Beneficial Interest in Property

Caragh Bailey
20/05/2021
8,819
2 min read
Beneficial Interest in Property from Parachute Law: a model house and a square block which reads '%' sit atop a long children's playing block, in balance on a cylindrical block

What does beneficial interest in a property mean?

A beneficial interest in a property (or land) which gives you a financial share in the property, even if you are not a legal owner. This means that you would get a share of any sale proceeds, or rental income. It also gives you the right to live in the property.

Your ownership is defined as a percentage, so it can increase and decrease in value with the value of the property.

Joint tenants own 100% of the beneficial interest equally between them. If you want to divide and assign shares of the beneficial interest, you must first sever your joint tenancy and register as tenants in common.


Who has beneficial interest in property?

There are three ways a person can gain a beneficial interest in property:

    1
    Express declaration of interests
The legal owner(s) can share the beneficial interest in the property between them, or with a non-owner, by signing a trust deed or written agreement, often called a co-habitation agreement.

Our Basic Deed of Trust is a standard declaration of trust which includes a fixed beneficial interest split (who has what percentage of the beneficial interest) and explains what to do on sale. It offers a cost effective way to for declaring your intentions for buy to let landlords tax purposes (suitable Form 17 declarations) or for first time buyers wanting a very simple agreement.


Alternatively, our floating deed of trust allows the co-owners of a property to have a beneficial interest that changes over time by their individual contributions toward purchase price, purchase costs, repairs/Renovations & mortgage repayments.

Unlike a fixed beneficial share deed of trust which doesn't go up or down even if one party moves out and stops paying toward the mortgage, a floating deed of trust allows for the co-owners to pay more of the above and increase the beneficial ownership. This will in turn increase their share of any gain or loss from the net sale proceeds.


Without a deed or declaration to set out your intended beneficial ownership, you put yourself at risk to dispute. A non owner could assert their beneficial interest by one of the methods below. If you would like to protect your beneficial ownership against a cohabiting party, you should have them sign a declaration of no beneficial interest in the property.


How do you transfer beneficial ownership of property?

You can carry out a transfer of beneficial interest in property with a a deed of assignment. It can be used by property owners to assign their beneficial interest to another party; either a legal owner or a non-legal owner.


    2
    Resulting Trust
Where there is no express trust, a resulting trust may arise when the property is transferred back to someone who is implied to have held the property in trust for the benefit of another.

For example:James pays Chayya some money toward the purchase of her first house.

There is a presumption that James did not intend the money as a gift, rather that Chayya holds the money or relative share of the property in trust for James, who has beneficial ownership of property relative to his contribution. This presumption, however, is easily rebutted by a counter presumption or by direct evidence that James did intend the money as a gift. James' intention would have to be determined in court.

    3
    Constructive trust
A constructive trust is when beneficial interest in property is allocated by the family court. This happens when the court holds that the behaviour of the parties is such that they will hold one party as a trustee to the other.

For example:Jane and Sarah are cohabiting partners. Jane's own her own home. Following discussions where Jane reassures Sarah that she will always look after her, Sarah leaves her rented apartment and her job in order to live with Jane and take care of Jane's children from a previous relationship, so that Jane could start a new business. Sarah pays the bills, out of her savings, while Jane's income recovers.

This could be found to be a constructive trust. Even where the non owner has not contributed to the purchase of the property, they may still be able to establish a beneficial interest of property.

How do you establish beneficial interest in property?

There are often disagreements between owners or partners, regarding what happened and what their intentions were. In this case you would need to establish your beneficial interest in court by way of one of the three mechanisms listed above. Property litigation is a complex and difficult process, you should seek a consultation from a solicitor before moving forward.



Frequently Asked Questions
The trustees are beneficial owners, if, they are also beneficiaries.
The legal owner's names are on the title deed. They are the registered owners with HM Land Registry. The beneficial owners are the people who own a right to the properties benefits, including income and the right to occupy.

Do you need help establishing or transferring your beneficial interest in property?

We can help you with deeds and declarations to protect your interests before you have a problem. Or, we can represent you to establish or to dispute a resulting or constructive trust. Contact us to find out what we can do for you.

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