Learning Outcomes
After studying this article, you will be able to identify the main types of legal and equitable estates in land, explain the statutory formalities for their valid acquisition and transfer, and distinguish between the rules for registered and unregistered land. You will also understand the concept of overreaching and its effect on equitable interests, and be able to apply these principles to SQE1-style scenarios.
SQE1 Syllabus
For SQE1, you are required to understand the acquisition and transfer of legal and equitable estates in land, including the relevant statutory requirements and the practical consequences for purchasers and beneficiaries. In your revision, focus on:
- the main types of legal and equitable estates in land (freehold, leasehold, and equitable interests)
- the statutory formalities for creating and transferring legal and equitable estates (deeds, writing, registration)
- the distinction between registered and unregistered land, and the effect on the protection and priority of interests
- the operation and requirements of overreaching
- the consequences for purchasers where formalities are not complied with.
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 two legal estates in land that can be held at law in England and Wales?
- What is the effect of failing to register a transfer of a legal estate in registered land?
- What is overreaching, and what are its requirements?
- How does the doctrine of notice affect the enforceability of equitable interests in unregistered land?
Introduction
Acquiring and transferring estates and interests in land is governed by strict statutory rules. For SQE1, you must know the difference between legal and equitable estates, the formalities for their creation and transfer, and how these rules operate in both registered and unregistered land. Understanding these principles is essential for advising clients and answering SQE1-style MCQs.
Types of Estates and Interests in Land
There are two main types of estates in land that can exist at law: the freehold (fee simple absolute in possession) and the leasehold (term of years absolute). All other rights in land are either legal interests (if they fall within a limited statutory list) or equitable interests.
Key Term: legal estate A right in land recognised by law as capable of existing at law, specifically the freehold or leasehold estate.
Key Term: equitable interest A right in land recognised by equity, often arising where legal formalities are not fully met or where fairness requires recognition.
Legal Estates: Freehold and Leasehold
A freehold estate gives indefinite ownership of land. A leasehold estate gives exclusive possession for a fixed period.
To create or transfer a legal estate, strict formalities must be followed:
- The transfer must be made by deed, which is a special type of written document.
- For registered land, the transfer must be registered at HM Land Registry to complete the legal title.
Key Term: deed A written document that is signed, witnessed, and states on its face that it is intended to be a deed. Required for most legal transfers of land.
Formalities for Legal Estates
- Freehold: Must be transferred by deed (Law of Property Act 1925, s 52(1)), and, for registered land, the transfer must be registered (Land Registration Act 2002, s 27).
- Leasehold: Leases over seven years must be by deed and registered. Leases between three and seven years require a deed but not registration. Leases of three years or less can be created orally or in writing without a deed if certain conditions are met.
Equitable Interests
Equitable interests arise in several ways:
- Where a legal estate is not validly created (e.g., missing a deed or registration), but there is a valid contract.
- Where a trust exists, separating legal and beneficial ownership.
- Where equity recognises a right due to fairness, such as proprietary estoppel.
Key Term: trust An arrangement where one person (the trustee) holds the legal title to land for the benefit of another (the beneficiary), who has an equitable interest.
Key Term: proprietary estoppel An equitable doctrine preventing a landowner from denying a right where another has relied on an assurance to their detriment.
Statutory Formalities: Legal vs Equitable
Legal estates and interests require strict compliance with statutory formalities. If these are not met, the right may still exist in equity if there is a valid contract or other equitable basis.
- Deed: Required for legal estates and most legal interests.
- Writing: Required for contracts to create or transfer interests in land (Law of Property (Miscellaneous Provisions) Act 1989, s 2).
- Registration: Required for legal estates and certain interests in registered land.
If a legal estate is not validly created (e.g., missing registration), only an equitable interest arises.
Worked Example 1.1
A sells a registered freehold property to B. The transfer is made by deed, but B fails to register the transfer at HM Land Registry. Who holds the legal estate?
Answer: The legal estate remains with A until registration is completed. B acquires only an equitable interest until registration.
Registered and Unregistered Land
The rules for protecting and prioritising interests differ between registered and unregistered land.
Registered Land
- Title is proved by the entries on the register.
- Transfers of legal estates must be registered to take effect at law.
- Equitable interests should be protected by a notice or restriction on the register.
- Some interests (e.g., rights of persons in actual occupation) may override registration and bind a purchaser even if not registered.
Key Term: overriding interest An interest that binds a purchaser of registered land even if not entered on the register, such as the rights of a person in actual occupation.
Unregistered Land
- Title is proved by title deeds.
- Legal rights bind the world and are enforceable against all.
- Equitable interests must be registered as land charges to bind a purchaser. If not registered, they are void against a purchaser for value.
- Some equitable interests (e.g., beneficial interests under a trust) are not registrable and are governed by the doctrine of notice.
Key Term: doctrine of notice A rule in unregistered land: a purchaser is bound by equitable interests if they have actual, constructive, or imputed notice of them.
Overreaching
Overreaching is a statutory mechanism that allows a purchaser to take land free of certain equitable interests, which are transferred to the purchase money.
Key Term: overreaching The process by which equitable interests in land are removed from the land and attached to the proceeds of sale, provided the purchase money is paid to at least two trustees.
Requirements for Overreaching
- The purchase money must be paid to at least two trustees or a trust corporation.
- The transaction must be a sale or mortgage of a legal estate.
If these requirements are met, the purchaser takes the land free of the beneficiaries' equitable interests, which attach to the money instead.
Worked Example 1.2
C and D are trustees holding land on trust for E and F. They sell the property to G, who pays the purchase price to both C and D. Are E and F's interests still attached to the land?
Answer: No. E and F's equitable interests are overreached and attach to the sale proceeds. G takes the land free of their interests.
Priority and Protection of Interests
Registered Land (Priority)
- Legal estates and interests must be registered to take effect at law.
- Equitable interests should be protected by a notice or restriction.
- Some interests override registration (e.g., rights of persons in actual occupation).
Unregistered Land (Priority)
- Legal rights bind all.
- Equitable interests must be registered as land charges to bind a purchaser.
- If not registered, the doctrine of notice applies for some interests.
Worked Example 1.3
H buys unregistered land from J. There is an unregistered equitable easement affecting the land. Is H bound by it?
Answer: No, if H is a purchaser for value and the easement was not registered as a land charge, it is void against H.
The Distinction Between Registered and Unregistered Land
- In registered land, registration is essential for legal title and for protecting most interests.
- In unregistered land, title is proved by deeds, and protection of interests relies on registration as land charges or the doctrine of notice.
Key Point Checklist
This article has covered the following key knowledge points:
- The two legal estates in land are the freehold and leasehold.
- Legal estates and interests require a deed and, for registered land, registration.
- Equitable interests arise where legal formalities are not fully met or where equity intervenes (e.g., trusts, proprietary estoppel).
- Registered land requires registration for legal title and protection of interests; some interests override registration.
- Unregistered land relies on title deeds and registration of land charges; the doctrine of notice applies to some equitable interests.
- Overreaching allows a purchaser to take land free of certain equitable interests if the purchase money is paid to two trustees.
Key Terms and Concepts
- legal estate
- equitable interest
- deed
- trust
- proprietary estoppel
- overriding interest
- doctrine of notice
- overreaching
