PastPaperHero | Acquisition and transfer of estates and interests

Learning Outcomes

This article outlines the creation, transfer, and protection of equitable rights in land for SQE1, including:

Statutory formalities for valid dispositions of existing equitable interests under s 53(1)(c) LPA 1925 and their consequences
Distinction between legal and equitable interests and why the distinction matters for enforceability and exam problem questions
Ways equitable interests arise, including estate contracts under s 2 LP(MP)A 1989 and trusts arising by operation of law under s 53(2) LPA 1925
Methods by which beneficiaries can deal with their equitable interests (assignment, directions to trustees, releases, and sub‑trusts)
Operation of overreaching, the capital money requirement, and how purchaser protection works in both registered and unregistered land
Priority rules and registration mechanisms under the LRA 2002 and LCA 1972, with focus on purchasers for valuable consideration
Circumstances in which equitable rights bind third parties via notices, restrictions, land charges, or as overriding interests through actual occupation
Typical exam traps, such as ineffective oral dispositions, failure to register, payment to a sole trustee, and mischaracterising a commercial right as a trust interest

SQE1 Syllabus

For SQE1, you are required to understand the creation and transfer of equitable rights in land, including the relevant statutory formalities and the effect of overreaching, with a focus on the following syllabus points:

the distinction between legal and equitable interests in land
the statutory requirements for the valid transfer of equitable interests (including writing and signature)
how overreaching operates to protect purchasers and affect beneficiaries
the rules governing priority and protection of equitable interests in both registered and unregistered land
the consequences of failing to comply with formalities or registration requirements
how s 2 Law of Property (Miscellaneous Provisions) Act 1989 can generate equitable rights (estate contracts) and how specific performance interacts with those rights
how notices and restrictions operate under the Land Registration Act 2002, including the effect of s 29 LRA 2002 on priority for purchasers for valuable consideration
the Land Charges Act 1972 classes relevant to equitable rights (C(i), C(iv), D(ii), D(iii), F) and the effect of registration or non‑registration
the doctrine of notice for non‑registrable equitable rights (including beneficial interests under a trust), and the exceptions where overreaching applies.

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 statutory provision requires dispositions of existing equitable interests to be in writing and signed?
What is overreaching, and when does it occur?
In unregistered land, what is the effect of failing to register an equitable interest as a land charge?
True or false? A resulting trust must always be evidenced in writing to be valid.

Introduction

Equitable rights in land arise when legal formalities are not fully satisfied, or when the law recognises fairness-based claims. Understanding how these interests are created, transferred, and protected is essential for SQE1. This article explains the formal requirements for transferring equitable rights, the operation of overreaching, and the rules that determine whether an equitable interest will bind a purchaser. It also clarifies the interaction between statutory formalities (LPA 1925 and LP(MP)A 1989), priority rules in registered and unregistered title, and practical methods of protecting rights (notices, restrictions, and land charges).

Creation and Nature of Equitable Interests

Equitable interests are property rights recognised by equity, often when legal requirements are not met or when fairness demands protection.

Key Term: equitable interest
A property right in land recognised by equity, enforceable against the legal owner and sometimes against third parties.

Equitable interests commonly arise from trusts (express, resulting, or constructive), estate contracts, restrictive covenants, or failed attempts to create legal rights. They may also arise where the interest is capable of being legal but is not vested at law because the proper formalities for legal creation or registration have not been satisfied.

Key Term: express trust
A trust intentionally created by the legal owner, usually in writing, specifying who holds the beneficial interest in land.

Key Term: resulting trust
A trust arising automatically when someone contributes to the purchase price of land but is not named as a legal owner. No writing is required because such trusts arise by operation of law (s 53(2) LPA 1925).

Key Term: constructive trust
A trust imposed by the court to prevent unjust enrichment, often where there is a common intention as to shares or detrimental reliance. No writing is required (s 53(2) LPA 1925).

Other equitable rights include:

equitable leases (typically arising from a compliant written contract under s 2 LP(MP)A 1989, coupled with the availability of specific performance)
equitable easements (usually by contract; estoppel can also generate equitable easements)
estate contracts (options or rights of pre‑emption)
restrictive covenants (enforceable in equity only)
equitable mortgages (e.g., of an equitable interest or from an agreement to create a legal mortgage which fails formalities).

