Acquisition and transfer of estates and interests - The tran...

Learning Outcomes

This article explains the statutory framework governing the creation and transfer of legal estates and interests in land, focusing on when a deed is required, what amounts to valid execution and delivery, and when statutory exceptions apply (such as the short-lease exception). It explains how to distinguish registrable dispositions from non-registrable dealings, when registration at HM Land Registry is essential for legal effect, and the consequences of failing to comply with deed or registration requirements, including when only an equitable interest arises and how it can be protected. It applies these rules to freehold transfers, the grant and assignment of legal leases, and express grants or reservations of easements, and highlights the interaction between LPA 1925, LP(MP)A 1989 and LRA 2002. It analyzes how equity may intervene where formalities are defective, with particular emphasis on s 2 LP(MP)A 1989, the Walsh v Lonsdale principle and specific performance. It prepares you to tackle SQE1 problem questions by emphasising common traps, such as confusing legal and equitable interests or overlooking the need for registration.

SQE1 Syllabus

For SQE1, you are required to understand the statutory formalities for creating or transferring a legal estate in land, with a focus on the following syllabus points:

• the distinction between legal and equitable estates and interests in land
• the statutory requirements for creating or transferring a legal estate, including deed execution
• the necessity and effect of registration for legal estates and certain interests
• the consequences of non-compliance with formalities (e.g., when an interest is only equitable)
• how these rules apply to freehold and leasehold estates, and to the transfer of property
• the requirements for a valid land contract under s 2 LP(MP)A 1989 and the Walsh v Lonsdale principle
• registrable dispositions under s 27 LRA 2002 (e.g., transfer of a registered estate, legal charges, legal leases over seven years, express legal easements)
• exceptions to s 52(1) LPA 1925 (e.g., short leases under s 54(2) LPA 1925, surrenders by operation of law, certain assents or disclaimers)
• execution of deeds by companies (Companies Act 2006, s 44)

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. What are the essential requirements for a valid deed transferring a legal estate in land?
2. What is the effect of failing to register a transfer of a freehold estate at HM Land Registry?
3. How does the law treat an agreement to grant a lease for five years if no deed is executed?
4. What is the difference between a legal and an equitable interest in land?

Introduction

Creation or transfer of a legal estate is controlled by a linked framework of formalities and registration. Section 52(1) Law of Property Act 1925 (LPA 1925) provides the general rule that a legal estate in land can only be created or conveyed by deed. Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989) prescribes what a valid deed must contain and how it must be executed and delivered. For registered land, execution of a valid deed is not enough on its own: where the dealing is a “registrable disposition”, it must also be completed by registration at HM Land Registry under the Land Registration Act 2002 (LRA 2002), otherwise it takes effect only in equity. In a limited set of cases (notably certain short leases), a deed is not required. If the deed or registration requirement is not met, equity may recognise an equitable interest where there is a valid written contract under s 2 LP(MP)A 1989 and specific performance is available.

Creation and Transfer of Legal Estates

Legal estates in land—freehold and leasehold—are capable of existing at law only if the relevant formalities are satisfied. These formalities serve three functions: to ensure certainty of the parties’ intentions, to provide a reliable public record (registration) for dealings in registered land, and to distinguish rights that take effect at law from those recognised only in equity.

Key Term: legal estate
A right in land recognised by law as capable of existing at law, such as a freehold or leasehold estate.

The Deed Requirement

Section 52(1) LPA 1925 provides that a legal estate in land can only be created or transferred by deed. This rule applies to freehold transfers and the grant or assignment of most legal leases (subject to the short-lease exception below), and to the express grant or reservation of a legal easement.

Key Term: deed
A formal written document that must meet statutory requirements to create or transfer a legal estate in land.

To be valid, a deed must (s 1 LP(MP)A 1989):

• clearly state on its face that it is intended to be a deed (for example, “executed as a deed”)
• be signed by the person making it (the transferor or grantor), in the presence of a witness who attests the signature
• be delivered as a deed (the maker must intend to be bound by it; delivery can be express or inferred from the circumstances)

Execution by a company is governed by Companies Act 2006, s 44. A company may execute a deed by:

• two authorised signatories (two directors, or a director and the company secretary) signing; or
• a single director’s signature in the presence of a witness who attests the signature; or
• affixing the company seal in accordance with the company’s constitution.

Delivery remains essential: even a perfectly signed and attested instrument is not a deed until delivered. In practice, deeds are often “delivered” on completion, which is when the parties intend to be bound.

