What is Constructive Possession?
Constructive possession is defined as knowledge of a thing combined with the ability to control it. Hence, if a man merely knows of the existence of a thing without being able to exercise control over it, he cannot be said to be in constructive possession of it, for mere knowledge without the right to control or power to control is nugatory. Physical control and manual occupation over a thing however may not constitute constructive possession unless coupled with the intention of retaining or acquiring control over them. Thus, the intention of the person seeking possession or the deity of such possession is a sine qua non of constructive possession, though actual physical possession may not be essential . The two elements of constructive possession are (a) conscious dominion and control, and (b) intent to control.
Constructive possession connotes the existence of all the elements required for actual possession, but where either of such elements is absent or lacking, there may still be constructive possession, such as possession by a servant. Actual possession so closely approaches constructive possession that courts have merged them and said that where it is distinguishable, it is only in relation to the extent and degree of dominion exhibited over the article in question. Even the least dominion over a thing involves custody, real or constructive.
The Legal Basis and Concepts
The legal principles governing constructive possession have been shaped by a combination of common law doctrines, equitable principles, and statutory provisions. At the heart of constructive possession is the Macari v Celso decision. [1982] 1 WLR 699. Mrs. Macari sold a house to Mr. Anol. The contract gave no date for completion but included the following clause: "the purchase … to be completed on the matter of exchange between affording to him such notice and upon the payment by the purchaser of the balance of the purchase money." No exchange or completion took place but the purchaser moved in. At the same time the vendor signed an undated contract with someone else. Professor Griffiths said that all four parties to the Macari contract took the risk that the matter of exchange might never happen. On the basis that it would not be in the public good to prevent Mr Anol moving furniture into his new home, the Court of Appeal decided that the vendor’s first purchaser was in constructive possession.
In Schmidt v Curran [1994] 1 WLR 100 the agreement between the parties was much more informal. The deed between the vendor and the first purchaser was undated, and the first purchaser moved in, paying rent. The Court of Appeal found that she had only been licensed to enter: no intention was expressed, even implied, to grant her a licence in perpetuity – the licence was determinable at will. Boultwood v Hussain (1988) 56 P & CR 152 concerned whether a lease had been created between the parties. Depending on the wording of the document, the possibility of express or implied creation of a lease arises. Re: Attributed Securities Ltd v Dines (1984) 83 LGR 396 is clearly an example of implied creation.
Initially, a unifying doctrinal standard for the creation of a lease arose from the doctrine of part performance. This was codified under section 40 of the Land Registration Act 2002, as part of Land Registration Rule 1935. That rule states that the documents must be "that of a quality which would, at common law, make them decisive of the presence or absence of a contractual right" and that a written instrument should detail the "essential term of the disposition". This rule has now been repealed in favour of section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989.
Thus, in the case of proprietary estoppel and constructive possession it is important to remember that you will need to create a lease by complying with section 4 of the Law of Property Act 1925 (requiring a deed) and section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (requiring a written instrument containing all the terms).
The crystallization of these principles of part performance and constructive trust has occurred in the Land Registration Act 2002 which has provided an added statutory dimension to the question of property ownership. Principles of proprietary estoppel cannot simply over-ride the property regime which the Land Registration Act 2002 created.
The Elements of Constructive Possession
To establish constructive possession in property law, a plaintiff must prove the existence of three elements: (1) the intent to possess, (2) the ability to control, and (3) knowledge of the facts giving rise to the right of possession. These elements are applied in each case depending on the nature of the chattel claimed. Intention is an essential part of the rule requiring intent to be conveyed to the owner of the land. The one who claims to be in constructive possession of goods must have a present intention to make use of them and thus must intend to exert control over them by virtue of his occupancy or ownership of the land on which they are located. To exercise control, a person must intend to exclude others from the benefits of the possession.
