Acquisition and transfer of estates and interests - How to a...

Learning Outcomes

This article explains the acquisition and transfer of estates and interests in land, focusing on the distinction between legal and equitable rights, the statutory formalities for creation, transfer and disposition, and the impact of registration on enforceability in both registered and unregistered land. It examines the scope of legal estates and legal interests under the Law of Property Act 1925, contrasts them with equitable interests such as restrictive covenants, options and estate contracts, and clarifies when defective formalities produce only equitable rights. It analyzes the short-lease exception, the requirements for valid contracts and deeds, and the role of resulting and constructive trusts and proprietary estoppel in generating equitable interests. It reviews the priority frameworks in registered and unregistered land, including the Land Registration Act 2002, the Land Charges regime, overriding interests, and the doctrine of notice. It also details how overreaching, notices, restrictions and land charges protect or displace equitable rights, and illustrates typical SQE1 fact patterns testing whether particular rights bind purchasers or mortgagees.

SQE1 Syllabus

For SQE1, you are required to understand the acquisition and transfer of estates and interests in land, including the distinction between legal and equitable rights, the formalities for creation and transfer, and the effect of registration, with a focus on the following syllabus points:

• the difference between legal estates, legal interests, and equitable interests in land
• the statutory formalities for creating and transferring legal and equitable rights
• the registration requirements for estates and interests in both registered and unregistered land
• the effect of registration (or non-registration) on enforceability against third parties
• the operation of overriding interests and the doctrine of notice
• the rules on contractual creation of land rights (s 2 LP(MP)A 1989) and valid deeds (s 1 LP(MP)A 1989)
• the short-lease exception (s 54(2) LPA 1925) and certainty of term for leases
• the priority framework in registered land (ss 28–29 LRA 2002), and protection via notices and restrictions
• the Land Charges regime in unregistered land and consequences of failure to register

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 only two legal estates in land recognized in England and Wales?
2. Which statutory provision sets out the formal requirements for a valid deed?
3. What is the effect of failing to register a legal transfer of a registered estate at HM Land Registry?
4. What is the main difference between a legal and an equitable interest in land?
5. In what circumstances can an equitable interest bind a purchaser of unregistered land?

Introduction

Acquiring and transferring estates and interests in land is a core aspect of property law. For SQE1, you must be able to identify the types of rights that exist in land, distinguish between legal and equitable rights, and apply the correct statutory formalities for their creation and transfer. You also need to understand the impact of registration on enforceability, and how equitable rights may still bind purchasers in certain circumstances.

In registered land, the modern scheme prioritises clarity and publicity. The Land Registration Act 2002 (LRA 2002) aims to make the register a mirror of title and interests, subject to certain limited classes of overriding interests. Priority between competing rights is governed by statutory rules (not by the doctrine of notice), and most rights must be protected by registration (as notices or restrictions) to bind purchasers for value. In unregistered land, legal rights generally bind the world, many equitable rights must be protected by registration as land charges, and for a small residual category the doctrine of notice remains relevant. Across both systems, the concept of overreaching ensures that many beneficial interests under trusts attach to sale proceeds rather than bind the land, provided statutory conditions are met.

Types of Estates and Interests in Land

Land law recognizes two main types of proprietary rights: estates (which confer a right to possess land for a period of time) and interests (which are rights over land owned by someone else).

Key Term: estate in land
A right to possess and use land for a defined period, such as a freehold or leasehold.

Key Term: interest in land
A right over land owned by another, such as an easement, mortgage, or restrictive covenant.

Legal Estates

There are only two legal estates in land:

• The freehold estate (fee simple absolute in possession): ownership for an unlimited duration.
• The leasehold estate (term of years absolute): the right to possess land for a fixed period.

Key Term: freehold estate
The right to possess land indefinitely, subject to statutory restrictions and third-party rights.

Key Term: leasehold estate
The right to possess land for a fixed or periodic term, as specified in a lease.

A lease must have certainty of term; periods like “for the duration of the war” are void for uncertainty. Alongside fixed terms, periodic tenancies (weekly, monthly, yearly) are valid, provided the law’s requirements are met.

