equitable interest

An equitable interest is a property right recognised by a court of equity but not by a court exercising its common law jurisdiction. Equitable title in property is usually merged, but may be into legal title and equitable title. It is this equitable title that is the equitable interest. Such interests are also referred to as beneficial interests.

Common examples of an equitable interest include the equity of redemption owned by the mortgagor arising from a mortgage; the beneficial interest in property owned by beneficiaries in a trust; the beneficial interest of a company over assets created by directors; and equitable charges. There are many others types of equitable interests in property recognised by courts of equity.

Disposal of equitable interests must be in writing. Bona fide purchasers acquiring the property for value and without notice of the equitable interest acquire a better title to the asset than a person having a mere equitable interest in the property. There are exceptions to this general rule, albeit rare. In such circumstances, the person holding the equitable interest may have a claim for damages against the person selling the legal title.

Usage: The lender elected to take an equitable interest in the intellectual property rights in exchange for the capital investment.

Related Words: legal mortgage; equitable mortgage; security interest; equitable mortgage; legal mortgage; real property; personal property; equitable charge; lien; charge; fixed charge; floating charge; pledge; asset; beneficial owner; fiduciary relationship; court of equity.