#16144 - Equitable Interests Overview - Land Law

• The trust creates proprietary interests binding successors in title, but notice is necessary for binding purchasers:

  • Actual notice (purchaser was aware of the trust)

  • Constructive notice (purchaser would have been aware if he investigated properly)

  • Imputed notice (an agent, eg. solicitor, had notice)

• Rule that a trust binds everyone except purchaser of legal interest without notice devised in 20C

• Other equitable interests:

  • Specific performance of contracts (while common law awards damages)

  • Redemption (if land is held as security for a mortgage, it can be lost for failure to pay a small amount of money, so equity allows it to be ‘redeemed’ upon payment of the loan and interest. This can last indefinitely but mortgagee can obtain a court order for foreclosure stipulating the time the mortgagor has to repay)

• Equities – a group of proprietary interests that differ slightly from equitable interests so their existence as a separate category is dubious

  • Effect on purchasers is weaker compared to equitable interests

    • Purchaser of equitable interest without notice is not bound

    • Purchaser less likely to be held to have had notice

  • Two types:

    • Latec Investments v Hotel Terrigal: C required the assistance of equity to remove an impediment to his title before asserting his interest

    • Rights different in nature from conventional equitable interests

  • Land Registration Act 2002 s116 gives proprietary status to the first kind of equities but it is unclear whether the second kind is caught also (Act uses the term ‘mere equity’)

• Though the Judicature Acts merged the courts of Equity and Common Law, it is unlikely that the two branches of law will be merged, because the Trust relies on a separation of the two interests

• However the two interests are becoming increasingly similar:

  • The principle that equitable interests don’t bind bona fide purchasers of legal estate without notice is eroding because registration requirements require both interests to be registered

  • Equitable remedies are discretionary whereas common law remedies are available as of right, but this is also inconsequential because it is rare for courts to deny an equitable remedy and these situations are usually mirrored by common law defences

  • Legal interests must comply with formality requirements and equitable interests not

  • Main difference today is perhaps the perception of equity as flexible (eg. ‘unconscionability’) and thus more receptive of legal developments. However it would be difficult to argue that merger of interests would stifle judicial development because the common law would still develop the law just using different reasons.

• The legislation doesn’t seek to codify property law but to bring it up to date and ease the creation and transfer of property interests

• Most reforms were already effectuated by late 1880s: settled land, implied terms in conveyance, registration

• 1925 Act provided a structure for the law for these reforms to operate – eg. the pre-1925 understanding of mortgage was that fee simple was conveyed to the mortgagee and reconveyed to mortgagor upon repayment, but this is messy and doesn’t reflect the true position of the mortgagor who is usually regarded as owner. The legislation abolished this and though it had little practical effect it changed the legal analysis

• Substantial reforms:

  • Abolished out of date provisions

  • Introduced implied terms into conveyances, leases, mortgages and trusts, though most can be excluded/amended by parties

  • Amended the effect of interests on purchasers (before, there was a heavy burden on purchasers to inquire because actual/imputed knowledge that life interests existed on property bound them)

Reforms

• Restricting legal estates and interests

  • S1 limits legal rights to those that should automatically bind purchasers – fee simple absolute in possession and leases are legal estates

  • S1(2) lists interests that are able to exist as legal interests:

    • easements (either indefinite or term of years; life excluded)

    • rentcharges – right to...