I. General

1. The term 'equitable interest' is here used to denote an interest which can only be equitable.

2. In this respect (apart from restrictive covenants), the interest described below differ from fee simple, leashold, easements, and profits, because such interest are capable of subsisting either as legal or as equitable interests.


II. Settlements and trusts for sale
These instruments were employed in order to achieve the object of the Property Acts to render land freely transferable.

1.Settlements
a) Strict settlements: Historically, land could be tied to the family (entailed interests etc.), which often became a burden on impoverished families that could have sold the land at a good price ut were bound to hold it. Therefore, the SLA made improvements. The Act retained and enlarged powers previously conferred upon tenants for life.
aa) It further provided that future settlements must be made by two deeds:
(1) The one deed (called a 'trust instrument'), declares the trusts upon which the land is to be held.
(2) The other deed (called a 'vesting deed'), declares that the legal estate in the land is vested in the person who is for the time being entitled to the enjoyment of it as tenant for life.
The names of the trustees of the settlement also appear in this deed but there is no mention of the trusts upon which they hold.
From time to time, a new vesting deed is executed as each new life tenant becomes entitled to the land.
A purchaser is normally only permitted to examine the vesting deed; thus, as far as he is concerned, the 'owner' of the land is the tenant for life (as according to the vesting deed), not the trustees. The trustees then hold the money (the price paid by the purchaser) in place of the land and they are bound to invest it, and to apply the income according to the trusts of the settlement.
bb) The effect, therefore, is this: The vesting deed makes the tenant for life the 'estate owner' with the result that he may sell the land and has general powers of administration and management, which include the power to let and mortgage it. A purchaser can and must (except for the payment of purchase money) deal with the person declared in the vesting deed to be the tenant for life as if he were the 'owner' in fee simple. The purchase money, however, must be paid to the trustees: it takes the place of the land.
The purchaser never knows the nature of the equitable interests affecting the land. He is thus not affected by no- tice of them. They lie behind the 'curtain' of the vesting deed and can therefore be over-reached when the land passes to a purchaser, so that he acquires the entire fee simple free from the trust.
cc) Strict settlements are now seldom in practice.
b) Implied settlements: The machinery in respect of 'strict settlements' was applied by the SLA to every case in which the free transfer of land is impeded by the absence of an adult owner who holds the fee simple absolute. But there is one exception: wherever the land is so limited that there is no fee simple owner of full age entitled to dispose of it, the land automatically becomes settled land by operation of law. The trustees thus become 'statutory owners' upon whom the powers of a life tenant are conferred. But land can never be 'settled land' where it is held upon trust for sale.

2. Trusts for sale
Settlements and trusts for sale are mutually exclusive.
a) Land becomes subject to an express trust for sale when it is conveyed to trustees under a trust which imposes upon them an absolute duty to sell it.
Equitable doctrine of conversion; based upon the principle that equity looks upon that as done what ought to be done. Thus, from the moment of the conveyance, whether there has been an actual sale or not, the land is regar- ded in equity as if it were (!) the purchase money (!) to be realized from the sale. This implies that the conveyance has the immediate effect of attaching (in theory) the right of the beneficiaries under the grant not to the land itself, but to the purchase money.
b) The trustess not only have the power, but a binding duty, to sell the land itself, and the equitable interests of the bene- ficiaries do not adhere to it. However, the trustees are usually entitled to postpone the sale indefinitely. Therefore, in practice, the beneficiaries may enjoy the land just as though they were entitled to it under a strict settlement. It may be so stipulated that the power of sale is only exercisable with the consent of a particular person.
c) Purposes and advantages:
aa) There is no need for a 'tenant for life'. The trustees - as legal owners - exercise the power of sale.
bb) Trustees are given all the powers of a 'tenant for life' under a settlement. They may, however, revocably delegate their powers of leasing, accepting surrenders of leases and of management, at any time before sale, to any per son of full age for the time being beneficially entitled in possession under the terms of the trust to the rents and profits of the land. Such a person is then in a position similar to that of a tenant for life.
cc) Since encumberances of land are in theory rights only in respect of a share of the purchase money, notice of them will have no effect upon a purchaser of the land: he pays the trustees the money, the distribution of it or of its earnings is their duty. He takes the land free.
dd) No machinery is needed to conceal the beneficiaries' rights; therefore, the trust may be created in one deed (but, for reasons of simplicity, there are usually two deeds used in practice).
d) Such a trust will only be treated as a trust for sale if the instrument which creates it imposes an 'immediate binding' trust - the trust must be intended to take effect at once upon the conveyance, and the duty to sell (although it will be subject ot the power of postponement) must be absolute (where there is only a discretion to sell, there is no conversion and no trust for sale). If the instrument creating the trust is not of such nature the land becomes 'settled land'.
e) There are also implied settlements of such nature and 'statutory' trusts in certain circumstances.