Legal and Equitable Interests

Certain rights over land can exist as legal interests if they are created using the correct formalities and are listed in section 1(2) of the Law of Property Act 1925. These include:

• Easements and profits à prendre (if created by deed and for the duration of a legal estate)
• Legal mortgages (created by deed)
• Rentcharges
• Rights of entry attached to a legal lease or rentcharge

All other rights in land are equitable only. Examples include restrictive covenants, options to purchase, and estate contracts (such as contracts for the sale or grant of a lease) which take effect as equitable interests until completion and registration of the legal disposition.

Key Term: legal interest
A right over land recognized by law if created using the required formalities and listed in s 1(2) Law of Property Act 1925.

Key Term: equitable interest
A right over land recognized and enforced by equity, either because it is not capable of being legal or because the legal formalities were not satisfied.

Key Term: estate contract
An equitable interest arising from a valid contract to create or transfer a legal estate or interest in land, such as a contract for sale or a contract to grant a lease.

Key Term: option to purchase
An equitable interest giving the grantee a right to buy the land within a stated time on stated terms.

Creating and Transferring Legal Estates and Interests

To create or transfer a legal estate or interest, strict statutory formalities must be followed.

Formalities for Legal Estates and Interests

• Deed: Most legal estates and interests must be created or transferred by deed (s 52(1) Law of Property Act 1925).
• Deed requirements: The deed must make clear on its face that it is a deed, be signed by the relevant party in the presence of a witness who also signs, and be delivered as a deed (s 1 Law of Property (Miscellaneous Provisions) Act 1989).

Key Term: deed
A written document executed with specific formalities, required to create or transfer most legal estates and interests in land.

There is an important statutory exception:

• Short leases: A legal lease for a term not exceeding three years may be created orally or in informal writing without a deed if it takes effect in possession, is at the best rent reasonably obtainable, and no premium is payable (s 54(2) LPA 1925).

Registration Requirements

For registered land, certain dispositions must be completed by registration at HM Land Registry to take effect at law (s 27 LRA 2002). These include:

• Transfers of registered estates
• Grants of legal leases for more than seven years
• Express grants or reservations of legal easements
• Legal charges (mortgages)

If registration is not completed, only an equitable interest is created and priority will be governed by the LRA 2002 (commonly s 29). In registered land, notice on the charges register protects the priority of an interest; failure to protect may result in loss of priority as against a purchaser for value.

Priority rules in registered land:

• ss 28–29 LRA 2002 set priority rules. As a general rule, a registered disposition for value takes subject only to interests protected on the register and overriding interests; unprotected interests may lose priority.

Key Term: notice (register entry)
An entry on the charges register of a title protecting the priority of a third-party interest (e.g., an equitable lease, restrictive covenant, or option).

Key Term: restriction
An entry on the proprietorship register regulating dispositions, often used to prevent registration unless specified conditions are met (for example, payment to two trustees to overreach beneficial interests, or obtaining consent under a trust).

Formalities for Equitable Interests

Equitable interests may arise in several ways:

• Where the right is not capable of being legal (e.g., a restrictive covenant)
• Where the legal formalities are not satisfied (e.g., a contract to create a legal right, but no deed)
• By operation of equity (e.g., resulting or constructive trusts, proprietary estoppel)

Most agreements to create or transfer rights in land must satisfy s 2 LP(MP)A 1989: they must be in writing, incorporate all expressly agreed terms, and be signed by or on behalf of all parties. If the agreement is specifically enforceable, equity may treat as done that which ought to be done: the classic Walsh v Lonsdale principle. A defective deed that nevertheless satisfies s 2 and is specifically enforceable may similarly give rise to an equivalent equitable right (e.g., Parker v Taswell). Equity will refuse relief where the claimant has “unclean hands” (e.g., Coatsworth v Johnson).

In relation to trusts:

• An express declaration of trust of land must be evidenced in signed writing (s 53(1)(b) LPA 1925).
• A disposition of an existing equitable interest must be in writing and signed by the person disposing (s 53(1)(c) LPA 1925).
• Resulting and constructive trusts arise without formalities (s 53(2) LPA 1925).

