In real estate law, "equitable title" refers to a person’s right to obtain full ownership of a property or property interest. This is often contrasted with or used in conjunction with the term "legal title." Legal title is the actual ownership of the land. A person with legal title to land has the right to transfer ownership of the property to another party.
In comparison, equitable title often relates to a person’s financial interest in the property. Thus, a person can have equitable title to a property that they have invested in, while another party holds legal title. In order to understand this interaction more, it may be necessary to examine some examples involving equitable and legal title.
A common example of how legal and equitable title work is in a trustee situation. Let’s suppose that a property owner wants to transfer property to beneficiaries through a trust. They may transfer legal title to a trustee, who will hold the property until a specified time indicated by the property owner (such as after 5 years, etc.).
In this situation, the trustee has legal title to the property. They are the one who is authorized to transfer the property according to the trust instructions. They may also be entrusted with the task of defending the property against legal action. In the meantime, the beneficiaries hold an equitable title in the property. This means that they may reap profits based on any improvements or increases in property value, during the time that the trustee was holding the property legally.
Another example is in a land contract (contract for deed) sale. This is where the seller provides financing for the person who is buying their property. Here, the seller loans the buyer some funds, and allows the person to live on the property. The buyer is obligated to make payments on the property. The buyer obtains equitable title, while the seller retains legal title to the property until the payments are completed. After this, the buyer will obtain both equitable and legal title.
Lastly, equitable title may be relevant in a regular real estate sale. The buyer may obtain equitable title when the contract is completed. However, they won’t obtain legal title until closing is completed and the deed is actually delivered to them.
Title disputes can often be difficult to resolve. One’s rights in an equitable title versus a legal title can be different. For instance, a person with equitable title generally has no rights to sell the property or transfer ownership in it. Disputes may often require legal action in order to resolve them. These may require a damages award or other similar remedy.
Equitable title laws can often be difficult to understand. Also, it may be difficult to understand how equitable title relates to legal title. You may need to hire a property lawyer if you need help with any types of real estate title issues. Your attorney can inform you of how title works and what your rights are. Also, if you need to attend any court sessions, your lawyer can represent you during trial meetings.