Acquisition and transfer of estates and interests - The transfer contract

Learning Outcomes

This article outlines the key role of the contract in the acquisition and transfer of estates and interests in land. It focuses on the statutory formalities required for a valid land contract under the Law of Property (Miscellaneous Provisions) Act 1989 and the consequences of compliance and non-compliance. After reading this article, you should be able to identify the requirements for creating a binding contract for the sale or disposition of land and explain how equitable interests can arise through contract or failed legal formalities, which is essential knowledge for the SQE1 assessment.

SQE1 Syllabus

For SQE1, you are required to understand the legal principles governing the formation and effect of contracts for the sale or disposition of land. This involves appreciating the strict formality requirements and the potential creation of equitable interests when these formalities are met, even before the legal transfer is completed.

As you work through this article, remember to pay particular attention in your revision to:

  • the requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989) for contracts disposing of interests in land
  • the creation of equitable interests (estate contracts) through valid land contracts
  • the consequences of failing to comply with the required formalities
  • the relationship between a valid contract and the subsequent transfer by deed
  • how equity may recognise an interest despite failed legal formalities (e.g. the rule in Walsh v Lonsdale).

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.

  1. Which piece of legislation sets out the main formality requirements for a contract for the sale of land in England and Wales?
    1. Law of Property Act 1925, s 52
    2. Land Registration Act 2002, s 27
    3. Law of Property (Miscellaneous Provisions) Act 1989, s 2
    4. Trusts of Land and Appointment of Trustees Act 1996, s 14
  2. Which of the following is NOT a requirement under s 2 LP(MP)A 1989 for a valid land contract?
    1. The contract must be in writing.
    2. The contract must be signed by or on behalf of each party.
    3. The contract must be executed as a deed.
    4. The contract must incorporate all the terms expressly agreed in one document (or two if exchanged).
  3. A buyer and seller orally agree all terms for the sale of a house. The buyer pays a deposit. Is there a binding contract?
    1. Yes, because the payment of the deposit constitutes part performance.
    2. Yes, because all terms have been agreed orally.
    3. No, because the agreement is not in writing and signed.
    4. No, because the agreement must be witnessed.
  4. What type of interest does a purchaser acquire upon entering into a valid and specifically enforceable contract for the sale of land?
    1. A legal interest.
    2. An overriding interest.
    3. A personal right only.
    4. An equitable interest (estate contract).

Introduction

The process of transferring ownership or creating interests in land typically involves two key stages: the contract stage and the completion stage. This article focuses on the contract stage, examining the legal requirements for creating a binding agreement for the disposition of an interest in land. Understanding these requirements is fundamental, as the contract itself can create significant rights and obligations before the legal title is formally transferred.

The primary legislation governing these contracts is section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989). This section imposes strict formality requirements aimed at achieving certainty and preventing disputes.

The Contract for the Sale or Disposition of Land

Before a legal estate (like a freehold or leasehold) or a legal interest (like a legal easement or mortgage) can be transferred or created, the parties usually enter into a contract. This agreement outlines the terms of the deal, including the property details, price, and completion date.

Formalities under Section 2 LP(MP)A 1989

Section 2 LP(MP)A 1989 mandates specific formalities for contracts involving the sale or other disposition of an interest in land. Failure to comply generally renders the contract void.

Key Term: Contract for the sale of land An agreement where one party agrees to sell and the other agrees to buy an estate or interest in land, subject to specific terms and conditions. It precedes the formal transfer (completion).

The requirements under s 2 LP(MP)A 1989 are:

  1. The contract must be in writing. Oral agreements for the sale of land are not binding.
  2. It must contain all the expressly agreed terms. All terms the parties have explicitly agreed upon must be incorporated into the written document (or documents, if contracts are exchanged). Omitting a term can invalidate the contract.
  3. It must be signed by or on behalf of each party. Both the buyer and the seller (or their authorised agents) must sign the document.

Worked Example 1.1

Ahmed agrees orally with Beth to sell her his freehold house for £300,000, with completion set for four weeks later. They shake hands on the deal. Beth pays Ahmed a £1,000 holding deposit. The next day, Ahmed receives a higher offer from Charles and tells Beth the deal is off. Can Beth enforce the agreement against Ahmed?

Answer: No. The agreement was purely oral. A contract for the sale of land must comply with s 2 LP(MP)A 1989, meaning it must be in writing, contain all terms, and be signed by both parties. As these requirements were not met, there is no valid contract for Beth to enforce. The payment of a deposit does not cure the lack of required formality.

Incorporation of Terms

The requirement that all expressly agreed terms are incorporated in the written document is strict. If the written contract refers to another document containing terms (e.g., standard conditions of sale), that document must also be sufficiently identified and incorporated.

Key Term: Section 2 LP(MP)A 1989 The statutory provision requiring contracts for the sale or other disposition of an interest in land to be made in writing, incorporating all expressly agreed terms, and signed by or on behalf of each party.

Variations to Contracts

Any subsequent agreement to vary a material term of a valid land contract must also comply with the formalities set out in s 2 LP(MP)A 1989 to be effective. An oral variation is generally ineffective.

Consequences of a Valid Contract: The Estate Contract

When a contract complies with s 2 LP(MP)A 1989, it creates more than just personal rights between the parties. Equity recognises that the purchaser acquires a proprietary interest in the land from the moment the contract is made. This interest is known as an estate contract.

Key Term: Estate contract An equitable interest in land acquired by a purchaser upon entering into a valid contract for the sale or disposition of land. It gives the purchaser the right to compel the transfer of the legal estate, subject to specific performance.