Exceptions to the general deed requirement exist, most notably under s 54(2) LPA 1925 for certain short leases (see below). Other exceptions include surrenders by operation of law and certain statutory assents or disclaimers. Outside these limited categories, the safe default assumption is that a deed is needed to create or transfer a legal estate or interest.

Registration

For most dealings with registered land, executing a valid deed does not, by itself, complete the transfer or grant at law. Where the dealing is a “registrable disposition” under s 27 LRA 2002, it must also be completed by registration at HM Land Registry. Key registrable dispositions include:

• a transfer of a registered freehold or registered leasehold estate (s 27(2)(a))
• the grant of a legal lease for a term of more than seven years (s 27(2)(b)(i))
• the grant of certain reversionary or discontinuous leases (s 27(2)(b)(ii)-(iii))
• the grant of a legal charge (mortgage) (s 27(2)(f))
• the express grant or reservation of a legal easement (s 27(2)(d))

Key Term: registration
The process of recording the transfer or creation of a legal estate at HM Land Registry, making it legally effective.

If a registrable disposition is not completed by registration, it operates only in equity (s 27(1) and s 7 LRA 2002). The grantee typically acquires an equitable interest, assuming there is a valid supporting instrument or contract. For unregistered land, certain dispositions trigger compulsory first registration (s 4 LRA 2002). Failure to register when required affects the status and enforceability of the interest against third parties.

Registration also determines priority as between competing interests in registered land. While the detail of priority is beyond this topic, it is important to recognise that a grantee who fails to register a registrable disposition may lose priority to a later registered disponee for value (s 29 LRA 2002), unless some other protective mechanism applies (for example, an overriding interest).

If a transfer of a freehold or the grant of a legal lease for more than seven years is not registered, the transferee/tenant acquires only an equitable interest, not a legal estate.

Short Leases Exception

A lease granted for three years or less can be created without a deed if the statutory conditions are met (s 54(2) LPA 1925). The short-lease exception applies where the lease:

• is for a term not exceeding three years (including many periodic tenancies where the period does not exceed three years)
• takes effect in possession (the tenant has an immediate right to possession, not reversionary)
• is at the best rent which can reasonably be obtained (i.e., market rent)
• is granted without a fine or premium (no substantial upfront lump sum)

Key Term: short lease exception
A statutory rule allowing certain leases of three years or less to be created without a deed or registration.

This exception relates to the grant of the lease. An assignment of even a short legal lease is a conveyance of a legal estate and must be effected by deed (s 52(1) LPA 1925), and in registered land may also need to be registered (e.g., where the existing lease itself is a registered title).

Note also that in registered land, legal leases for seven years or less are protected without registration by virtue of being overriding interests (Sch 3, para 1 LRA 2002). However, leases exceeding seven years must be substantively registered to take effect at law.

Equitable Interests

If the formalities for a legal estate are not met (for example, there is no deed where required, or a registrable disposition is not completed by registration), equity may still recognise an interest, provided there is a valid land contract in writing that equity would specifically enforce.

Key Term: equitable interest
A right in land recognised by equity, often arising when legal formalities are not fully satisfied but fairness requires recognition of the right.

Contracts for the creation or transfer of rights in land must comply with s 2 LP(MP)A 1989. The contract must:

• be in writing
• incorporate all the expressly agreed terms
• be signed by or on behalf of each party

A contract that satisfies s 2 creates an enforceable “estate contract”, and equity may grant specific performance. In that event, equity may treat as done that which ought to be done (the Walsh v Lonsdale principle). The classic applications include:

• equitable leases where the parties agreed in writing (complying with s 2) to grant a lease requiring a deed but omitted to execute a valid deed; and
• equitable easements where the parties agreed in writing to grant an easement but did not execute a deed and/or register the legal easement.

Equity will not assist a party who is in breach of the contract’s terms when seeking specific performance (clean hands). For example, in Coatsworth v Johnson, an equitable lease was refused because the claimant was himself in breach of the contract.

Protection of the equitable interest depends on the system of land registration:

• In registered land, most equitable interests should be protected by entry of an agreed or unilateral notice on the charges register (ss 32 and 34 LRA 2002). If not so protected, a purchaser for value may take free, subject to overriding interests (Sch 3).
• In unregistered land, many equitable interests must be protected by registration as a Land Charge (for example, an estate contract class C(iv) under the Land Charges Act 1972). Failure to register the appropriate Land Charge usually renders the right void against a purchaser for money or money’s worth of a legal estate.

