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In law, 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". [1]
Someone with an equitable interest in the property but no legal title, as in MCC Proceeds v Lehman Brothers, [9] cannot recover the money under common law. [10] Due to these limitations, "many leading academics and judges" have suggested that common law tracing should be completely merged with equitable tracing.
The rights may be vested or contingent, [2] and may include an equitable interest. [3] Mortgages and loans are relatively straightforward and amenable to assignment. An assignor may assign rights, such as a mortgage note issued by a third party borrower, and this would require the latter to make repayments to the assignee.
At common law, equitable title is the right to obtain full ownership of property, where another maintains legal title to the property. In the United States, legal titles are those that were recognized by the law courts in England. Equitable titles were those recognized by the English chancery courts.
Maxims of equity are legal maxims that serve as a set of general principles or rules which are said to govern the way in which equity operates. They tend to illustrate the qualities of equity, in contrast to the common law, as a more flexible, responsive approach to the needs of the individual, inclined to take into account the parties' conduct and worthiness.
Automatic resulting trusts arise from a "gap" in the equitable title of property. The equitable maxim "equity abhors a vacuum" is followed; it is against principle for a piece of property to have no owner. [13] As such, the courts assign the property to somebody in a resulting trust to avoid this becoming an issue. [13]
For disposing of existing equitable interests, the Law of Property Act 1925 provides in Section 53(1)(c) that: (c) A disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or his agent thereunto lawfully authorised in writing or by will. [26]
The contract transfers the equitable interest from the original owner to the other party, which takes place through a constructive trust. This originated with Chinn v Collins , [ 48 ] where it was decided that the creation of such a contract automatically passes the equitable interest to the buyer, assuming the contract can be completed.