III. Classes of equitable interests

1. Entailed interests
a) The purpose is to earmak property within the family - family settlements. The essence is limitation to lineal heirs.
b) Two main classes:
aa) Interests in tail general: They limit the property to the grantee and then to the heirs successively; including all heirs of any marriage that he would make.
bb) Interests in tail special: They limit the property to the grantee and then to the heirs successively who are de- scended from a specified spouse of the grantee.
Both general and special entails may, however, be so limited as to descend to heirs of one sex to the exclusion of the other - 'tail male' or 'tale female'.
c) Nature of entailed interests:
aa) Before the LPA, they were known as 'estates in fee tail' and were capable of subsisting at common law; but this type of legal estate was then abolished. Now entailmens can only be equitable.
bb) Entailments can only exist behind the curtain of a trust.
cc) Any property, whether land, goods, or other personalty, can be entailed.
d) Creation of entailed interests:
aa) Words of limitation (that is, words denoting the nature of the interest) must include the word 'heirs'.
bb) Any form of limitation will be permitted whether the grant be by deed or by will, but either the one or the other must be used.
e) Barring of entails:
aa) On principle, an entail fetters the property and makes it inalienable (except for the period of a particular life in- terest) until the family becomes extinct.
bb) But it is now possible to free the property of the interest of the remaindermen (successors) and also of that of the revisioner (the grantor or the successor should the family become extinct).
(1) A tenant in tail in possession may turn his interest into a fee simple estate by executing a 'disentailing assu- rance' (a deed by which he conveys the land to himself absolutely).
(2) A tenant in tail in remainder (the successor who will have an interest) can only turn his interest into a fee simple if he has the consent of the 'protector of the settlement' (usually the tenant in tail in possession).
However, the LPA provides that if he should make specifec reference to the property or to the instrument creating the entail, and if he should be of full age and in possession of the property, he will have the power
to devise or bequeath it - his testamentary disposition will bar the entail and pass the fee simple to the devisee.
If a tenant in tail in remainder executes a disentailing assurance without being in possession and without the consent of the protector of the settlement, this will entitle A only to a base fee, which is not worth much in the market. Because re-settlement is possible, a tenant in tail in remainder will usually prefer a future life interest over a base fee. However, a base fee can be so devised as to pass a fee simple to the devisee.

2. Life interests
a) The normal life interest is that of the tenant for life under a strict settlement.
b) The common law treats the tenant for life as if he were entitled to the income, but not to the capital, of a fund of money. He may enjoy the profits of his gift but he must pass on the bulk to his successors. He must not commit waste which would damage the inheritance. The tenant for life plays a dual role: he is both a beneficiary who owns a part interest in the family property and also the 'estate owner' for the purpose of conveying the land upon a sale. Beside the power of sale (but only at the best price possible) the SLA confers further powers upon him:
aa) Power of exchange: he may, instead of selling it, agree on a barter against land of equal value.
bb) Power to grant leases (maximum of 50 years, wich exceptions).
cc) Power to mortgage if that is done ofr certain purposes, such as raising capital in order to finance improvements.
dd) Power to make improvements and charge the cost of them upon the capital money (trust money).
c) Before he may exercise his powers, he must give notice to the trustees. Some powers' exercise has to be consented to. Whenever he exercises these powers, he acts on behalft of the family, so that he is himself in the position of a trustee.

3. Future interest
These are not another class of interests. What is of concern here is the legal effect of creating any of the interests that have been described above (entailed, life) in such a manner that they should not, at the time of the gift which creates them, immediately arise, but rather at some time in the future
a) All interests limited to arise in the future can now only be equitable, whatever their nature. But there is one exception: terms of years. These may be legal estates, even if limited in possession or in the future (provided that they take effect within 21 years).
b) The effect of conveying any other interest so that it shall arise at a future time is to subject the land concerned to an automatic settlement (except in the case of a trust for sale, which is exclusive to settlements), (thus creating an equi- table interest).
c) Future interest are subject to the 'over-reaching' machinery of the Property Acts (the equitable interest subsists even though the tenant for life may change). But they are only valid if they conform with the requirements of the Rules against Perpetuities (which apply only to contingent, as opposed to vested limitations).
aa) Difference between vested rights and contingent rights:
(1) A vested right actually exists in some holder; it may be vested in possession (such as the right of a tenant in possession with regard to an entailed interest) or vested in interest (such as the right of a remainder with regard to an entailed interest).
(2) A contingent right is one which does not come into existence until some uncertain event takes place in the future. The event must be uncertain to take place at all; such as a grant of land to a minor subject to the condition that he reaches the age of 21 years.
bb) Rules against Perpetuities apply to contingent limitations only. That is because otherwise, land would become tied because it could not effectively be sold for some uncertain event in the future could spark the interest of a grantee. The Perpetuities and Accumulations Act 1964 had altered the first rule somewhat and introduced the second:
(1) Rule One (applies to kinds of property): The interest must vest (!) within 21 years after a life in being. The time thus start to run upon the testator's death (in the case of a gift by will) or at the time of the execution of the instrument creating it (such as a gift inter vivos conveyed by deed). Alteration by the Act: if the event takes place during the period described, the instrument is regarded as valid.
(2) Rule Two (applicable to most kinds of dispositions): If there is a duration (regarding the time limit in which the future event creating the interest is to occur) specified in the instrument creating that interest, and that duration is not in excess of 80 years, the gift is valid even though it would have been void under the 'life in being' rule.
d) Accumulations: If one by will directs that the income accruing from his property shall be accumulated for a period of time, and then be given to a named beneficiary, he creates an accumulation. The period permitted for an accu- mulation is governed by rules stricter than those applying to perpetuity. Corporations are not subject to the rules against accumulations.