Equitable rights that are equitable by nature (i.e., because they are not capable of being legal under s 1 LPA 1925) include restrictive covenants and beneficial interests under a trust. These must be created and protected by the appropriate equitable formality and priority rules.

Worked Example 1.1

Scenario:
Sarah agrees in writing to sell her freehold house to Tom. They sign a contract, but no deed is executed and the transfer is not registered. Tom pays the price and moves in.

Answer:
Tom has an equitable interest in the house (specifically, an estate contract), but no legal estate. Without a deed and registration, the legal estate remains with Sarah. Tom can seek specific performance, but a third party who acquires the legal estate for value and without notice (in unregistered land) or who is protected by the LRA 2002 priority rules (in registered land) may not be bound by Tom’s interest unless it was properly protected (e.g., by a Land Charge in unregistered land, or a notice or overriding interest in registered land).

Worked Example 1.2

Scenario:
A landlord grants a five-year lease to a tenant by signing a written agreement, but no deed is executed.

Answer:
The lease is not a legal lease, as a deed is required for leases over three years. However, if the agreement is in writing, signed by both parties, and contains all agreed terms, it may be enforceable as an equitable lease (Walsh v Lonsdale), provided the tenant has clean hands.

Worked Example 1.3

Scenario:
On 1 November 2024, Owner grants Neighbour a right of way over registered Land A to benefit registered Land B by deed expressly described as an easement. The deed is never submitted for registration against Land A’s title.

Answer:
An express grant of a legal easement over registered land is a registrable disposition (s 27(2)(d) LRA 2002). Until it is completed by registration against the servient title (Land A), it does not operate at law and takes effect only in equity (s 27(1) and s 7 LRA 2002). Neighbour holds at best an equitable easement, which should be protected by a notice to bind future purchasers. Without registration as a legal easement or a protective notice, a purchaser for value of Land A may take free, subject to any applicable overriding interest (which is unlikely to apply to this new express easement).

Worked Example 1.4

Scenario:
Landlord orally grants a two-year monthly periodic tenancy at market rent, the tenant taking possession immediately. Six months later, Landlord assigns the reversion by deed to Buyer, who seeks to evict the tenant on the basis that the lease is invalid.

Answer:
A lease for three years or less may be created without a deed if it meets s 54(2) LPA 1925: it must take effect in possession, be at the best rent reasonably obtainable, and be without a fine or premium. The oral grant here creates a valid legal tenancy. The assignee of the reversion takes subject to this legal lease. The tenant’s lease will also override as a short legal lease in registered land (Sch 3, para 1 LRA 2002).

Exam Warning

Failing to comply with deed or registration requirements does not invariably make a transaction void for all purposes. Equity may recognise an equitable interest where there is a valid s 2 LP(MP)A 1989 contract and specific performance is available, but the equitable position is less secure. In registered land, an unregistered registrable disposition takes effect only in equity and may lose priority against a later registrant for value. Additionally, the s 54(2) short-lease exception applies to grants but not to assignments of leases, which ordinarily require a deed.

Revision Tip

Keep the stages distinct:

• Ask whether the interest is capable of being legal.
• If so, has a valid deed been executed and delivered (and, for registered land, has the registrable disposition been completed by registration)?
• If not, consider whether there is a valid s 2 LP(MP)A 1989 contract that equity would specifically perform (Walsh v Lonsdale), and how that equitable interest must be protected (notice in registered land, Land Charge in unregistered land).
• For leases, check whether the s 54(2) short-lease exception applies, and remember that assignments of leases still require a deed.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• A legal estate in land (freehold or leasehold) must be created or transferred by deed.
• The deed must state it is a deed, be signed and witnessed, and be delivered.
• In registered land, registrable dispositions (e.g., transfers, leases for more than seven years, express legal easements, legal charges) must be completed by registration to take effect at law.
• Leases for three years or less may be created without a deed or registration if certain conditions are met, but assignments of leases require a deed.
• Failure to comply with deed or registration requirements usually results in only an equitable interest.
• An enforceable land contract that complies with s 2 LP(MP)A 1989 can give rise to an equitable interest that equity may specifically enforce (Walsh v Lonsdale), subject to clean hands.
• Equitable interests must be appropriately protected (Land Charges in unregistered land; notices or, where applicable, overriding status in registered land) to bind purchasers.

Key Terms and Concepts

• legal estate
• deed
• registration
• short lease exception
• equitable interest