Learning Outcomes
After studying this article, you will be able to identify and explain the legal formalities required to create and transfer estates and interests in land. You will understand the distinction between legal and equitable rights, the role of deeds and registration, and how equitable interests arise and are protected. You will be able to apply these principles to SQE1-style scenarios and recognise the consequences of failing to comply with statutory requirements.
SQE1 Syllabus
For SQE1, you are required to understand the legal processes and formalities for creating and transferring estates and interests in land. Focus your revision on:
- the two legal estates in land (freehold and leasehold) and how they are created and transferred
- the distinction between legal and equitable interests, including how equitable interests arise
- the statutory requirements for deeds and registration under the Law of Property Act 1925 and Land Registration Act 2002
- the effect of failing to comply with formalities (e.g. resulting in equitable interests only)
- the operation of overreaching and its impact on purchasers
- how equitable interests are protected, including the use of notices, restrictions, and the doctrine of actual occupation
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.
- Which two legal estates can exist in land under English law?
- What are the minimum requirements for a valid deed?
- What is the effect of failing to register a registrable disposition of a legal estate?
- How can a purchaser take land free of certain equitable interests?
- What is overreaching and when does it apply?
Introduction
The creation and transfer of estates and interests in land are subject to strict legal formalities. These requirements are designed to ensure certainty, protect parties, and maintain a reliable system of land ownership. For SQE1, you must be able to identify the correct formalities for different types of estates and interests, understand the distinction between legal and equitable rights, and apply the relevant statutory rules to practical scenarios.
Legal Estates in Land
There are only two types of legal estate in land that can exist or be created:
Key Term: freehold estate
A freehold estate (fee simple absolute in possession) is ownership of land for an unlimited duration, with the right to possess and use the land immediately.Key Term: leasehold estate
A leasehold estate (term of years absolute) is the right to possess and use land for a fixed, certain period, after which possession reverts to the freeholder.
Legal estates must be created and transferred by deed, and, for registered land, must be registered to take effect at law.
Legal Formalities: Deeds
Most legal estates and interests must be created or transferred by deed. The requirements for a valid deed are set out in statute.
Key Term: deed
A deed is a written document that must state it is a deed, be signed by the executing party in the presence of a witness, and be delivered as a deed.
A deed is required for the transfer of a freehold, the grant of a lease for more than three years, and the creation or transfer of most legal interests (such as legal mortgages and easements).
Worked Example 1.1
Scenario:
Sarah wants to grant a 10-year lease of her shop to Tom. They sign a simple contract, but do not execute a deed.
Answer: The lease will not be a legal estate, as it was not created by deed. If the contract is valid and specifically enforceable, Tom may have an equitable lease only.
Registration of Estates and Interests
For registered land, certain transactions must be registered to take effect at law. This is known as substantive registration.
Key Term: substantive registration
The process by which a legal estate or registrable interest is entered on the register, making it effective at law.
If a registrable disposition (such as a transfer of a freehold, grant of a lease over seven years, or grant of a legal charge) is not registered, it will only take effect in equity.
Worked Example 1.2
Scenario:
A freehold owner transfers her property to a buyer by deed, but the buyer fails to register the transfer.
Answer: The buyer acquires only an equitable interest. The legal estate remains with the seller until registration is completed.
Equitable Interests in Land
Equitable interests arise in several ways, including:
- where the formalities for a legal estate or interest are not satisfied (e.g. no deed or no registration)
- where the right is not capable of being legal (e.g. a restrictive covenant or a beneficial interest under a trust)
- by operation of equity (e.g. resulting or constructive trusts, proprietary estoppel)
Key Term: equitable interest
A right in land recognised and enforced by equity, often arising where legal formalities are not met or where the right is not capable of being legal.Key Term: resulting trust
A trust imposed by law when one person provides the purchase money for property held in another's name, presuming an intention to retain a beneficial interest.Key Term: constructive trust
A trust imposed by law to reflect the parties' common intention or to prevent unconscionable conduct, often where someone has contributed to the acquisition or improvement of property.Key Term: proprietary estoppel
An equitable remedy preventing a landowner from denying rights to someone who has relied on an assurance and acted to their detriment.
Worked Example 1.3
Scenario:
James pays the deposit for a house, but the property is registered in his partner's sole name. There is no written declaration of trust.
Answer: James may have a beneficial interest under a resulting trust, proportionate to his contribution to the purchase price.
Overreaching
Overreaching is a statutory mechanism that allows a purchaser to take land free of certain equitable interests, provided the purchase money is paid to at least two trustees or a trust corporation.
Key Term: overreaching
The process by which equitable interests in land are detached from the land and transferred to the purchase money when paid to two trustees or a trust corporation.
This protects purchasers and ensures that beneficial interests under a trust do not bind the land itself if the correct process is followed.
Worked Example 1.4
Scenario:
A house is held by two trustees on trust for themselves and a third person. The house is sold, and the purchase money is paid to both trustees.
Answer: The third person's equitable interest is overreached and attaches to the sale proceeds. The buyer takes the house free of that interest.
Protection of Equitable Interests
Equitable interests must be protected to bind purchasers. In registered land, this is usually done by entering a notice or restriction on the register. Some interests may also be overriding if the holder is in actual occupation.
Key Term: notice (registered land)
An entry on the register protecting an interest in land, ensuring it binds future purchasers.Key Term: restriction (registered land)
An entry on the register limiting the owner's ability to deal with the land, often used to protect beneficial interests under a trust.Key Term: overriding interest
An interest that binds a purchaser even if not registered, such as the rights of a person in actual occupation.
Worked Example 1.5
Scenario:
Maria has a beneficial interest under a trust and is living in the property. The legal owner sells the property to a buyer, who does not check for other occupiers.
Answer: Maria may have an overriding interest if she is in actual occupation. The buyer may be bound by her interest, unless it is overreached.
Failure to Comply with Formalities
If the required formalities for a legal estate or interest are not satisfied, the right may still exist in equity if there is a valid contract and specific performance is available.
Exam Warning
If a registrable disposition is not registered, the transferee acquires only an equitable interest. This can have serious consequences for priority and enforceability.
Summary
| Type of Right | Formality Required | Effect if Formality Not Met |
|---|---|---|
| Legal estate | Deed + (if registered) registration | Equitable interest only |
| Legal interest | Deed + (if registered) registration | Equitable interest only |
| Equitable interest | Writing (if required) | May not exist / unenforceable |
Key Point Checklist
This article has covered the following key knowledge points:
- There are only two legal estates in land: freehold and leasehold.
- Legal estates and most legal interests must be created and transferred by deed.
- For registered land, registrable dispositions must be registered to take effect at law.
- Failure to comply with formalities (deed or registration) usually results in an equitable interest only.
- Equitable interests arise where legal formalities are not met, or where the right is not capable of being legal.
- Overreaching allows a purchaser to take land free of certain equitable interests if purchase money is paid to two trustees or a trust corporation.
- Equitable interests must be protected by notice, restriction, or actual occupation to bind purchasers.
Key Terms and Concepts
- freehold estate
- leasehold estate
- deed
- substantive registration
- equitable interest
- resulting trust
- constructive trust
- proprietary estoppel
- overreaching
- notice (registered land)
- restriction (registered land)
- overriding interest
