Establishing A Beneficial Interest In Property: Why Property Rights Do Not End With The Legal Title

• Published date: 05 September 2023
• Subject Matter: Real Estate and Construction, Family and Matrimonial, Estate Management, Landlord & Tenant - Leases, Wills/ Intestacy/ Estate Planning
• Law Firm: Weightmans
• Author: Mr Robert Emmett and Libby McKean

We take a look at the ways in which a beneficial interest can be created.

Property ownership in England and Wales is reflected both through the legal ownership and the economic benefit, commonly referred to as the beneficial ownership.

Being the registered legal owner of a property - whether solely or jointly with another - does not mean you will automatically share in the economic benefits. The extent of your right to share in the economic benefits will depend on the extent of your beneficial interest.

So what exactly is a beneficial interest?

A beneficial interest is an interest in land that gives a person a financial share in a property and/or the right to occupy a property.

In this article we take a look at the ways in which a beneficial interest can be created as well as touching upon some of the key legal concepts that relate to property ownership.

How is a beneficial interest created?

If we start with the example a non-married couple who choose to invest in property together and decide to register the legal ownership in their joint names, what does this mean in terms of their beneficial interests?

Registering the ownership of a property in joint names, absent a declaration of your beneficial interests, will result in the joint owners becoming joint tenants. This means that they will have equal rights to the whole property and, if one of them dies, their interest would pass automatically to the surviving joint tenant. In other words, they are both entitled to 100% of the beneficial interest in the property and if they choose to sell the property then they would each receive an equal share of the net proceeds of sale.

However, it is common for couples buying a property together to contribute towards the purchase cost in unequal shares. So, how does a party contributing more to the purchase avoid unintentionally surrendering their right to benefit from their greater financial contribution? What if one or both parties do not want their share of the property to pass to the other automatically on death? In these situations it is common for the parties to enter into a declaration of trust at the time of purchase which will record the parties' respective beneficial interests in the property (resulting in the parties becoming tenants in common). However. there are alternative ways to establish a beneficial interest.

How to establish a beneficial interest

There are three ways in which a beneficial interest can arise:

• by express declaration of interests
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