The Distinction Between Legal and Equitable Interests

The starting point for any land law analysis is whether an interest is legal or equitable. Under the Law of Property Act 1925, only a limited category of interests can exist at law: the freehold estate (fee simple absolute in possession), the leasehold estate (term of years absolute), and certain charges and easements. Everything else — including most beneficial interests under trusts — is equitable.

Why does this matter? Because legal interests bind the world, while equitable interests depend on registration or notice for their enforceability against third parties.

Registered Land: The Land Registration Act 2002

The majority of land in England and Wales is now registered at HM Land Registry. In the registered land system, the register is intended to be a complete picture of title. The key concepts are:

• Registered charges: Must be registered to be legal. A charge registered at the Land Registry takes priority according to the order of registration.
• Overriding interests: Bind the registered proprietor even though they do not appear on the register. The most important for SQE1 are: legal easements that have been used within a year of the disposition; the rights of persons in actual occupation at the time of the disposition who did not conceal their interest on enquiry (Schedule 3, para 2, LRA 2002).
• Overreachable interests: Beneficial interests under a trust of land can be overreached — removed from the land and attached to the purchase money — where the purchase price is paid to at least two trustees or a trust corporation. This protects the buyer even if the beneficiary is in occupation.

Priority of Competing Interests

Under s.29 LRA 2002, a registered disposition for valuable consideration takes free of unregistered interests that are not overriding and not protected by a notice or restriction on the register. The key rule is: protect your interest or risk losing it to a later buyer who registers.

The distinction between a notice (which protects a third-party interest) and a restriction (which regulates how the registered proprietor can deal with the land) is frequently tested. A restriction does not protect an interest as such — it prevents registration of a disposition without compliance with stated conditions.

Co-Ownership and Trusts of Land

Where land is co-owned, it is held on a trust of land under the Trusts of Land and Appointment of Trustees Act 1996. Co-owners hold the legal estate as joint tenants (they cannot hold it as tenants in common at law). They may hold the equitable/beneficial interest as joint tenants or tenants in common.

• Joint tenancy: Right of survivorship operates — on death, the deceased co-owner’s share passes automatically to the survivor(s). There are no shares — all co-owners own the whole together.
• Tenancy in common: Each co-owner has a distinct share. No right of survivorship. On death, the share passes under will or intestacy.

Severance converts a joint tenancy in equity to a tenancy in common (without affecting the legal estate). It can occur by written notice under s.196 LPA 1925, by act operating on one’s own share (e.g. assignment), by mutual agreement, or by mutual conduct.

Easements

An easement is a right attached to one piece of land (the dominant tenement) that is exercisable over another piece of land (the servient tenement) owned by a different person. To be capable of being an easement, the right must satisfy the Re Ellenborough Park criteria: there must be a dominant and servient tenement, the right must accommodate the dominant tenement, the tenements must be owned by different persons, and the right must be capable of forming the subject-matter of a grant.

Easements can be created expressly, impliedly (under s.62 LPA 1925, the rule in Wheeldon v Burrows, or by necessity), or by long use (20 years under the Prescription Act 1832).

Covenants

Freehold covenants are promises about the use of land. The original parties are always bound at law. The question of whether successors in title are bound is more complex:

• Burden of a restrictive covenant: passes in equity to successors if the covenant was negative in substance, intended to run, the successor had notice, and the covenantor owned the dominant land.
• Burden of a positive covenant: does not pass in equity. Various workarounds exist (chain of indemnity covenants, estate rentcharges) but none are perfect.

Practise This Topic on Sqewise

Land law questions in FLK2 often involve multi-issue scenarios combining registration, overriding interests, co-ownership, and easements in a single set of facts. Regular practice questions are the most effective way to develop the analytical speed these questions require. See all covered topics or try our full mock exams.

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