Learning Outcomes
After reading this article, you will be able to explain the difference between legal and equitable estates and interests in land, identify the statutory formalities for creating and transferring these rights, and apply the rules for registration and enforceability in both registered and unregistered land. You will also be able to distinguish between the main types of estates and interests, and advise on the practical implications for clients in common SQE1 scenarios.
SQE1 Syllabus
For SQE1, you are required to understand the acquisition and transfer of estates and interests in land, including the distinction between legal and equitable rights, the formalities for creation and transfer, and the effect of registration. In your revision, focus on:
- the difference between legal estates, legal interests, and equitable interests in land
- the statutory formalities for creating and transferring legal and equitable rights
- the registration requirements for estates and interests in both registered and unregistered land
- the effect of registration (or non-registration) on enforceability against third parties
- the operation of overriding interests and the doctrine of notice
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What are the only two legal estates in land recognized in England and Wales?
- Which statutory provision sets out the formal requirements for a valid deed?
- What is the effect of failing to register a legal transfer of a registered estate at HM Land Registry?
- What is the main difference between a legal and an equitable interest in land?
- In what circumstances can an equitable interest bind a purchaser of unregistered land?
Introduction
Acquiring and transferring estates and interests in land is a core aspect of property law. For SQE1, you must be able to identify the types of rights that exist in land, distinguish between legal and equitable rights, and apply the correct statutory formalities for their creation and transfer. You also need to understand the impact of registration on enforceability, and how equitable rights may still bind purchasers in certain circumstances.
Types of Estates and Interests in Land
Land law recognizes two main types of proprietary rights: estates (which confer a right to possess land for a period of time) and interests (which are rights over land owned by someone else).
Key Term: estate in land A right to possess and use land for a defined period, such as a freehold or leasehold.
Key Term: interest in land A right over land owned by another, such as an easement, mortgage, or restrictive covenant.
Legal Estates
There are only two legal estates in land:
- The freehold estate (fee simple absolute in possession): ownership for an unlimited duration.
- The leasehold estate (term of years absolute): the right to possess land for a fixed period.
Key Term: freehold estate The right to possess land indefinitely, subject to statutory restrictions and third-party rights.
Key Term: leasehold estate The right to possess land for a fixed or periodic term, as specified in a lease.
Legal and Equitable Interests
Certain rights over land can exist as legal interests if they are created using the correct formalities and are listed in section 1(2) of the Law of Property Act 1925. These include:
- Easements and profits à prendre (if created by deed and for the duration of a legal estate)
- Legal mortgages (created by deed)
- Rentcharges
- Rights of entry attached to a legal lease or rentcharge
All other rights in land are equitable only.
Key Term: legal interest A right over land recognized by law if created using the required formalities and listed in s 1(2) Law of Property Act 1925.
Key Term: equitable interest A right over land recognized and enforced by equity, either because it is not capable of being legal or because the legal formalities were not satisfied.
Creating and Transferring Legal Estates and Interests
To create or transfer a legal estate or interest, strict statutory formalities must be followed.
Formalities for Legal Estates and Interests
- Deed: Most legal estates and interests must be created or transferred by deed (s 52(1) Law of Property Act 1925).
- Deed requirements: The deed must be clear on its face, signed by the relevant party in the presence of a witness, and delivered as a deed (s 1 Law of Property (Miscellaneous Provisions) Act 1989).
Key Term: deed A written document executed with specific formalities, required to create or transfer most legal estates and interests in land.
Registration Requirements
For registered land, certain dispositions must be completed by registration at HM Land Registry to take effect at law (s 27 Land Registration Act 2002). These include:
- Transfers of registered estates
- Grants of legal leases for more than seven years
- Express grants or reservations of legal easements
- Legal charges (mortgages)
If registration is not completed, only an equitable interest is created.
Formalities for Equitable Interests
Equitable interests may arise in several ways:
- Where the right is not capable of being legal (e.g., a restrictive covenant)
- Where the legal formalities are not satisfied (e.g., a contract to create a legal right, but no deed)
- By operation of equity (e.g., resulting or constructive trusts, proprietary estoppel)
Most equitable interests must be created or assigned in writing and signed by the relevant party (s 53 Law of Property Act 1925).
Key Term: resulting trust An equitable interest arising when someone contributes to the purchase price of property but is not the legal owner.
Key Term: constructive trust An equitable interest imposed by the court where it would be unconscionable for the legal owner to deny another's beneficial interest.
