Introduction

• legally a person buys an estate rather than a property (either freehold or leasehold)
• multiple people can own land concurrently by creating another estate within an existing estate
• owning an estate in land rather than land itself allows for flexibility in ownership
• estates only apply to realty not personalty

Doctrine of estates

• estate describes the length of time a person holds land

Life estate

• freehold estate
• at common law a person could hold land for their lifetime
• on their death property reverts back to owner of fee simple

Fee simple

• freehold estate & largest estate in land
• fee means estate in land capable of being inherited & simple means estate may pass to estate owners heirs
• fee simple estate can last indefinitely (until landowner has no heirs)
• qualified fee simples are the conditional fee (on condition heir reaches 18 yrs old) or determinable (to A until he finishes full time education)
• fee simple absolute has no conditions attached

Fee tail

• freehold estate
• possible to restrict class of heirs
• eg land conveyed to A & heirs of his body, length of time estate lasts could be limited to survival of A's lineal descendants
• grantor retains portion of fee simple
• not able to create fee tail today

Leasehold estates

• estate in land originally commercial arrangement: fees simple owner allowed possession of land for rent
• originally contractual but became recognised as an estate in land

Doctrine of tenures

• subinfeudation: from 1066 all land was regarded as held of the king: the king allocated land to tenants-in-chief, who could further allocate land to other tenants
• today only tenure is free tenure of common socage (so simply freehold)
• freehold is an estate in land of indefinite time
• leasehold is an estate in land from the freeholder for a set time

Successive interests

• possible to create successive interest in land
• when an individual has a fee simple absolute he is deemed to have full rights of the property with no conditions which may end the estate early
• a person may have an interest in: possession, reversion or remainder
• where successive estates exist in one piece of land, that land is usually held in trust

Possession

• possession of estate is defined in Law of Property Act 1925 (LPA)

  Law of Property Act 1925

  • s.205(1)(xix): person deemed in possession of estate if they have immediate enjoyment of it (physical possession or receipt of rent)
• life estate is an interest in possession

Reversion

• interest that is not disposed of following the granting of an estate
  if A gives B only a life interest in property, A retains an interest in reversion
  if A grants B a lease, A retains a freehold reversion
• reversion is a future right in the land & there are two forms of reversion interest in an estate
• original owner can gift/sell a portion of their estate (life time estate being given from fee simple absolute), once gifted estate runs out will revert back to original owner
• original owner can create a new estate running parallel to the original estate (original owner retains form of possession in the right to receive rent but new party has exclusive physical possession - leasehold)

Remainder

• applies if original owner gives up entire estate, but in more than one portion
• eg life time estate to son & then fee simple to grandson, original owner has kept no reversion, future interest is a remainder, son gains a lifetime estate & grandson will then gain the remainder (the fee simple) on death of the son

Contribution of equity

• equity developed to overcome shortcomings of common law to try to ensure just outcome
• owner of land may transfer land to a trustee (T) to the use of or on trust for a beneficiary (B) (T promised to look after land for B)
• equity not allow T to act unconscionably (claiming ownership of the land in contravention of promise)
• B own equitable interests in the land (their rights only recognised in equity)
• T legal owners as held the legal estate in their land (ownership recognised by common law)
• trust represented further fragmentation of ownership of realty & can also apply to personalty
• became common practice to convey trust to two trustees & equity imposed duty on Ts to exercise powers in best interests of B
• Ts may sell & if so B's equitable interest is dealt with under the bona fide purchaser rule & overreaching

The bona fide purchaser rule

• unregistered land: purchaser has to ensure appropriate searches carried out before exchanging contracts to avoid being bound by adverse third party interests
• equity supports position of bona fide purchaser who acquired unregistered land for value & without notice of an equitable right
• purchaser includes mortgagee (bank lending money to owner of land in return for mortgage over the land)

  Kingsnorth Finance v Tizard [1986] 2 All ER 54

  Facts:

  • X held the legal title to house, as trustee for himself & his estranged wife (X's wife had equitable interest as beneficiary of the trust)
  • without his wife's knowledge X applied to Kingsnorth (K) for a mortgage loan
  • X was going to transfer a legal interest in the property (the mortgage) to K in return for the loan
  • X described himself as single on the mortgage application & did not inform K about wife's equitable interest (however during an inspection X did mention he was separated from his wife)
  • K lent X the money, X defaulted on repayments & K sought to sell the house to recoup the loan
  • question arose whether K was bound by wife's equitable interest

  Issue:

  • was K a bona fide purchaser?

