Legal ownership
The legal interest in a property refers to the right to possess or use property. It belongs to the legal owner, i.e. the person who is registered at the Land Registry on the title deeds. Legal interest gives the owner a right of control over the property, which means they can decide to sell or transfer the property.
When two or more people are registered as proprietor of the land they are known as ‘joint proprietors’. Their legal ownership of the land is truly ‘joint’ as the legal estate cannot be divided between them and each person cannot own a percentage share in that legal estate. There is no physical division in the land. When one joint proprietor dies, the legal estate in the whole of the land automatically vests in the surviving joint proprietor.
Beneficial ownership
The beneficial interest is an interest in the economic benefit of a property. It belongs to the beneficial owner, who is entitled to the financial value of the land, regardless of the title entries at the Land Registry.
In particular, beneficial interest gives right to:
- live in the property;
- a share of the rental income;
- a share of the proceeds of sale if the property is sold
Unlike the legal estate, the beneficial ownership can be split into equal or unequal shares. For example, a couple may have purchased a property with one contributing £20,000 and the other contributing £80,000, on the understanding their contributions would give rise to a beneficial interest for each of them in the land of 20% and 80% respectively.
Joint proprietors always own the registered estate on trust. A trust in land is the relationship between the legal owner(s) and the beneficial interest in the land. They can either hold it on trust for themselves or on trust for a third party.
If they hold it on trust for a third party this means that they, as legal owners, are not entitled to the equity at all and must pass this on to the person beneficially entitled to it. An example of this would be where parents are the registered proprietors of a property, but they are holding it on trust for a child to whom a grandparent has left it to. Although the parents are the registered legal owners, they are not entitled to keep any monies from the sale of the property as the child is entitled to that. They are holding the property as trustees for the child.
This also means that a husband/wife can hold it on trust for their spouse – see article
Transferring a property into your husband/wife’s name
If they hold it on trust for themselves, this means no one else has any beneficial interest in the property. They may have unequal interests, as in the example above, but they are the only ones with those interests.
Parties who hold land on trust for themselves can do so in two ways – as joint tenants in equity or as tenants in common. Remember, this still relates only to the beneficial interest.
Joint tenants in equity
If an equitable joint tenancy exists, the beneficial interest of any joint tenant (proprietor) will pass on death to the surviving tenant. The last survivor will then hold the land as sole legal and beneficial owner and, as a result, the trust will come to an end. On a sale of the land that person will then be entitled to receive the whole of the purchase money.
Tenants in common
Some people may not want their interest in the land to vest in the surviving tenant. If they decided to hold the land as tenants in common, on their death their share would vest in the beneficiaries under their will, for example, their children or relatives. If the property was subsequently sold following the death of one of the proprietors, a second trustee would need to be appointed to sell it.
This is because the purchase price needs to be paid to at least two trustees in order for the beneficial interest to be overreached. The trust would then attach to the proceeds of sale and the purchaser would take the property free from any trust.
Change your type of ownership
You can change from being either:
- joint tenants to tenants in common, for example if you divorce or separate and want to leave your share of the property to someone else
- tenants in common to joint tenants, for example if you get married and want to have equal rights to the whole property
You can also change from sole ownership to tenants in common or joint tenants, for example, if you want to add your partner as joint owner. This is called transferring ownership.