Key Term: resulting trust
An equitable interest arising when someone contributes to the purchase price of property but is not the legal owner.

Key Term: constructive trust
An equitable interest imposed by the court where it would be unconscionable for the legal owner to deny another’s beneficial interest.

Key Term: proprietary estoppel
An equitable remedy where a person acts to their detriment in reliance on an assurance relating to rights in land.

Key Term: actual occupation
A factual state of physical presence or occupation appropriate to the nature of the property, relevant to overriding interests in registered land.

Disposing of Estates and Interests

Disposing of Legal Estates

To transfer a legal estate (freehold or leasehold):

• Execute a valid deed
• For registered land, complete registration at HM Land Registry

Until registration is completed, the transferor remains the legal owner, and the transferee holds only an equitable interest. Priority will then depend on whether the equitable interest is protected (e.g., by notice) and on the LRA 2002 rules.

Disposing of Equitable Interests

Equitable interests can be assigned by written instrument signed by the assignor (s 53(1)(c) LPA 1925). For trusts, the beneficiary may direct the trustees to hold the property for another person, subject to the same formalities. Many beneficial interests under a trust of land do not need entries as notices; instead, they are better protected by restrictions, and may be overreached on a sale if statutory conditions are met.

Key Term: overreaching
The statutory process by which certain equitable interests (e.g., beneficiaries under a trust of land) are detached from the land and transferred to the purchase money paid to at least two trustees or a trust corporation.

Registration and Enforceability

Registered Land

The Land Registration Act 2002 requires that most dealings with registered land are completed by registration. The register is intended to provide a complete and accurate record of title and third-party rights.

• Notices: Entries in the charges register to protect the priority of interests such as equitable easements, estate contracts/options, or restrictive covenants.
• Restrictions: Entries in the proprietorship register to regulate dispositions, often used to protect trust interests (e.g., Form A restriction for tenants in common) or to require the consent of a named party before registration.

If an interest is not protected by registration, it may lose priority against a purchaser for value under s 29 LRA 2002, unless it qualifies as an overriding interest.

Key Term: overriding interest
A right that binds a purchaser of registered land even if not registered, such as a short legal lease or the rights of a person in actual occupation, and certain legal easements and profits à prendre.

Priority framework highlights:

• s 28 LRA 2002 preserves existing priorities when there is no disposition for value.
• s 29 LRA 2002 gives priority to a registered disposition for value over unprotected interests (subject to overriding interests).
• Expressly created legal easements post-13 October 2003 must be registered to take effect at law and do not generally override; implied or prescriptive legal easements may override if they meet Schedule 3 criteria (e.g., obvious on inspection or used within the previous year).

Unregistered Land

In unregistered land, legal rights bind the world. Equitable interests must be protected by registration as a land charge (Land Charges Act 1972) or may be subject to the doctrine of notice for residual categories.

• Land charges: Equitable interests such as restrictive covenants (D(ii)), equitable easements (D(iii)), and estate contracts including equitable leases/options (C(iv)), and puisne mortgages (C(i)) must be registered against the name of the estate owner. Failure to register means the interest is void against a purchaser for value of a legal estate (s 4(6) LCA 1972). Registration constitutes deemed actual notice (s 198 LPA 1925).

Key Term: land charge
A registrable equitable right in unregistered land noted against the estate owner’s name at the Land Charges Department; must be registered to bind purchasers (e.g., D(ii) restrictive covenants, D(iii) equitable easements, C(iv) estate contracts, C(i) puisne mortgages).

Key Term: puisne mortgage
A legal mortgage over unregistered land not protected by deposit of title deeds; it must be registered as a Class C(i) land charge to bind purchasers.

• Doctrine of notice: Some equitable interests (e.g., beneficial interests under trusts, and a small residual category of rights not registrable as land charges) bind a purchaser unless the purchaser is Equity’s Darling—a bona fide purchaser for value of a legal estate without notice (actual, constructive, or imputed).

