply even though there may have been some acts inconsistent with an outright termination of the tenancy.
This case is still cited in cases in which estoppel has come into play despite there being clear evidence that possession was not intended to be restored to the rightful owner.
Estoppel in real estate
Estoppel in real estate is where a person, by his words or actions, acknowledges an interest in your land which could otherwise be contested. Estoppel can prevent a prior party from denying your ownership rights on your property. It is an equitable principle that prevents inconsistent positions being taken by someone who asserts something for their benefit and then seeks a different position when it’s not as favorable to them anymore.
A departure from precedence must have been made with full knowledge of the facts or else done under duress or mistake or else it would be unfair to allow the departure. The party being estopped must have had full knowledge of the facts or ignorance is no defense against an estoppel.
Advantages for a Person:
Estoppel prevents a person from asserting his legal rights where that assertion would be unjustly to his detriment because he has misled another who reasonably relied on what was said or done by him so as to alter his position in justifiable reliance thereon. This results in two types of estoppels, one called “proprietary” which ties up ownership and possession of property, and another called “personal” which affects personal rights like contract or other relationships.
Personal estoppel can affect rights arising out of land indirectly, but it only derives from the act created it (e.g. a sale) and not from the land itself. Personal estoppel typically ties up some right. Proprietary estoppel is where someone’s words or actions tie up ownership of property, as this creates a legal relationship that binds successors in title.
Anyone cannot prevent another:
In general, one cannot prevent another from doing what they have a right to do except for matters involving proprietary estoppels which can also be executed involuntarily by operation of law even though the owner may not have intended it. The concept of proprietary estoppel was first advanced in 1932 by Lord Romer LJ who made clear that the doctrine would only apply if there was clear evidence that possession has been given away with intent to transfer whatever rights came with it.
In “Jennings v Rice-Smith” it was opined that where the claimant of estoppel had acted inconsistently, they could not deny their prior conduct and claim an interest in land which they once said they didn’t have.
Importance
Estoppel is based upon fairness and justice where one party has changed his/her position as a result of what another said or did and it would be unfair to allow them to go back on this later. Estoppel can also arise from misrepresentations made by those with some measure of influence over others such as agents, friends, and partners etc., thus creating a duty to disclose all material facts when dealing against those who rely on such information.
It is because of this that there are limits as to how far a party can go in creating reliance by another that alters their position. The party claiming estoppel must have been acting under a mistake of some sort, be it from silence or from misleading information given them which they reasonably relied on to their detriment.
According to Lord Simon:
In “Pettitt v Dunkley”, Lord Simon stated that if someone has created an initial impression of ownership equity and goodwill in land, he/she cannot deny this later even though the person may have known the facts at the time while being silent about them. Estoppel therefore is not confined to cases where there has been a positive assertion but extends to conduct which creates a false impression as well.
In order for a claimant to seek relief using estoppel effects, they must have been entitled to relief in the first place. In “Walsh v Lonsdale” it was found that estoppel can prevent a person from arguing they didn’t have a contract when in fact one did exist, but estoppel cannot create a right where none exists—estoppel does not affect matters of law or change rights into something else.
Read More:What is Due Diligence in Real Estate? All the Information about Due Diligence in Real Estate
Hazell v Hammersmith:
In “Hazell v Hammersmith”, the House of Lords ruled that anyone who creates an impression which leads another to reasonably rely on it would be deemed as an equitable estopeple even if what he said turned out to be untrue. A pre-existing right will generally not be dispensed with by regards to proprietary estoppels unless it is done for good cause, as it is better to err on the side of caution. One must also consider that estoppel does not normally allow an individual to attach new conditions or qualifications without having acted inconsistently with what they previously said, but there are cases where this has occurred such as “Frazer v Walker” which allowed for continuity despite some changes over time.
Estoppel is not designed to operate in situations where there is misconduct by one party against another, so the claimant must be able to show that they have suffered a disadvantage of some sort through their reliance on what was previously believed before they can seek relief or compensation for it. If someone has entered into an agreement with someone who later reneged and made a claim based upon equitable estoppel, then they will only be able to rely upon the agreement in question if there has been a detrimental change of position and that they were acting in good faith when entering into it.
Conclusion
It can be complicated to buy and sell real estate. Changing dialect from one region to another doesn’t help. According to the state where a homebuyer lives and works, the term “tax certificate” can have different connotations. The term estoppel is another example.
A principle of estoppel prevents someone from asserting anything contrary to what is implied by previous actions or statements or by previous judicial determinations.”