Key Term: proprietary estoppel An equitable remedy where a person acts to their detriment in reliance on an assurance relating to rights in land.
Disposing of Estates and Interests
Disposing of Legal Estates
To transfer a legal estate (freehold or leasehold):
- Execute a valid deed
- For registered land, complete registration at HM Land Registry
Until registration is completed, the transferor remains the legal owner, and the transferee holds only an equitable interest.
Disposing of Equitable Interests
Equitable interests can be assigned by written instrument signed by the assignor (s 53(1)(c) Law of Property Act 1925). For trusts, the beneficiary may direct the trustees to hold the property for another person, subject to the same formalities.
Registration and Enforceability
Registered Land
The Land Registration Act 2002 requires that most dealings with registered land are completed by registration. The register is intended to provide a complete and accurate record of title and third-party rights.
- Notices: Entries in the charges register to protect the priority of interests such as equitable easements or restrictive covenants.
- Restrictions: Entries in the proprietorship register to regulate dispositions, often used to protect trust interests.
If an interest is not protected by registration, it may lose priority against a purchaser for value.
Unregistered Land
In unregistered land, legal rights bind the world. Equitable interests must be protected by registration as a land charge (Land Charges Act 1972) or may be subject to the doctrine of notice.
- Land charges: Equitable interests such as restrictive covenants, equitable easements, and estate contracts must be registered against the name of the estate owner. Failure to register means the interest is void against a purchaser for value.
- Doctrine of notice: Some equitable interests (e.g., beneficial interests under a trust) may bind a purchaser if they have actual, constructive, or imputed notice of the interest.
Key Term: doctrine of notice The principle that certain equitable interests bind a purchaser of unregistered land only if the purchaser has notice of the interest.
Overriding Interests and Priority
Certain interests, known as overriding interests, may bind a purchaser of registered land even if not registered. These include:
- Legal leases not exceeding seven years
- Rights of persons in actual occupation
- Certain legal easements and profits à prendre
If an equitable interest holder is in actual occupation, their right may override a registered disposition (e.g., Williams & Glyn's Bank v Boland).
Key Term: overriding interest A right that binds a purchaser of registered land even if not registered, such as a short legal lease or the rights of a person in actual occupation.
Interaction of Legal and Equitable Principles
The distinction between legal and equitable rights affects enforceability and priority. Legal rights are always enforceable against purchasers. Equitable rights may be lost if not properly protected or if the purchaser is bona fide for value without notice (in unregistered land).
Worked Example 1.1
Sarah owns registered freehold land and agrees to sell it to Tom. They sign a valid transfer deed, but Tom does not register the transfer at HM Land Registry. Who is the legal owner, and what rights does Tom have before registration?
Answer: Sarah remains the legal owner until registration is completed. Tom holds an equitable interest in the land and can compel Sarah to complete registration, but cannot dispose of the legal estate until then.
Worked Example 1.2
Emily contributes half the purchase price of a house, but the legal title is registered in her partner's sole name. What interest, if any, does Emily have?
Answer: Emily may have an equitable interest under a resulting trust, proportionate to her contribution, even though she is not the legal owner.
Worked Example 1.3
A restrictive covenant is created over unregistered land after 1925 but is not registered as a land charge. The land is sold to a purchaser for value. Is the purchaser bound?
Answer: No. Failure to register the restrictive covenant as a land charge means it is void against a purchaser for value of a legal estate, even if the purchaser knew of it.
Summary
| Type of Right | Creation/Formality | Registered Land | Unregistered Land |
|---|---|---|---|
| Legal estate | Deed + registration | Must be registered | Deed only |
| Legal interest | Deed + registration (if required) | Must be registered | Deed only |
| Equitable interest | Writing (or by operation of equity) | Register notice/restriction | Register as land charge or doctrine of notice |
| Overriding interest | N/A | Binds even if unregistered | N/A |
Key Point Checklist
This article has covered the following key knowledge points:
- The distinction between legal estates, legal interests, and equitable interests in land
- The statutory formalities for creating and transferring legal and equitable rights
- The registration requirements for estates and interests in registered and unregistered land
- The effect of registration (or non-registration) on enforceability against third parties
- The operation of overriding interests and the doctrine of notice in protecting or defeating rights
Key Terms and Concepts
- estate in land
- interest in land
- freehold estate
- leasehold estate
- legal interest
- equitable interest
- deed
- resulting trust
- constructive trust
- proprietary estoppel
- legal interest
- equitable interest
- doctrine of notice
- overriding interest
