Introduction into English Law of Real Property

Absolute ownership of land is vested in the Crown. Below that level, the law distinguishes between ‘freeholders’ and ‘leaseholders’. Freehold owners own an estate in the land from the Crown. Leaseholders hold an estate under a contract called a lease. The word ‘estate’ describes the nature and duration of the rights owned by freeholder or leaseholder. The estate will vary according to whether it is freehold or leasehold, legal or equitable.

Freehold estates

The principal freehold estate is the fee simple estate. The word ‘fee’ means that the estate is heritable and ‘simple’ that the rights of inheritance are unrestricted. Estates can be absolute or conditional. The effect of a condition is precedent or subsequent. In the former case, compliance with the condition is necessary before the estate can exist, for example: ‘To AB in fee simple when or if he attains the age of 21 years’. In the latter case, the estate can be terminated by the happening of the conditional event, for example ‘To AB in fee simple provided he never sells out of the family.’ The fee absolute estate is subject to no condition.

Estates can be in expectancy or ‘in possession’. The former is where a right to possession only arises on the termination of an earlier estate in a succession of estates called a settlement. Where land is settled ‘To AB for life and thereafter to CD in fee simple’, AB has an estate in possession and CD, during the life of AB, has an estate in expectancy. Future estates are ‘remainders’ or ‘reversions’. CD’s estate is a remainder because, on the termination of AB’s life, the estate remains away from the grantor. If there was no gift over to CD, the estate would revert back to the grantor or his heirs who have a reversionary interest.

The most perfect and most normal form of the fee simple estate is the fee simple absolute in possession. Other freehold estates of minor importance are the ‘fee tail’ estate where inheritance is restricted to the descendants of the original tenant in tail and the estate would terminate if the line of descendants came to an end. There also is the ‘life estate’ which generally terminates on the death of the person to whom the estate is granted.

Leasehold estates

The ‘Term of Years’ is the most important leasehold estate and is one for a fixed determinable period of time, which may be calculated in years or even in months. It includes the renewable yearly lease. The term of years can also be conditional or absolute and in possession or in expectancy. Other leasehold estates of little importance are the ‘Estate at Will’ which is a tenancy determinable at the will of either party. The ‘Estate by Sufferance’ arises when a person with an estate for a term of years continues in possession after the term.

Equitable estates

Equitable estates can arise under a trust and where some non-compliance with the legal formalities of the common law prevents the transfer or creation of a legal estate.

Equitable estates arising under a trust.

Under a trust, the owner of an estate would convey the land to a person for the ‘use’ of another. The transferee’s moral obligation was only enforced in equity, the common law treating the transferee as the full and unfettered owner. Initially the equitable obligation was only enforced against the trustee, and could not be enforced against a new owner on the sale of the land by the trustee. Ultimately, however, the beneficiaries’ rights became enforceable against a purchaser except in the case of bona fide purchaser of the legal estate for value without notice, actual or constructive, or the trust.

Equitable estates arising other than under a trust.

These arise where non-compliance with the legal formalities prevents the transfer of a legal estate: for example, an attempt to transfer a freehold estate without the use of a formal deed, or the creation of mortgage without a deed. In both cases the court can, at its discretion, order specific performance of the agreement but will in any event recognise the transferee or the mortgagee as holding an equitable title.