equitable interest

Equitable interests are rights in property which are recognised and enforced by a court of equity, but not a court exercising its common law jurisdiction; that is, legal interests recognised in common law courts. English Courts exercise the common law and equitable jurisdiction concurrently, such that the same judge has jurisdiction wear the hat of a common law court and a court of equity.

Equitable interests:

1. originally arose when it was contrary to equitable principles to enforce the strict legal (in the common law sense) rights of a person;
2. in property are interests where the ownership of the beneficial title to the property becomes separated from the legal title;
3. take priority of legal interests where the person acquiring legal title was aware or ought to have been aware of the prior equitable interests.

Examples are:

1. establishing a trust (whether a resulting trust, constructive trust, express, implied or by operation of law), where the trustee is the legal owner of the property. The beneficiaries have an equitable interest in the trust property;
2. In the context of mortgages, where the mortgagee holds the legal title to the property, and the mortgagor retains the equity of redemption;
3. where a director of a company develops property in his capacity of director of the company (subject to contract); the company will have a beneficial interest in the property.

Equitable interests arise when the legal title to property becomes separated from the equitable title. In the case of a trust, the beneficial owner is entitled to the income from the trust, but does not own the property. Equitable interests are superior to legal rights in property, provided they are first in time and subject to the interests of a bona fide purchaser for value without notice.
They may be created by operation of law, by express agreement or implied by the conduct of persons.