The route by which an equitable interest arises is important for formalities and for priority. Rights arising by operation of law (resulting/constructive trusts) do not require writing under s 53(2) LPA 1925, whereas rights created by grant or contract usually do.

Formalities for Transfer of Equitable Interests

The transfer (disposition) of an existing equitable interest is subject to strict statutory requirements.

Key Term: disposition of an equitable interest
Any act that transfers, assigns, or otherwise deals with an existing equitable interest in land.

Statutory Writing Requirement

Section 53(1)(c) of the Law of Property Act 1925 requires that any disposition of an existing equitable interest must be:

in writing; and
signed by the person disposing of the interest or their authorised agent.

Failure to comply renders the disposition void, so the equitable interest remains where it was prior to the attempted disposition. A “disposition” includes directions by a beneficiary to trustees to hold the beneficial interest for someone else, assignments to third parties, and releases. It does not catch every change in the beneficial ownership position; careful characterisation is required.

Key Term: s 53(1)(c) Law of Property Act 1925
The statutory rule that a disposition of an existing equitable interest must be in writing and signed to be valid.

In practice:

a beneficiary’s direction to trustees that they henceforth hold the beneficial interest for another person is a disposition that needs writing and signature
a beneficiary assigning their equitable interest to someone else is a disposition and must be in writing and signed
a release or disclaimer of an equitable interest is generally treated as a disposition and should comply with s 53(1)(c).

Exceptions

Section 53(2) LPA 1925 provides that the writing requirement does not apply to resulting, implied, or constructive trusts. These arise automatically by operation of law and do not require formal documentation. Thus, where beneficial interests change because equity imposes a constructive trust (e.g., on common intention and detriment), there is no need for writing even though the effect is to “re‑arrange” beneficial ownership.

Key Term: s 53(2) Law of Property Act 1925
The statutory exception that resulting, implied, and constructive trusts do not require writing or signature to be valid.

Methods of Transfer

Equitable interests can be transferred by:

Assignment: The beneficiary assigns their interest to another, complying with s 53(1)(c).
Declaration of trust: The legal owner declares they now hold the beneficial interest for another (this is creation of a trust, not necessarily a disposition of an existing equitable interest).
Sub-trust: The beneficiary declares a new trust of their own equitable interest for someone else. Whether a sub‑trust is a disposition of the existing equitable interest (and so within s 53(1)(c)) depends on the nature of the arrangement; in practice, prudent practice is to comply with s 53(1)(c) to avoid dispute.

Key Term: assignment (of equitable interest)
The transfer of an existing equitable interest by the beneficiary to another person, requiring writing and signature.

When equitable interests arise through contracts (estate contracts, equitable leases, equitable easements), the creation usually depends on a written, signed contract including all agreed terms (s 2 LP(MP)A 1989), together with the availability of specific performance. Where specific performance would be refused (e.g., because of the claimant’s breach), the equitable interest may not arise.

Worked Example 1.1

A is the beneficiary under a trust of land. She wishes to assign her interest to B. She writes and signs a letter to the trustees stating she assigns her interest to B. Is this valid?

Answer:
Yes. The assignment is in writing and signed by A, satisfying s 53(1)(c) LPA 1925.

Directions to Trustees and Releases

Where a beneficiary directs trustees to hold on different trusts, or releases their interest, s 53(1)(c) requires writing and signature. If the beneficiary instead withdraws consent to a bare trust by causing the legal estate to be transferred outright to a new legal owner with beneficial ownership vesting at law (for example, where legal title is transferred free of the prior trust), different issues arise; the safest route remains compliance with writing.

Sub‑trusts and prudence

A declaration by a beneficiary that they hold their equitable interest on trust for another is conventionally treated as creating a new trust of the beneficial interest. The safer view is to comply with s 53(1)(c) whenever a beneficiary deals with their equitable interest, whether by assignment, direction, release, or sub‑trust, so the dealing is not vulnerable.

