Equitable Interests (registered land enforcement)

Equitable interest

A proprietary right recognised in equity (not law) e.g. restrictive covenant, estate contract, equitable easement

Creation of equitable interest

An equitable interest can be validly created without registration (registration affects enforceability, not existence)

Key question for enforcement

Is the new owner a donee or a purchaser for valuable consideration?

Donee

A person who receives land by gift or inheritance; bound by ALL pre-existing equitable interests whether protected or not (LRA 2002 s 28)

Purchaser for valuable consideration

Buyer or lender paying money; only bound by protected interests and overriding interests (LRA 2002 s 29)

Basic rule of priority

Earlier interests bind later owners unless displaced by LRA 2002 s 29

Equitable interests protection rule

Equitable interests must be protected by entry to bind purchasers for value

Two methods of protection

Notice or restriction

Notice

An entry in the Charges Register that protects most equitable interests intended to bind future owners

Purpose of notice

Alerts purchaser that an equitable interest exists and will bind them if validly created

Effect of notice

If properly protected, the equitable interest binds buyers and lenders (LRA 2002 s 29(2))

What notice does NOT do

Does not confirm validity of the interest; only protects priority

Equitable interests that MUST be protected by notice

Restrictive covenants, estate contracts, equitable easements, equitable leases

Restrictive covenant (notice example)

Promise not to build, not to use land commercially → must be protected by notice

Estate contract (notice example)

Contract to buy land, option to purchase, right of pre-emption → protect by notice

Equitable easement (notice example)

Informal right of way not created by deed → protect by notice

Equitable lease (notice example)

Lease failing legal formalities (e.g. no deed) → protect by notice

Legal leases 3

7 years

Overriding interest reminder

Binds purchaser even though not on register (e.g. legal lease ≤7 years)

Interests that CANNOT be protected by notice

Beneficial interests under a trust of land (LRA 2002 s 33)

Restriction

An entry in the Proprietorship Register imposing conditions before disposition can be registered

Purpose of restriction

Controls how land is transferred, not priority of interests

Most important restriction example

Beneficial interest under a trust of land

Trust interest protection

Protected by restriction, NOT notice

Why trust interests use restriction

To ensure overreaching by requiring payment to two trustees

Typical trust restriction wording

“No disposition unless capital money paid to two trustees”

Effect of restriction

Does not bind purchaser directly; ensures proper overreaching occurs

Restriction vs notice

Notice protects priority; restriction controls registration conditions

Bankruptcy restriction example

Prevents sale without trustee in bankruptcy’s consent

Restrictions cannot do

Cannot stop a sale entirely; only impose conditions

If equitable interest is protected

Purchaser for value takes land subject to it

If equitable interest is NOT protected

Purchaser for value takes land free of it

Once an equitable interest is lost

It is not revived on later transfers

SQE exam shortcut

Ask: Is it an equitable interest? If yes → notice, unless trust → restriction