Legal Interests: Historically the common law recognised these interests
Equitable Interests: Historically, an interest only courts of equity/chancery recognise

-    Equity was a late inclusion into property law
-    In 1066, only the common law recognised interests in land. Chancery had some jurisdiction over personal property but not land
-    It took some time for equitable interests in land to become recognised and established
-    In terms of land, you could have a legal interest side by side with an equitable interest. Typical example is a trust.
-    Trust: Legal owner is the trustee, but the beneficiary of the trust have rights as well. Traditionally, these rights were only recognised in the courts of equity
-    Nowadays they are heard in the one court, but legal and equitable interests are still distinguished in modern unified court system
-    At common law, there could be estates in land or interests in land. A lease is an interest in land, but it is not technically an estate.
-    All estates are interests in land but not all interests are estates
-    Equity has a parallel system of interests and estates. You can have equitable estates and equitable interests.

Equitable Interests

-    Said to have developed in land of crusades in 12th and 13th centuries. When knights went on crusades, they knew they would leave their estates for some time and may not return.
-    The knight would convey their land to a trusted friend who would hold the land for the benefit of his family. The trusted friend was never intended to own the land beneficially for himself.
-    In the eyes of the common law, the only person with rights over the land was trusted friend. He had the fee simple and was seised.
-    The fee simple was conveyed to Friend/feoffee (F); Formula used: To F and his heirs to the use of A and his heirs.
-    F is the trusted friend but was known as the feoffee the person to whom the land was conveyed
-    If F was a rogue and sold the land to a stranger (in fraud of the arrangement), A had no recourse to get the land from the third person.
-    The chancellor would force the understanding on F. But the only remedy the chancellor would grant would be that F would be damned forever.
-    A’s interests would be protected from the third party (P) who knew of the agreement between A and F. If P bought the land knowing of the existence of the obligations, P held the land subject to A’s interests also.
-    A’s interest is now binding on P, it is a proprietary right
-    Not only does the chancellor bind the conscience of F, but also binds A’s interest in the land. A has the equitable fee simple and F has the legal fee simple
-    The modern construct of this is the trust. If third party purchaser knew of the trust, A’s interest survives and A can enforce it against P.
-    If purchaser had no notice, A’s equitable interest is extinguished. A would have remedy against F but not P.
-    If land left in will, the legal fee simple vests in the executor of the will. The beneficiaries under the will take equitable interest in the same land. When the estate is wound up, the beneficiaries get legal interest

Trust

-    Convey the property to trustee to hold for beneficiaries. Legal fee simple passes to the trustee. The beneficiaries have an equitable ownership of the property.
-    The trustee has the normal legal power of transfer inherent in the ownership of a legal estate. If the transfer is a proper exercise of the trustee’s power or duty, the transferee will take the property free from the trust.
-    Historically, “use of land” was a precursor of the trust. The basis of this institution was the transfer of property to a trusted friend, who would hold it not for personal benefit but for the purposes of carrying out the transferor’s instructions. Assume that a knight owned a parcel of land and set off to fight a battle. As he was unsure as to whether he would return, he would convey the property to a trusted friend to hold for the benefit of the knight’s family. The owner of the land is the feoffee (trusted friend) under common law, who won’t recognize the knight’s family’s rights to the land. The Chancellor protected the rights of the family, making the feoffee abide by the “use of land” agreement. This was a purely personal action.
-    If the feoffee sold the estate, the common law said this was fine as they were the owner of the land. The Chancellor enforced the details of the “use of land” agreement on the purchaser if they were aware of the arrangement at the time of purchase. If they are, then a proprietary interest in the land exists. However, if they bought without notice of the agreement, then there is no proprietary interest in the land.
-    Equitable interest in land doesn’t bind the purchaser of the legal estate who buys for value without the notice of the equitable interest. However, if the property is a gift and no consideration is exchanged, then they are bound whether they knew about the agreement or not.

Mortgage:

-    I (mortgagor) give you (mortgagee) a mortgage over my land as security for you lending money to me.
-    Mortgage now has taken the form of a conveyance of the land from borrower to lender with promise of the lender to reconvey upon being paid what they are owed by the borrower.
-    It is a draconian kind of security. It may invite fraud, if the lender sells the land to a stranger.
-    At common law the borrower has nothing left in them. In the courts of equity, the lender is regarded as having only a security interest. Therefore the borrower still has an equitable fee simple in the land. Equity protects the rights of the mortgagor.
-    If P knows of the mortgage, they take the land from mortgagee subject to the mortgage, and the mortgagor can enforce their interests against P

Sale of Land

-    The owner agrees to sell the land and the contracts are signed, but the title doesn’t pass until exchange, which usually occurs sometime after.
-    The equity court says that once the parties both sign the contract, then the equitable right in the property changes hands. The common law court says that the legal rights don’t change until the exchange some time later.

Equity Follows the Law (Maxim)

-    Equity has a parallel system of estates like common law.
-    Can have a legal fee simple and an equitable fee simple in the one piece of land.
-    As a general principle, equity defers to the common law and allows legal interests to prevail over equitable interests; hence another maxim of equity is “where the equities [the merits of the case] are equal, the law prevails.” However, “equity will not suffer a wrong to be without a remedy”, which means that equity would not permit the legal interest to prevail if conscience dictate that in the circumstances dictated that it shouldn’t prevail.