The estate contract is an equitable interest because the purchaser has the right to the equitable remedy of specific performance to compel the seller to complete the transfer of the legal estate.

Key Term: Specific performance An equitable remedy compelling a party to perform their contractual obligations. In land contracts, it can force the seller to transfer the property or the buyer to complete the purchase. It is granted at the court's discretion.

Worked Example 1.2

Fatima enters into a written contract, signed by both parties and containing all agreed terms, to buy Greenacre from George. Completion is set for six weeks later. Before completion, George receives a higher offer from Hattie and attempts to withdraw from the contract with Fatima. What is Fatima’s primary remedy?

Answer: Fatima has an equitable interest in Greenacre (an estate contract) arising from the valid contract. Her primary remedy is specific performance. She can apply to the court for an order compelling George to complete the sale and transfer the legal title to her as agreed in the contract. Damages might be available but specific performance is the usual remedy for breach of a land contract due to the unique nature of land.

Equitable Interests Arising from Informal Arrangements

While s 2 LP(MP)A 1989 imposes strict formality requirements for contracts, equity may sometimes recognise rights even where formalities are lacking, particularly through resulting trusts, constructive trusts, or proprietary estoppel. These concepts are complex but important.

Key Term: Equitable interest A proprietary right in land recognised and enforced by equity, often arising where legal formalities are incomplete or where fairness demands it (e.g., interests under a trust, restrictive covenants, estate contracts).

For example, a constructive trust might arise if parties had a common intention that one party should have an interest in land, and that party acted to their detriment in reliance on this, even without a written contract. Section 2(5) LP(MP)A 1989 expressly states that s 2 does not affect the creation or operation of resulting, implied, or constructive trusts.

Equitable Leases and the Rule in Walsh v Lonsdale

A significant instance where equity may recognise an interest despite failed legal formalities relates to leases. If parties enter into a specifically enforceable contract to grant a legal lease (complying with s 2 LP(MP)A 1989) but fail to execute the required deed to create the legal lease, equity may treat the contract as creating an equitable lease on the same terms. This is known as the rule in Walsh v Lonsdale.

Worked Example 1.3

Leo agrees in writing (signed by both) to grant Maya a 10-year lease of a workshop. Maya moves in and pays rent, but they never execute a formal deed. Leo later tries to evict Maya, arguing there is no valid legal lease. Can Maya enforce the agreement?

Answer: Yes, potentially. Although no legal lease was created due to the absence of a deed (required for leases over 3 years), the written agreement complies with s 2 LP(MP)A 1989. If Maya has acted equitably (has 'clean hands'), she can seek specific performance of the contract. Equity may treat the agreement as an equitable lease on the same terms as the intended legal lease (the rule in Walsh v Lonsdale). Leo would likely be prevented from evicting her based solely on the lack of a deed.

The Role of Deeds in Transfer

While the contract creates equitable rights, the actual transfer of a legal estate (completion) generally requires a deed. Section 52(1) LPA 1925 states that all conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed.

Key Term: Deed A formal written legal document that is signed, witnessed, and delivered, used to transfer ownership of or create interests in land. Required by s 52 LPA 1925 for most legal dispositions.

The requirements for a valid deed are set out in s 1 LP(MP)A 1989. The document must make it clear on its face it is intended to be a deed, and be validly executed (signed, witnessed, delivered).

Exceptions to the Need for a Deed

The most significant exception relates to short leases. Under s 54(2) LPA 1925, a legal lease can be created without a deed (or even orally) if it:

  • Takes effect in possession (the tenant takes possession immediately).
  • Is for a term not exceeding three years (including periodic tenancies).
  • Is at the best rent reasonably obtainable (market rent).
  • Does not involve payment of a fine or premium (a lump sum payment upfront).

Key Term: Parol lease A legal lease created orally or by simple written agreement (not by deed) under the exception in s 54(2) LPA 1925, valid only if for three years or less, taking effect in possession at market rent without a premium.

Key Point Checklist

This article has covered the following key knowledge points:

  • Contracts for the sale or disposition of an interest in land must comply with the strict formality requirements of s 2 LP(MP)A 1989 (in writing, all terms included, signed by both parties).
  • Failure to comply with s 2 generally renders the contract void.
  • A valid contract complying with s 2 creates an equitable interest for the purchaser (an estate contract), enforceable by specific performance.
  • Variations to land contracts must also comply with s 2 formalities.
  • Transfer of a legal estate typically requires a deed (s 52 LPA 1925), meeting the requirements of s 1 LP(MP)A 1989.
  • Equity may recognise rights despite failed formalities, e.g., through constructive trusts (s 2(5) LP(MP)A 1989) or the rule in Walsh v Lonsdale creating equitable leases from specifically enforceable contracts.
  • Short leases (≤ 3 years, in possession, best rent, no premium) are an exception and can be created legally without a deed (parol leases under s 54(2) LPA 1925).

Key Terms and Concepts

  • Contract for the sale of land
  • Section 2 LP(MP)A 1989
  • Estate contract
  • Specific performance
  • Equitable interest
  • Deed
  • Parol lease
The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Barbri SQE
One-time Fee
$3,800-6,900
BPP SQE
One-time Fee
$5,400-8,200
College of Legal P...
One-time Fee
$2,300-9,100
Job Test Prep
One-time Fee
$90-350
Law Training Centr...
One-time Fee
$500-6,200
QLTS SQE
One-time Fee
$2,500-3,800
University of Law...
One-time Fee
$6,200-22,400

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal