Property compromise agreements may be oral even though they have a disposing effect provided they do not have a disposing purpose.
Yeates v Line and Field [12 November 2012] considered the important issue of whether an agreement to compromise a dispute over ownership of certain land had to be in writing.
The Yeates applied to the Land Registry to alter the register of title by registering them as proprietors of a triangular parcel of land measuring about 34 metres by 24 metres. The basis for the application was that the Yeates had acquired title to the land by adverse possession.
Subsequently, the Yeates met Ms Line and Mr Field, who were the registered proprietors of the land and objected to the Yeates’ application. Field explained that he wanted to erect a fence across the land and Ms Yeates indicated that she accepted that it did look from certain plans as though the land could belong to Line and Field. Field said to Yeates “So, we are agreed then?” to which Yeates replied “Yes”, and they shook hands on the deal.
Despite the handshaking, the parties remained in dispute and this was referred to a Land Registry deputy adjudicator for resolution. The adjudicator decided that the Yeates had acquired title to the land by adverse possession, but decided not to direct alteration of the register, because she found that the parties had reached an oral agreement to compromise their dispute. This was on the basis that Yeates’ application would be withdrawn and Line and Field could erect the fence, which would leave Yeates in possession of a small part of the land to the south of the fence.
The adjudicator held that this agreement was a legally binding contract amounting to exceptional circumstances, which justified not altering the register. The adjudicator directed the registrar to cancel Yeates’ application.
Yeates appealed against the adjudicator’s decision on the basis that the oral compromise agreement was void, since it fell foul of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, part of which provides that a contract for the sale or other disposition of an interest in land can only be made in writing.
Since the adjudicator had held that the land actually belonged to Yeates and the compromise agreement allowed Line and Field to erect the fence and treated them as owners of the land to the north of the fence, the effect was that land belonging to Yeates should in future belong to Line and Field.
Yeates contended that because the agreement had this disposing effect, it fell foul of section 2. The High Court, however, held in favour of Line and Field. The agreement was not an agreement for the sale or other disposition of an interest in land within the meaning of section 2, so that despite being oral it was a valid contract.
There was case authority that an oral agreement to demarcate an unclear boundary described in title documents or on a plan, is not void by virtue of section 2 even though it has a disposing effect (land is disposed from one party to another), because section 2 refers to an agreement which has a disposing purpose. As a matter of ordinary English usage, for a contract to be one “for” selling or disposing of land, it must have been the parties’ purpose that the contract should achieve such a sale or disposal. For the agreement to fall foul of that section, it has to have a disposing purpose and dispose of more than a trivial amount of land.
The Court held that if a disposing effect is not the acid test in relation to boundary agreements, it should not be so in relation to other agreements. The compromise agreement did not fall foul of section 2, because it did not have a disposing purpose even though it had a disposing effect. Since the agreement is valid, this appears to mean that the register will not be altered.