What Is Equitable Title?

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 What Is Real Estate And Property Law? What Is A Title?

Real estate and property law address a large variety of topics, including but not limited to:

  • Buying;
  • Selling;
  • Using; and
  • Leasing residential or commercial property.

Some common examples of real estate and property law disputes include:

Real estate and property law also addresses the financial aspects of real property, such as:

Additionally, wills and trust law can be addressed by real estate and property law; however, these issues may also be separated as their own minor subtopic of estate law.

“Title” and “deed” are two terms that you will want to be very familiar with. When a seller transfers ownership of a house to a buyer, both the deed and the title transfer. The seller is known as the grantor, while the buyer is known as the grantee. A deed and a title, however, are not the same thing.

The defining difference between a deed and a title would be the physical component. A deed is an official written document which declares a person’s legal ownership of a property, while a title actually refers to the concept of ownership rights.

An example of this would be a book. Although you can own a physical copy of a book and hold it in your hands, you cannot physically hold a book’s title in your hand. This is how a book title and a property title are the same; although neither are physical objects, they are concepts. Alternatively, a deed can and must be in your physical possession once you have purchased the property.

To further explain, a title is the legal right to ownership of a property, which includes the right to sell. Legal purchase of a house transfers the title to the buyer, meaning that the title will belong to the grantee, along with the deed. A title search may be done in order to uncover any limitations on property use.

An example of this would be easements, or any unresolved payments tied to the property such as liens. A title search can also help determine whether the seller truly has a legal right to transfer ownership.

What Is an Equitable Title?

Under real estate law, the term equitable title refers to a person’s right to obtain full ownership of a property, or a property interest. This can contrast or be used in conjunction with the term “legal title.” As previously mentioned, legal title refers to the actual ownership of the land. Additionally, a person who has legal title to land has the right to transfer ownership of the property to another party. What this means is that they have the right to sell the property.

Alternatively, equitable title is generally associated with a person’s financial interest in the property. Because of this, a person may have equitable title to a property that they have invested in, while another person actually holds legal title to that same property.

What Are Some Examples Of Common Situations In Which Legal And Equitable Title Interact?

One of the most common examples of how legal and equitable title work would be a trustee situation. If a property owner would like to transfer property to beneficiaries through a trust, they may transfer legal title to a trustee. This trustee will hold the property until a specified time indicated by the property owner, such as after 5 years.

In this specific situation, the trustee has legal title to the property. What this means is that they are the one who is authorized to transfer the property according to the trust instructions. Additionally, they may be tasked with defending the property against legal action. At the same time, the beneficiaries hold an equitable title in the property. What this means is that they are allowed to reap profits based on any improvements made or increases in property value, but only during the time that the trustee was legally holding the property.

Another common example would be a land contract sale, also known as a contract for deed sale. A contract for deed agreement is a type of legal document, permitting a person who is buying a house to make monthly installment payments to the seller until the property has been paid off in full. Such agreements can be particularly useful for homebuyers who do not qualify for standard loans, or need a quick way to pay for property.

Contract for deed agreements are considerably less costly and much faster than using a mortgage in order to finance a home. The homebuyer can skip the mortgage and loan process entirely, avoiding fees and long application processes. Contract for deed financing allows the homebuyer to enter directly into a contract with the seller, in which the seller will agree to provide financing to the buyer for the property.

Simply put, the seller is financing the sale of their own house. The seller loans the buyer some funds, and allows the person to live on the property. In turn, 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 process, the buyer will obtain both equitable and legal title.

Finally, equitable title may be associated with a regular real estate sale. This would be the case if the buyer obtains equitable title when the contract is completed. However, they will not obtain legal title until closing is completed, and the deed is actually delivered to them.

How Are Title Disputes Resolved?

Chain of title refers to the series of documents transferring ownership for a specific piece of real property, dating from its original owner to the property owner who presently holds title. A chain of title is meant to represent the historical timeline of title holders. If you are purchasing or selling real property, you should know the overall ownership history contained in the chain of title. This can ensure that the title you are buying or selling is valid.

One common example of a title dispute would be when a person contracts to purchase a home, but a third party intervenes, claiming the property as their own. The third party may assert that the property was transferred to them by a previous owner, either through a will or during a separate sale. Resolving a situation such as this would require conducting a title search, which will help settle whether the third party has a valid claim.

The party who has a recorded deed to the property will generally prevail over the party claiming the property without a recorded deed. This is why recording real estate documents is one of the most important aspects of real property sales; doing so can avoid or resolve future conflicts associated with title, including equitable title. However, it is important to note that each state has its own set of laws governing recording acts, or rules outlining how to properly record real estate transfers.

Do I Need An Attorney For Equitable Title Issues?

If you have any questions or issues associated with an equitable title, you should consult with an experienced and local property lawyer.

An attorney will be best suited to helping you understand your state’s specific laws concerning equitable title, chain of title, and recording real estate documents. A property attorney can provide you with advice regarding your legal options, and will also be able to represent you in court, as needed.

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