A person who has constructive possession also has constructive custody. Constructive possession differs from actual possession in that it is not physical but legal possession. Constructive possession is of the thing of which another is in actual possession and so the former, or the one who has constructive possession, has the right to dispossess the latter one, who has actual possession. Therefore, constructive possession is one thing and actual possession is another. Another distinguishing feature of constructive possession is that such possession is similar to possession which the supposed owner as a tenant may have in grapes or fruits in the soil of another.
In the case of theft of property in the possession of another, which is later sold to the claimant, the owner has constructive possession only. Constructive possession, however, is exclusive and it is not enough that the occupier of a building is merely in the neighborhood of the thing claimed, or that he accidently sees it. The possession must be continuous and it must be of a permanent kind. It should be noted that exclusive possession does not mean that no one else but the claimant can use the property.
An individual may claim constructive possession and sue for recovery of such property against the finder, although he has not seized it as yet, and although there was no intrusion of any sort on the property. However, an innocent purchaser in good faith for value, without notice of the right of the true owner, may be protected even against the true owner. Property claimed by constructive possession need not have passed into the constructive possession of another person.
Case Studies in Constructive Possession
In one notable construction dispute, a building contractor successfully claimed a lien on real property despite the fact that the construction materials had been incorporated and were no longer on the property or in the possession of the contractor. A sub-contractor held possession of some of the materials, but it was not the original building contractor. The Court held that in such a lien situation the materials were considered to be in the "possession" of the original contractor, not the sub-contractor that had actual possession. There was no prejudice to the owner and it was clear that there was an intention to make payment to the original contractor. The Court considered and applied a common law principle of agency which held that possession of property was considered to be in the principal’s possession, not with the agent. The Court, in that case, further held that the owner could not in good faith object to a registration of a lien on the basis that the original contractor had not supplied the landscaping and concrete cutting because the work had been assigned by the original contractor to a sub-contractor.
An Ontario court held that even though a claimant did not exercise exclusive control over the improvement being made to another’s property, it could nonetheless claim a lien on the basis that it had constructive possession of the materials used for the improvement. The Court held that to be in "constructive possession" of a material it must be in the visible or physical control of the claimant, or at least enforceable at the time the lien was claimed, which means that the claimant could have removed it, either lawfully or unlawfully, at the time of taking. In that situation, the builder had a lien on a new car that the owner had parked in his driveway. The car was there at the time of improvement of the property and owned by the property owner who had hired the builder. The builder claimed a lien on the basis that the car was being used as a form of material storage while the builder was performing improvements on the property. The issue arose as to whether or not the car could be considered to be being "built or reconstructed". The Court held that the car had been "built and reconstructed" by the builder and then was parked on the owner’s property for use as material storage there, and therefore it was subject to a lien under the Construction Act.
Other types of possessions considered applicable in case law would include an interest in land or fixtures, housewares, machinery, artwork, culinary items and specialized materials.
Constructive vs. Actual Possession in Property Law
The distinction between constructive possession and actual possession is often a point of consideration in a variety of situations. Constructive possession may be favored in some cases, especially where certain public policy considerations become relevant, while in others actual possession will be the mindset of the court.
In order to prove constructive possession a sufficient showing must be made that an individual has the ability to control a specific property or interest in that property. If the person is in possession of something and has the ability to exert control that is sufficient to establish constructive possession. Constructive possession does not require knowledge of the possession. This is important because it provides a much wider breadth of scope for the purposes of the law. For instance, consider a case where a person owns a parcel of land but leases it out to another person. The owner can take possession of the land at any time. While the tenant possesses the land for the duration of the lease, the actual owner can still claim possession of it. In the event of a dispute this is important because they may have a valid claim to that land whereas the tenant does not. The reasoning behind the distinction between actual and constructive possession is largely based on public policy . The law favors the notion of who is in actual possession of the property. This is simply a reflection of the willingness of the court to engage with who is actually in use of the property. On the other hand, while not quite as strong, the law takes into consideration the idea of constructive possession to give the courts enough flexibility to account for certain unique situations where constructive possession may be a better fit for determining the legal rights of the parties involved. In a recent appellate court decision, the court examined the term constructive possession and how it relates to the underlying concept of hostile use. The court found that the doctrine meant to defeat the title of the true owner is the appropriation of it without legal process. Accordingly, the court found that the concept of constructive possession is akin to the concept of possession under a claim of right. A court may also look towards a set of circumstances that are a little less practical. If you were to find a major fault with a building that leads to the owner being unable to maintain it properly this could be the type of circumstance that leads a court to finding constructive possession. Another such circumstance may be where an individual satisfies several other elements of possession but is not actually using the property.
