Legal and equitable estates compared

Legal estates bind subsequent purchasers of the land, even those without notice of their existence, whereas equitable estates are overreached and attach to the proceeds of the sale of the legal estate where it has been sold to a bona fide purchaser for value without notice of their existence.

Rights Over the Property of Another

A person may have legal or equitable rights over property owned by another person. These interests may enable him (i) to enjoy the benefits from the land of another in the form of easements or profits a prendre or (ii) to restrict the other owner’s rights to use his property through a restrictive covenant.

Easements and profits

Easements include rights of way, rights to abstract water and rights to the support of buildings (terraced houses). Profits include rights in connection with shooting, fishing, grazing, cutting turf and taking wood.

Restrictive covenants

A restrictive covenant in a contract to transfer title restricts the transferee’s right on the use of the land for the benefit of the transferor. Legally binding between the contracting parties it had no legal force against a subsequent transferee because of privity of contract.

The Reforms of 1925

The Law of Property Act 1925 took the essential difference between legal and equitable estates as the basis of reform and reduced the legal estates to two: the fee simple absolute in posession and the term of years absolute. Other estates could only subsequently exist as equitable estates under a trust. The number of legal interests was reduced to five.

The Settled Land Act 1925 simplified the creation of trusts, separating the transfer property from the terms of the trust through the use of two deeds, and provided that, on sale of trust property, the rights of the beneficiaries are transferred to the money realised by the sale. The Land Registration Act 1925 introduced a completely new system of registered land with registered title and a simplified transfer system based upon the share transfer system.

Registered and Unregistered Conveyancing

Where land is sold there is a contract between the vendor and purchaser which can only be made in writing. The contract becomes binding on the exchange of contracts; however, before any transfer of title can take place, the title of the vendor must be established. The procedure varies, depending on whether the land is unregistered or registered.

Unregistered conveyancing

The vendor’s title is provided through the ‘title deeds’ which must establish a chain of at least 15 years to a ‘good root of title’. The purchaser also searches for encumbrances against the land in the Land Charges Registry which classifies encumbrances under different classes. The final transfer of the land will be a conveyance by deed drawn up by the purchaser’s solicitor.

Registered conveyancing

Each area has a District Registry and each registered title is allocated a title number. Each registered interest comprises three separate registers: (i) the Property Register which describes the property, usually by reference to a map; (ii) the Proprietors Register which gives the name of the registered proprietor and a description of his title; and (iii) the Charges Register which details charges and other claims registered against the property. Once a search of the register has been made with the permission of the registered proprietor, a standard form from legal transfer is executed in the form of a deed, and the registers will be updated.

The Classification of Estates and Interest in Land:

Unregistered and Registered

Unregistered land

The classification is based on the old distinctions between legal and equitable estates and interests and comprises (i) legal estates; (ii) legal interests; (iii) equitable estates under a trust; (iv) equitable interests; and (vi) equitable interests subject to the equitable doctrine of notice.

Registered land

The following interests in land exist: (i) registrable interests; (ii) registered charges; (iii) overriding interests; and (iv) minor interests.

Registered charges.

These are registered legal mortgages. The Land Certificate is replaced by a Charge Certificate issued to the morgagee.

Overriding interests.

Registered land works on the ‘mirror principle’ and the register reflects the exact picture of the title to the property. Overriding interests contradict this principle and cannot be independently registered, but they are binding on a subsequent purchaser. The most important category relates to rights of occupation. In Williams and Glyn’s Bank Ltd v. Boland [1981], a husband and wife bought a house from their joint earnings but the house was registered in the name of the husband alone. The husband later mortgaged the house to the bank without telling the wife. The bank made no enquires about the wife. The husband defaulted on the mortgage and the bank claimed possession of the house prior to sale. The House of Lords upheld the decision of the Court of Appeal that the wife had an overriding interest and refused the bank’s claim. The basis of the claim was the wife’s contribution to the purchase of the property.

Minor interests.

These are those which are overreachable even though protected by a register entry and those which cannot be overreached as long as they are protected by a register entry. The overreachable interests are the old equitable and legal estates exiting under a trust which are protected by a restriction on the Proprietorship Register; they are overreached where a purchaser complies with the terms of restrictions, for example by paying the purchase price to the person(s) named as trustee.

Interests which cannot be overreached are protected by register entries of which the most important relate to equitable mortgages which are protected by (a) cautions against dealing which ensure that the mortgagee is notified of an attempt to register a dealing in the land. If the cautioner does not contest the registration within 14 days of notification, the registration will proceed and the caution will be removed; and (b) Protection by Notice of Deposit of Land Certificate/Charge Certificate which operates in the same way as a caution.

Choses in Possession

The term covers all tangible (or corporeal) property capable of physical possession by the owner; that is, goods.

Choses in Action

The term relates to intangible property which is enjoyed by the enforcement of rights of ownership. Choses in action can be assignable or negotiable.