Property ownership goes beyond simply purchasing a property and having complete control over it. There are circumstances where someone may have a legitimate interest in property, without being the legal owner of it. To account for this, there are two different types of title – legal and equitable. In this article, we’ll explain the less-common equitable title, and what it means.
Table of Contents
Legal Title
Before understanding what an equitable interest is, we must first understand why it can arise. Equitable interests arise where there is an interest in a property, albeit the party with the interest does not have legal title. Legal title is the true and enforceable ownership of a property. This cannot easily be overridden, save for when an equitable interest exists.
A legal title carries with it many responsibilities such as maintaining, using, and controlling a piece of property. A common example of this is found in the Torrens title system of land ownership, where a legal interest is registered on the title of the property. Although this type of ownership appears to be absolute, there are circumstances where this can be challenged. This is what is called an ‘equitable interest’.
Equitable Interest
An equitable interest arises where there is an interest in the property, but no legal title exists. However, this title is not “true ownership”, and ordinarily, this type of interest can be overridden by legal ownership. The only way an equitable interest can be enforced is by the Court.
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Common examples
Having equitable rights to a property doesn’t come with the same rights as having legal title to the property. However, the reason Courts recognise these interests is because ‘it is just and fair to do so’.
Equitable title does not transfer legal ownership of the property, as it simply gives the individual or entity the right to use and also enjoy the property. Some common examples of this type of interest include:
- A partner’s interest in the partnership
- Proprietary interests that are counterparts to common law interests
- Equitable interests over body parts or materials obtained in the course of treatment or medical research
- Equitable security interests
- Equitable rights over land
Example
Mary has signed a contract for the purchase of a property with Gustav and transferred him the purchase price. There is a period when the transfer of property has not yet taken place. During this period, Mary retains an equitable interest over the property to secure her eventual ownership of it.
If you have further questions about how property ownership works, it may be worth contacting a property lawyer.
Conclusion
It is important to first understand what comprises a legal title as this distinguishes the benefits and rights from an equitable interest. An equitable interest, whilst not affording full legal rights, does offer remedies which are afforded on a case by case basis.