The Implications on Property Disputes
The full import of constructive possession is best manifested in property disputes. Take adverse possession claims, for example. An adverse possessor need not be the person who physically occupies the property as long as the construction exclusion is within that person’s exclusive dominion and control. Adverse possession "commands and controls" the property—not occupies it, even though occupancy is an important element of an adverse possession claim.
Landlord-tenant issues also implicate constructive possession. Even in a very open and notorious lease with only limited protections from dispossession, the tenant has not lost constructive possession if the premises are sublet or rented to someone else unless the lease restricts some aspect of subleasing. In that case, the tenant is merely taking or holding the actual possession constructively of the owner. In other words, the owner is deemed to be reconstructively in possession of the property subject to the rights of the tenant. If the tenant refuses to relinquish or dispossess the subtenant, the landlord may be required to institute an action to oust him.
Difficulties and Misinterpretations
Many challenges and misunderstandings exist in the realm of legal concepts. Constructive possession is no different. A common misconception is that constructive possession requires actual possession of the property, generally before entering into a contract, or retention of actual possession after a consideration of value has been paid to acquire the property. For example, in the case of real property, constructive possession will be found if the purchaser is in constructive possession of the property if the land is fenced. However, actual possession can be found when the purchaser is in constructive possession, such as where the purchaser is in control and has the use of the subject property, even if it is not fenced. As well described in United States v. Davis, there are four essential elements: it must be shown that a party is exercising the right to control (1) the disposition, (2) the management, (3) the regulation, and (4) the direction of the finances. Only one person needs to have all four elements to have constructive possession, but multiple people can cooperate to have constructive possession. Unlike actual possession, constructive possession does not require direct physical contact with the subject property if a party has exercised any one of the four control elements on the property. A party can still maintain constructive possession over property even if they are not using it. This is unlike actual possession, which is defined as a physical element where a party exercises exclusive physical control over a piece of property. Another misconception is that constructive possession is a concept driven by statute. In fact, it is not. Constructive possession is a common law concept. Constructive possession finds its basis in the broader concept of possession. Constructive possession would take effect when the actual possession of the thing is held by another , as is the case of bailments. In other words, it is a remedy for claiming personal property interests without another method of recovery by the bailor through traditional means. A bailor can seek a remedy of constructive possession of a lost item, like a vintage collectible or piece of artwork, even if they lose the item. The typical example is a lost item that a bailor puts up a sign for anyone finding the lost item to contact the bailor. Applied to a real property context, the bailor would be the owner and the sign would be the deed. Civil law treats the bailor as the owner of the lost item, even if they lose it, and thereby entitled to the condemnatory award as it would treat an owner being dispossessed by eminent domain. Yet a further misunderstanding is that the doctrine of constructive possession relates only to instances of repossession by lenders of personal property collateralized by security. In reality, constructive possession can apply to any situation, including eminent domain, where the legitimate expectation of entitlement to property has been frustrated. In the eminent domain context, eminent domain statutes allow a condemnor (i.e., a governmental agency) to acquire property from the landowner (i.e., the condemnee) by force if an authorized governmental agency cannot reach a fair and just resolution. Anecdotal studies have suggested that only around 10% of real property cases in the United States go to eminent domain trial. Most successful eminent domain property owners negotiate a settlement with the condemnor. But for the 90% of cases where the parties do not settle before trial, constructive possession plays an important strategic role for a property owner facing eminent domain.