What is a legal interest/estate in land?
It is an interest in land acquired in a manner which is consistent with the law or that the law acknowledges eg created by deed and exists for as long as a legal estate exists (in fee simple and for a term of years absolute). The effect of an interest in land (right in rem) is that it may be enforced against the whole world as opposed to an equitable interest in land which is enforceable against certain persons only.
What is an equitable estate/interest in land.?
It is an interest in land which has been acquired through equity and therefore it may be enforced only against a limited number of persons, eg It may be enforceable against a person who has notice of its existence at the time he acquired the legal estate in Land However it may not bind a bonda fide purchaser in good faith for value without notice. Furthermore an equitable interest in land is one which falls short of the formalities of the law for various reason. (click here to see by someone would create an equitable interest in land rather than a legal one).
The following examples illustrate what could have happened in the pre 1925 ERA when the old equitable principles and majorly the doctrine of notice played a key role in the ranking of interests in land. Any equitable interest my apply in place of the estate contract as used below.
EQUITBALE INTEREST ESTATE vs LEGAL INTEREST/ESTATE ( the title signifies the order in which came the interests acquired in the examples)
When legal interest comes second in matters of time and legal interest holder has no notice of previous equitable interest him being a bona fide purchaser for value. (For instance A makes an agreement with B to sell his land. B is has bought the land but the land is not conveyed to him yet (Is it possible to buy land before paying the purchase price and before having it conveyed to you? How a vendor claim his land back if the purchase price has not been paid ? )(he has an estate contract). Nonetheless A in dishonestly sells the land to C and conveys his interest in land to the latter as well. For a start B has an equitable interest in the said land as the assignee of the rights in land by B to him so far (by virtue of the estate contract). If C had notice when he acquired the legal estate of A in the land (that is when land was conveyed to him ) he is bound by it even though he holds a legal interest in land. Click here to see what would happen applying today’s law to the example given above.
EQUITBALE INTEREST ESTATE vs LEGAL INTEREST/ESTATE
In the following example the legal holder even second in time will bind the equitable holder becomes the legal holder was not affected in equity/terms of conscience by the rights which are produced by the equitable interest holder (rights in personam).
In the alternative scenario if C was not affected with notice and he bought the land in good faith and for value then C’s right does not bind him because it’s a right in personam (equitable rights bind certains persons) and C he has a legal right ( by virtue of the conveyance). In this case B will not be able to claim any rights in the land or a right to possession but will be restricted only to a mere right to sue A and claim damages for breach of contract. A right in personam binds only certain parties ( who are the certain parties? whereas a right in rem binds the whole world.
EQUITBALE INTEREST ESTATE vs EQUITBALE INTEREST ESTATE PRE 1925 ERA.
In the same scenario if C purchased the land after B had done so but the legal estate was not conveyed to him, even though he had no notice of B’s equitable interest in land, since they both hold equitable estates in land B’s rights bind him and he will not have any right in the land ( Phillips v Phillips ( 1861) 4 De GF & J 208 at 215.).However if B later acquires the legal interest and he still had no notice of B’s equitable interest up until that time when the legal estate was transferred to him, then the principle of Equity follows the law applies ( Pilcher v Rawlins ( 1872) 7 Ch App 259). Though if he is affected with notice just before the legal estate is transferred to him then B’s interest binds him.