Worked Example 1.2

C is the sole beneficiary under a trust of land. C orally instructs the trustees to hold the property for D instead. The trustees act accordingly. Later, C disputes the transfer. Is the disposition valid?

Answer:
No. A direction by C that the trustees hold for D is a disposition of an existing equitable interest and must comply with s 53(1)(c) (writing and signature). The oral instruction is ineffective; C’s equitable interest remains unless and until a compliant written, signed disposition is made.

Overreaching

Overreaching is a statutory mechanism that removes certain equitable interests from land and attaches them to the proceeds of sale, protecting purchasers.

Key Term: overreaching
The process by which a purchaser who pays capital money to at least two trustees (or a trust corporation) takes land free of beneficial interests, which transfer to the sale proceeds.

Overreaching derives from ss 2 and 27 LPA 1925. It applies to transactions where capital money arises (e.g., sale, mortgage) and protects purchasers and mortgagees who deal with at least two trustees (or a trust corporation). Beneficiaries’ rights then attach to the money instead of the land.

When Does Overreaching Occur?

Overreaching occurs when:

There is a sale, mortgage, or other conveyance of a legal estate for which capital money is paid; and
Capital money is paid to at least two trustees (or a trust corporation).

If these conditions are met, the purchaser takes the land free of the equitable interests under the trust, which are instead attached to the money received by the trustees.

Overreaching applies equally to registered and unregistered land. In registered land, beneficiaries’ rights can be kept “off the register” by the curtain principle so long as purchasers pay two trustees.

Worked Example 1.3

C and D are trustees of land. E is a beneficiary in actual occupation. C and D sell the land to F, who pays the purchase price to both trustees. Is E's interest overreached?

Answer:
Yes. The purchase money was paid to two trustees, so E's equitable interest is overreached and attaches to the proceeds, not the land. F takes free.

Which Interests Can Be Overreached?

Overreaching principally applies to beneficial interests under a trust of land. It does not displace legal rights, nor does it generally apply to commercial third‑party rights such as legal leases, easements or restrictive covenants. Overreaching also does not convert defective legal rights into valid ones; it simply moves equitable trust interests from the land to the money.

Exceptions to Overreaching

Overreaching will not occur if:

The purchase money is paid to only one trustee (and not a trust corporation);
The interest is not of a kind that can be overreached (e.g., contractual or commercial rights which are not beneficial interests under the trust).

In such cases, an equitable interest may bind a purchaser if protected appropriately (as an overriding interest in registered land, or by registration in unregistered land) or if the purchaser is not Equity’s Darling.

Exam Warning

If purchase money is paid to a single trustee, overreaching does not occur. The purchaser may then be bound by the equitable interest if it is protected as an overriding interest or by registration.

Practical protection: Restrictions

In registered land, a restriction can be used to ensure overreaching occurs (e.g., requiring two trustees to join in any disposition). If a buyer ignores a restriction that requires two trustees, they risk taking subject to beneficiaries’ interests and may face refusal of registration.

Key Term: restriction (registered land)
An entry on the register controlling dispositions of the registered estate (e.g., requiring two trustees to join or consent). It does not protect a third‑party interest as such; it regulates how dispositions can be completed.

Worked Example 1.4

G is a sole trustee and legal owner of a registered title. The proprietorship register contains a restriction requiring any disposition to be by two trustees. G sells and the buyer pays the price to G alone. Will the buyer take free of G’s spouse H’s beneficial interest?

Answer:
No. Payment to a single trustee means overreaching does not occur. Because the buyer ignored the restriction requiring two trustees, H’s beneficial interest may bind, potentially as an overriding interest if H is in actual occupation, and registration may be refused unless the restriction is complied with.

Priority and Protection of Equitable Interests

The enforceability of an equitable interest against a purchaser depends on the system of title (registered or unregistered) and compliance with the appropriate protection and registration requirements. Priority outcomes turn on statutory schemes rather than the mere legal/equitable label.

