Legal Estates Vs Beneficial Interests
Posted on 10th June 2020
When Property Law Solicitors register the ownership of Property or land with the Land Registry, the Land Registry will focus on the legal estate and usually the person registered as the Proprietor will also be the owner of the Legal Estate.
The register will not however record the underlying ownership (i.e those with equitable or beneficial interests in the land). Usually, a person dealing with the sale of property can assume the registered proprietor has unlimited power to dispose of the property unless there is a restriction or entry in the register which limits their powers.
So, the owner at law could be a different person to the beneficial owner. The beneficial owner may be entitled to benefit from the land and upon the death of a beneficial owner the equitable interest is unlikely to pass in the same way as legal ownership would.
What is the legal estate?
When we refer to an “owner” in relation to land, we are usually referring to the “legal owner” and the legal owner will normally be the registered proprietor. If two or more people are the registered proprietors, they will be called “joint proprietors”. If their legal ownership is truly “joint” then the estate cannot be divided between them as they do not own a percentage share in that property, they both own the whole of the Property. Consequently, when one joint proprietor dies, the legal estate in the whole land will vest automatically in the survivor.
What is an equitable or beneficial interest?
An equitable interest is a right which is enforceable by the Courts and protected by equitable remedies. The equitable interest is an interest in, or right, over a property. We see this, most commonly, when joint proprietors own registered land as tenants in common. Unlike the legal estate, an equitable or beneficial interest can be split in to shares, either equally or unequally. Property Law Solicitors therefore recognise that joint proprietors will always own the registered estate on trust.
What is a trust in land?
In its most simple form, a trust describes the relationship between the legal owner of land and the beneficial interest in land. For example, a couple may purchase a property together:
The property costs £100,000.00
one party contributes £75,000.00 to the purchase price
the other contributes £25,000.00
With the intention that their contributions give rise to a beneficial interest for each of them:
one having a beneficial interest of 25%
the other having a beneficial interest of 75%.
Another example of a trust in land would be where the legal owners are holding the land or property on trust for a third party. This can happen where parents hold property on trust for a child that has been left to the child by a grandparent. The parents would be the legal owners of the property but if the property was sold, the parents would not be entitled to any money from the sale, this money would have to go to the child.
How do you know if a legal owner is holding a property on trust?
The Land Registration Act 2002 allows a restriction to be entered in to the official registers of title by anyone who has sufficient interest in the land. This protection is two-fold as it allows the beneficial owners protection as well as limiting the power of the legal owners.
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