What is the Difference Between Legal and Equitable Interest?

The main difference between legal and equitable interest lies in the rights and privileges associated with each type of interest. Here are the key differences between legal and equitable interest:

1. Ownership: A legal interest represents absolute ownership of a property, allowing the owner to legally enforce their rights over the asset. In contrast, an equitable interest gives an individual the right to enjoy the benefits that come with ownership without legally owning the asset.
2. Selling or Transferring: Legal title allows the titleholder to sell or transfer ownership, while equitable title does not have this privilege.
3. Rights and Duties: Legal title focuses on the duties of the property owner, while equitable title refers to the enjoyment of the property.
4. Beneficial Use: Equitable title embodies the beneficial use of the property associated with the legal title.

In some cases, legal and equitable title can be held by separate parties. For example, in a land contract, the seller may finance the buyer using a payment or loan plan, resulting in the seller retaining legal title while the buyer holds equitable title. In this situation, the buyer has the right to use the land and enjoy the benefits that come along with it, but they cannot sell or transfer ownership until they obtain legal title.

In summary, legal interest and equitable interest are distinct forms of ownership held over assets, with legal interest representing absolute ownership and the ability to enforce rights over the asset, while equitable interest allows the holder to enjoy the benefits of ownership without legally owning the asset.

Comparative Table: Legal vs Equitable Interest

The difference between legal and equitable interest lies in the rights and enforceability associated with each type of interest. Here is a table summarizing the key differences:

In summary, legal interest provides a person with complete and perfect ownership of a property, allowing them to own, sell, or transfer it, while equitable interest grants a person the beneficial use of the property without formal legal title. Legal interest is enforceable in a court of law, while equitable interest is more flexible but not enforceable in a court of law.