Registered Land

Equitable interests should be protected by entry of a notice or restriction on the register. Notices protect the priority of an interest against purchasers for value (s 29 LRA 2002); restrictions control how dispositions can be completed.
Some interests (e.g., beneficial interests under a trust) may be protected as overriding interests if the beneficiary is in actual occupation (Sch 3, para 2 LRA 2002), but only if occupation is obvious on reasonably careful inspection or the purchaser has actual knowledge; failure to disclose on inquiry may defeat overriding status.
Equitable easements created after 13 October 2003 will not be overriding; they require a notice to bind a purchaser. Express legal easements created after that date must be registered to take effect at law.
If an equitable interest is not protected appropriately, it may lose priority to a purchaser for valuable consideration under s 29 LRA 2002.

Key Term: notice (registered land)
An entry on the register protecting an interest in land, ensuring it binds future purchasers (either “agreed” or “unilateral”). Notices give priority against purchasers for value under s 29 LRA 2002.

In registered land:

Legal leases of 7 years or less are overriding (Sch 3, para 1 LRA 2002).
Beneficial interests under a trust can be overriding via actual occupation if the conditions in Sch 3, para 2 are met.
Implied legal easements may override under Sch 3, para 3 if they are known, obvious on inspection, or exercised within the year before disposition.
Equitable leases may bind through actual occupation (Sch 3, para 2), provided occupation is apparent or known; otherwise, they should be protected by notice.

Actual occupation is fact‑sensitive. Continuous presence, belongings, intention to return, and the nature and state of the property are relevant. Concealed occupation and failure to disclose upon reasonable inquiry may defeat overriding status.

Worked Example 1.5

H has an equitable lease arising from a compliant written contract (s 2 LP(MP)A 1989). H moved in and clearly occupies. The landlord sells to J. There is no notice entry. Will H bind J?

Answer:
Likely yes, as an overriding interest under Sch 3, para 2 LRA 2002 if H’s occupation is obvious on a reasonably careful inspection or J had actual knowledge. If H’s occupation was concealed or H failed to disclose on inquiry when reasonably expected, overriding status may be lost. If overriding status is not established, H should have protected the equitable lease by a notice.

Unregistered Land

Most equitable interests must be registered as land charges against the name of the estate owner (LCA 1972). Failure to register (where registration is required) renders the interest void against a purchaser for value of a legal estate.
Some equitable interests (e.g., beneficial interests under a trust) are not registrable as land charges and are protected by the doctrine of notice or by overreaching.
Puisne legal mortgages (second/subsequent legal mortgages) must be registered as a Class C(i) land charge to bind a purchaser.

Key Term: land charge
A registration of an equitable interest in unregistered land, required for enforceability against purchasers.

Relevant classes:

C(i): puisne mortgage (legal mortgage not protected by deed deposit)
C(iv): estate contract (e.g., option; contract for a lease)
D(ii): restrictive covenant
D(iii): equitable easement
F: home right (Family Law Act home rights of occupation).

Section 198 LPA 1925 deems registration as actual notice to all persons as from the date of registration. Under s 4(6) LCA 1972, failure to register renders the interest void against a purchaser for money or money’s worth of a legal estate, regardless of the purchaser’s knowledge.

Beneficial interests under a trust cannot be registered as land charges; the doctrine of notice continues to apply (subject to overreaching). A purchaser will take free if overreaching occurs (payment to two trustees) or if the purchaser is Equity’s Darling (bona fide purchaser for value of a legal estate without notice). Otherwise, a beneficial interest may bind.

Worked Example 1.6

G is the beneficiary of an equitable mortgage over unregistered land but fails to register it as a land charge. H later buys the land for value. Is G's interest enforceable against H?

Answer:
No. Failure to register the equitable mortgage as a land charge means it is void against a purchaser for value of a legal estate, irrespective of H’s actual knowledge.

Searching and names

The land charges register is searched against the exact name(s) of the estate owner appearing in the title deeds. Variations in names or missing names can defeat protection. Best practice is to search against all owner names revealed by the epitome of title, including pre‑root owners. A search certificate under s 10 LCA 1972 provides statutory protection if properly done.

Equity’s Darling and notice

Where land charges are not available (e.g., beneficial interests under a trust), a purchaser of a legal estate who pays value without notice (actual, constructive, or imputed) takes free. Constructive notice includes what would have been discovered on reasonable inspection and inquiry; imputed notice includes what the purchaser’s agents (e.g., solicitors) know or ought to know.