  Held:

  • K had not made all reasonable enquiries, so K had constructive notice of wife's equitable interest & could not claim to take free of it under the bona fide purchaser rule
  • K should have made further enquiries on becoming aware at inspection X was separated
• bona fide purchaser rule also applies to personalty, but purchasers are not expected to carry out such detailed enquiries

  Macmillan v Bishopsgate Investment Trust (No. 3) [1995] 1 WLR 978

  • in commercial transactions involving personalty there is rarely any title to investigate & equitable interests cannot be discovered from inspection
  • constructive notice only applies if commercial purchaser knew facts which make it imperative to seek an explanation, because in the absence of an explanation it was obvious that the transaction was probably improper
• bona fide purchaser rule does not apply to registered land

Overreaching

• the transfer of rights under a trust from land to the proceeds of sale of land
• if purchaser has notice of equitable interests (knows property held in trust for beneficiaries), purchaser not be bone fide purchaser must use overreaching procedure to be free of the equitable interests
• to overreach there must be a minimum of two trustees, the value paid for the property must be paid to all trustees & receipt must be given
• equitable interest in the property transfers to the sum of money held by the trustees
• trustees obliged to distribute the capital or invest it, as detailed by the terms of the trust

Property legislation 1925

• 1925 Acts: Law of Property Act (LPA), Settled Land Act , Trustee Act, Administration of Estates Act, Land Charges Act , Land Registration Act (now 2002)
• prior to 1 January 1926 (commencement dates) land ownership could be fragmented
• horizontal split: trustees (T) hold legal estate & beneficiaries (B) equitable interest
• vertical split: X for life, Y in fee tail & Z in fee simple
• successive split: T1 & T2 hold legal estate & equitable estate has vertical split
• reform needed to overcome confusion for purchasers (necessity to deal with multiple owners & complex enquires to acquire good title)
• solution: smaller estates in land (placing life interest & fee tail as equity behind a trust rather than legal estates)
• LPA 1925 reduced the number of estates in land which are capable of being conveyed or created at law

  Law of Property Act 1925

  • s.1: only estates in land which are capable existing are -
    s.1(a): an estate in fee simple absolute in possession, and
    s.1(b): a term of years absolute (lease)
• equitable interest under a trust not legal estate: if estate not fee simple absolute or term of years absolute

  Law of Property Act 1925

  • s.1(2): only interests or charges in or over land which are capable of existing are -
    s.1(2)(a): easement, right or privilege in or over land for an interest equivalent to an estate in fee simple absolute in possession or a term of years absolute
    s.1(2)(b): rentcharge in possession issuing out of or charged on land being either perpetual or for a term of years absolute
    s.1(2)(c): a charge by way of legal mortgage
    s.1(2)(d): and any other similar charge on land which is not created by an instrument, and
    s.1(2)(e): rights of entry exercisable over or in respect of a legal term of years absolute, or annexed for any purpose, to a legal rentcharge
  • s.1(3): all estates & interests other than those listed in s.1(1) & s.1(2) LPA 1925 are equitable
• valid equitable interest in land if: not listed in s.1(1) or s.1(2) LPA 1925 or listed but conditions not satisfied & correct form used to create the right
• legal interest in land if: listed in s.1(1) or s.1(2) LPA 1925, conditions satisfied & correct form used to create the right
• no legal or equitable interest in land if: not listed in s.1(1) or s.1(2) LPA 1925 or listed but conditions not satisfied & incorrect form used to create the right

Statutory right

• in addition statutory rights are created under Family Law Act 1996 amended by Civil Partnership Act 2004

  Family Law Act 1996

  • s.30(1) applies if
    s.30(1)(a): one spouse or civil partner (A) is entitled to occupy a dwelling-house by virtue of -
    s.30(1)(a)(i): a beneficial estate or interest or contract; or
    s.30(1)(a)(ii): any enactment giving A the right to remain in occupation;
    and
    s.30(1)(b): the other spouse or civil partner (B) is not so entitled.
  • s.30(2): B has the following home rights-
    s.30(2)(a): if in occupation, a right not to be evicted or excluded from the dwelling-house or any part of it by A except with the leave of the court given by an order under s.33;
    s.30(2)(b): if not in occupation, a right with the leave of the court so given to enter into and occupy the dwelling-house.