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An equitable interest is an "interest held by virtue of an equitable title (a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title) or claimed on equitable grounds, such as the interest held by a trust beneficiary". The equitable interest is a right in
equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...
that may be protected by an
equitable remedy Equitable remedies are judicial remedies developed by courts of equity from about the time of Henry VIII to provide more flexible responses to changing social conditions than was possible in precedent-based common law. Equitable remedies were gran ...
. This concept exists only in systems influenced by the common law (as opposed to civil law) tradition, such as New Zealand, England, Canada, Australia, and the United States.


Equity

Equity is a concept of rights distinct from legal (that is, common law) rights; it is (or, at least, it originated as) "the body of principles constituting what is fair and right (natural law)".Black's Law Dictionary. Second Pocket Edition. p. 241. 2001 West Group. Bryan A. Garner (editor in chief) It was "the system of law or body of principles originating in the English Court of Chancery and superseding the common and statute law (together called 'law' in the narrower sense) when the two conflict". In equity, a judge determines what is fair and just and makes a decision as opposed to deciding what is legal. Perhaps the most common example of an equitable interest is the interest of a beneficiary under a trust. Under a trust, the
trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to t ...
has a legal interest in the trust property and all of the rights and powers that follow from that legal interest (for example, rights to deal with that trust property and to invest trust property), subject to the interest of the beneficiary and the terms of the trust (deed). The
beneficiaries A beneficiary (also, in trust law, '' cestui que use'') in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the perso ...
under the trust have an equitable interest in the trust property. The precise nature of the interests and rights of the beneficiary under a trust is contested. Ben McFarlane states that there are three principal theses about the nature of equitable rights. The first one is that, equitable interest is a right against a right, rather than right against a thing or right against a person. Second, whenever a party B has a right against a right of another A, B's right is prima facie binding on anyone who acquires a right that derives from A's right. Third, B will acquire such a persistent right whenever A is under a duty to hold a specific claim-right or power, in a particular way, for B. The rights and obligations of the beneficiary, trustee, third parties contracting with the trust and potentially of other parties (such as the settlor of the trust or, if the trust provides for such, a protector or enforcer of the trust) depend on the terms of the trust deed. Trust law includes both mandatory law (that is, law which cannot be excluded, such as the irreducible core, information rights and the supervisory jurisdiction of the court) and default law (that is, law which can be excluded by express provision in the trust deed). The trust deed, therefore, has a significant role to play in determining the rights and obligations of the parties in that default law (such as fiduciary obligations and rights of recourse against non-entitled third parties) may be excluded or modified by the trust deed. In '' DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)'',. the
High Court of Australia The High Court of Australia is Australia's apex court. It exercises Original jurisdiction, original and appellate jurisdiction on matters specified within Constitution of Australia, Australia's Constitution. The High Court was established fol ...
held that if a person has an equitable interest in property, this implies that some other person has the legal interest in that property. If one person has both the legal and equitable interest in the relevant property, he or she has no ‘equitable interest’ in that property as such. Aickin J said "If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable". As stated by Brennan J held that " nequitable interest is not carved out of a legal estate but impressed upon it". ''
Latec Investments Ltd v Hotel Terrigal Pty Ltd ''Latec Investments Ltd v Hotel Terrigal Pty Ltd''. is a 1965 property law decision of the High Court of Australia The High Court of Australia is Australia's apex court. It exercises original and appellate jurisdiction on matters speci ...
'' establishes that, in New South Wales, there are 3 classes of equitable interests: equitable interest, mere equity and personal equity.. Mere equity, for example, may arise when one party has been unjustly disadvantaged by the unconscionable behaviour of another. Importantly, however, a ‘mere equity’ will not prevail over an actual bona fide equitable interest – such as an equitable charge.


Land law

An enforceable contract for sale confers an equitable interest on the purchaser of the land, as per the rule established in ''
Lysaght v Edwards Lysaght may refer to: People *John Lysaght, 1st Baron Lisle (1702–1781) * John Lysaght, 2nd Baron Lisle (1729–) * Edward Lysaght (1763–1811), Irish songwriter * Sidney Royse Lysaght (1856–1941), Irish poet * John Lysaght (1832–1895), man ...
'' It was similarly held in ''
Walsh v Lonsdale ''Walsh v Lonsdale'' (1882) 21 Ch D 9 is an English property law case about the effect of the Judicature Acts. It is the authority for the equitable maxim that "Equity regards as done that which ought to be done". It created the doctrine of antici ...
'' that 'equity looks on as done that which ought to be done'. A contract, which does not meet the requirements of a deed, required by the
Law of Property Act 1925 The Law of Property Act 1925c 20 is a statute of the United Kingdom Parliament. It forms part of an interrelated programme of legislation introduced by Lord Chancellor Lord Birkenhead between 1922 and 1925. The programme was intended to moderni ...
s.52(1), may be
specifically enforced Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. It is typically available in the sale of land law, ...
to convey the equitable interest to the new purchaser. This rule has had a significant impact because it allows interests that have not been conveyed by a deed to still be binding on future purchasers, through the doctrine of
constructive notice Constructive notice is the legal fictionThe phrase "legal fiction" should not be construed to mean that the concept of constructive notice is legally invalid. that signifies that a person or entity should have known, as a reasonable person would hav ...
. However, the
UK Parliament The Parliament of the United Kingdom is the supreme legislative body of the United Kingdom, the Crown Dependencies and the British Overseas Territories. It meets at the Palace of Westminster, London. It alone possesses legislative supremac ...
has weakened the impact of this rule, with the Law of Property (Miscellaneous Provisions) Act 1989 s.2, which requires all contracts for the sale of land (which could be specifically enforceable) to be in writing, to contain all the terms of the agreement and be signed by both parties. Any contracts that are not in writing and signed by both parties cannot be specifically enforced and so will not create or transfer an equitable interest in land.


See also

*
Equitable servitude An equitable servitude is a term used in the law of real property to describe a nonpossessory interest in land that operates much like a covenant running with the land. In England and Wales the term is defunct and in Scotland it has very lon ...
*
Overriding interest Overriding interest is an English land law concept. The general rule in registered conveyancing is that all interests and rights over a piece of land have to be written on the register entry for that land. Otherwise, when anyone buys that piece of ...


References

{{law Property law Equity (law)