Consequences of Failing to Comply with Formalities

If a disposition of an equitable interest does not comply with s 53(1)(c) (writing and signature), it is void; the equitable interest remains with the disponor.
If a contract intended to create a legal or equitable right does not comply with s 2 LP(MP)A 1989 (writing, signed by both parties, containing all agreed terms), the contract is generally unenforceable. Equity may nevertheless assist via constructive trusts or proprietary estoppel where appropriate.
If an equitable interest is not registered as required in unregistered land, it will generally be void against a purchaser for value of a legal estate.
If overreaching does not occur, the purchaser may be bound by the equitable interest if it is protected as an overriding interest or by registration (notice), depending on the system of title.

Worked Example 1.7

K is a beneficiary. K orally releases their beneficial interest to the trustees, who then sell the property to a buyer who paid two trustees. Is K’s release effective?

Answer:
The oral release is a disposition that fails s 53(1)(c) and is ineffective. However, if the buyer paid capital money to two trustees, K’s beneficial interest would be overreached on the sale: the buyer takes free and K’s rights attach to the proceeds held by the trustees.

Worked Example 1.8

L agrees in writing, signed by both parties, to grant M a lease for five years of registered land. No deed is executed, but M takes possession. Subsequently, the freehold is sold to N. No notice is entered. Will M bind N?

Answer:
The written contract satisfies s 2 LP(MP)A 1989 and is specifically enforceable, giving M an equitable lease. In registered land, M can bind N if M’s actual occupation meets Sch 3, para 2 LRA 2002 (occupation is obvious on inspection or N has actual knowledge and M did not fail to disclose on inquiry). Otherwise, M should have protected the equitable lease by a notice; failure to do so risks loss of priority under s 29 LRA 2002.

Other practical points

Agreed vs unilateral notices: an agreed notice requires evidence acceptable to the registrar; a unilateral notice can be entered by a claimant but may be objected to by the registered proprietor. Either type protects priority under s 29 LRA 2002.
Restrictions regulate dispositions; they do not, by themselves, confer priority on the relevant interest.

Revision Tip

Always check whether the statutory formalities for transferring an equitable interest have been met, and whether overreaching or registration requirements apply. For registered land, ask: is there a notice or restriction, or an overriding interest? For unregistered land, ask: is the right registrable as a land charge? If not, do the doctrine of notice and overreaching apply?

Key Point Checklist

This article has covered the following key knowledge points:

Equitable interests arise where legal formalities are not fully satisfied or where equity recognises fairness-based claims.
Dispositions of existing equitable interests must comply with s 53(1)(c) LPA 1925 (writing and signature), unless resulting, implied, or constructive trusts apply under s 53(2).
Contracts to create interests in land must satisfy s 2 LP(MP)A 1989 to be enforceable; equitable rights arising from such contracts depend on specific performance.
Overreaching removes certain equitable interests from land when capital money is paid to at least two trustees (or a trust corporation), so the purchaser or mortgagee takes free.
In registered land, equitable interests should be protected by notice or restriction. Beneficial interests under a trust may override if the beneficiary is in actual occupation (subject to exceptions).
In unregistered land, most equitable interests must be registered as land charges. Failure to register typically renders the interest void against a purchaser for value of a legal estate.
Actual occupation is assessed on continuity, presence of belongings, intention to return, and visibility on inspection. Failure to disclose on inquiry may defeat overriding status.
Overreaching does not occur if purchase money is paid to a single trustee; in such cases, the equitable interest may bind the purchaser if protected or if the purchaser is not Equity’s Darling.
Notices protect priority in registered land; restrictions control how dispositions are completed (e.g., requiring two trustees), supporting overreaching.

Key Terms and Concepts

equitable interest
express trust
resulting trust
constructive trust
disposition of an equitable interest
s 53(1)(c) Law of Property Act 1925
s 53(2) Law of Property Act 1925
assignment (of equitable interest)
overreaching
notice (registered land)
restriction (registered land)
land charge

Acquisition and transfer of estates and interests - Transfer...