Key Term: doctrine of notice
The principle that certain equitable interests bind a purchaser of unregistered land only if the purchaser has notice of the interest.

Key Term: Equity’s Darling
A bona fide purchaser for value of a legal estate without notice of the equitable interest; such a purchaser takes free of the equitable interest.

Constructive notice includes matters discoverable by inspection of the land or documents that a prudent purchaser would examine. Imputed notice is notice held by an agent (e.g., solicitor) that is attributed to the purchaser.

Overriding Interests and Priority

Certain interests, known as overriding interests, may bind a purchaser of registered land even if not registered. These include:

• Legal leases not exceeding seven years (Schedule 3, para 1)
• Rights of persons in actual occupation (Schedule 3, para 2)
• Certain legal easements and profits à prendre (Schedule 3, para 3) where they are implied or acquired by prescription and are either known to the purchaser, obvious on inspection, or used within the year prior to the disposition

If an equitable interest holder is in actual occupation, their right may override a registered disposition (e.g., Williams & Glyn's Bank v Boland). The scope of “actual occupation” depends on the facts; temporary absence may not defeat occupation, and occupation must be considered at the time of disposition (with nuances about time of registration). Occupation must also be obvious on a reasonably careful inspection or the purchaser must have actual knowledge, unless the occupier unreasonably fails to disclose when asked.

Examples illustrating the threshold:

• Renovation cases show that regular presence and intention to reside can suffice.
• A person abroad with minimal or sporadic ties to the property may not be in actual occupation.
• Use of a staircase or passage alone will not typically amount to occupation of the structure (equitable easements do not override under para 3; they must be protected by notice).

Key Term: actual occupation
A factual concept judged by presence and intention, assessed at the time of the disposition and by reference to property type and use; relevant to overriding interests under Schedule 3, para 2 LRA 2002.

Interaction of Legal and Equitable Principles

The distinction between legal and equitable rights affects enforceability and priority. Legal rights are always enforceable against purchasers (subject to registration rules in registered land). Equitable rights may be defeated if not properly protected or if the purchaser is Equity’s Darling (in unregistered land). In registered land, equitable rights must usually be protected by notice or restriction to bind purchasers for value; otherwise, they may lose priority unless they qualify as overriding interests.

Overreaching is central: on a sale or mortgage where capital money is paid to at least two trustees (or a trust corporation), beneficiaries’ equitable interests under a trust of land are detached from the land and attach to the sale proceeds. In such cases, even a beneficiary in actual occupation will not override, because the interest is overreached.

Key Term: restriction
An entry on the proprietorship register preventing registration of certain dispositions unless specified conditions are met (e.g., payment to two trustees to achieve overreaching).

Worked Example 1.1

Sarah owns registered freehold land and agrees to sell it to Tom. They sign a valid transfer deed, but Tom does not register the transfer at HM Land Registry. Who is the legal owner, and what rights does Tom have before registration?

Answer:
Sarah remains the legal owner until registration is completed. Tom holds an equitable interest in the land and can compel Sarah to complete registration, but cannot dispose of the legal estate until then. Tom should protect his equitable interest by entering a notice; otherwise, a subsequent registered disposition for value may take priority over his interest.

Worked Example 1.2

Emily contributes half the purchase price of a house, but the legal title is registered in her partner's sole name. What interest, if any, does Emily have?

Answer:
Emily may have an equitable interest under a resulting or constructive trust, proportionate to her contribution or quantified by common intention, even though she is not the legal owner. If the property is sold, her interest may be overreached if the buyer pays capital money to at least two trustees.

Worked Example 1.3

A restrictive covenant is created over unregistered land after 1925 but is not registered as a land charge. The land is sold to a purchaser for value. Is the purchaser bound?

Answer:
No. Failure to register the restrictive covenant as a land charge (Class D(ii)) means it is void against a purchaser for value of a legal estate, even if the purchaser knew of it.

Worked Example 1.4

An oral agreement grants a tenant immediate possession for two years at market rent, and no premium is paid. No deed exists. Is the tenancy valid, and can it bind a purchaser of the freehold?

Answer:
Yes. This is a valid short legal lease under s 54(2) LPA 1925 and does not require a deed. In registered land it is an overriding interest under Schedule 3, para 1, binding a purchaser; in unregistered land legal leases bind the world.

Worked Example 1.5

A landlord and tenant sign a written, signed agreement containing all terms for a seven-year lease but never execute a deed. The tenant takes possession and complies with terms. What interest arises?

Answer:
An equitable lease arises under s 2 LP(MP)A 1989 and the Walsh v Lonsdale principle (specific performance available). In registered land, the tenant should protect the lease by entering a notice; failing that, it may override only if the tenant is in actual occupation under Schedule 3, para 2. In unregistered land, the equitable lease is an estate contract and must be registered as a C(iv) land charge to bind purchasers.

Worked Example 1.6

Bella and Hugo are joint legal owners of registered land and hold beneficial interests as tenants in common. They sell to Carla, who pays the purchase price to Bella alone. Hugo is abroad and does not sign. Carla completes registration. Are Hugo’s beneficial interests binding?

Answer:
Yes. Overreaching did not occur because capital money was paid to only one trustee. Hugo’s beneficial interest may constitute an overriding interest if he (or his agent) was in actual occupation, unless one of the statutory exceptions applies. A Form A restriction on the proprietorship register would have alerted Carla to the need to pay two trustees.

Worked Example 1.7

A buyer of unregistered land fails to search the Land Charges Register. There was an unregistered option to purchase (Class C(iv)). The buyer paid full value. Is the option enforceable?

Answer:
No. An unregistered Class C(iv) land charge is void against a purchaser for money or money’s worth of a legal estate. A buyer’s actual knowledge does not revive an unregistered land charge.

Worked Example 1.8

Dina has an equitable right under a constructive trust and is in actual occupation of registered land. On sale, the purchaser made reasonable enquiries of occupiers and Dina, present at the viewing, failed to disclose her interest. Will her right override?

Answer:
Likely no. Under Schedule 3, para 2, overriding status is lost if the occupier fails to disclose the right upon reasonable enquiry when they could reasonably be expected to do so. Dina’s interest should instead have been protected by a restriction, and her remedy lies against the seller.

Summary

In registered land, priority depends on protection and statutory overriding categories. In unregistered land, many equitable rights must be registered as land charges; otherwise, the doctrine of notice applies only to a narrow residual class.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinction between legal estates, legal interests, and equitable interests in land (s 1 LPA 1925)
• The statutory formalities for creating and transferring legal and equitable rights (s 52 LPA 1925; s 1 and s 2 LP(MP)A 1989)
• The short-lease exception to the deed requirement (s 54(2) LPA 1925)
• The registration requirements for estates and interests in registered land (s 27 LRA 2002) and the priority framework (ss 28–29 LRA 2002)
• Protection of interests in registered land via notices and restrictions; when interests cannot be protected by notice and require a restriction
• The effect of registration (or non-registration) on enforceability against third parties, including loss of priority for unprotected interests in registered land
• The operation of overriding interests (short legal leases, actual occupation, implied/prescriptive legal easements) and the associated exceptions
• The Land Charges regime for unregistered land (classes C(i), C(iv), D(ii), D(iii)), and consequences of failure to register
• The doctrine of notice and the concept of Equity’s Darling in the residual unregistered-land categories
• The rules on creating equitable rights by contract and equity’s intervention (Walsh v Lonsdale; Parker v Taswell; Coatsworth v Johnson)
• The role of overreaching in both registered and unregistered land, and how restrictions help prevent unintended overreaching
• Practical steps to protect equitable interests: entering notices, restrictions, and where necessary registering land charges

Key Terms and Concepts

• estate in land
• interest in land
• freehold estate
• leasehold estate
• legal interest
• equitable interest
• deed
• estate contract
• option to purchase
• resulting trust
• constructive trust
• proprietary estoppel
• actual occupation
• overriding interest
• overreaching
• notice (register entry)
• restriction
• land charge
• puisne mortgage
• doctrine of notice
• Equity’s Darling