What is legal title?
How do you legally define it?
What are the important elements that you must know!
In this article, we will break down the legal definition of “legal title”, so you know all there is to know about it!
Keep reading as we have gathered exactly the information that you need!
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What is a legal title
A legal title refers to the actual ownership of a property as it appears on the property deed.
A person having the legal title has all the rights, responsibilities and duties of a property owner, such as maintaining the property, using it and controlling it.
Having legal title means that you have legal rights (or duties) relating to:
- Easement rights
- Possession rights
- Usage rights
- Conveyance rights
- Disposition rights
- Mineral rights
- Development rights
- Farming rights
- Grazing rights
- Air rights
- Hunting rights
- Appearance rights
A person having legal rights on a property has complete and perfect ownership rights associated with that property.
In addition, the person carrying legal title can also have an apparent right of possession of the property.
Legal title definition
According to The Free Dictionary by Farlex citing West’s Encyclopedia of American Law, legal title is defined as:
Ownership of property that is cognizable or enforceable in a court of law, or one that is complete and perfect in terms of the apparent right of ownership and possession, but that, unlike equitable title, carries no beneficial interest in the property.
In other words, a person having legal title carries “full”, “complete” and “perfect” title in terms of apparent ownership.
Elements of legal title
Here are the elements of a legal title:
- It gives you actual ownership of a real estate property
- The legal title holder has the right to sell and transfer the property
- The person having legal title can demand compensation for the property in the context of a sale or lease
- The legal rights held are legally binding and enforceable in law
- Having legal title does not mean that the title holder necessarily has the rights and privileges associated with ownership
The legal rights to a property can be separated and assigned to different people.
For instance, a person may have a legal title while another person has an equitable title and a third person can have possession.
Bare legal title
A bare legal title is a type of title to a property that is purely legal in nature.
A bare legal title or naked title is a person having legal title to a property but having no beneficial ownership in the property and not doing anything to maintain or add value to the asset.
A person co-signs a loan for another to purchase a property.
The co-signer will have a bare legal title as they will not be making any payments towards the house nor will enjoy the benefits of asset appreciating in value or paying for its maintenance nor the one controlling the property.
Legal title vs equitable title
What is the difference between legal vs equitable title?
A person having full and absolute ownership of a property will have the property’s legal title and possession.
A person having an equitable title is a person who has the right to obtain full ownership of a property and eventually get the legal title to the property.
Let’s look at the interplay between legal title and equitable title in a typical real estate transaction.
When a buyer and seller enter into a real estate purchase agreement (or contract for sale), at that moment, the equitable interest in the property is created in favour of the buyer.
Upon signing the contract, the buyer does not have legal title to the real estate property as certain conditions need to be met.
Eventually, the legal documentation must be signed at closing (seller must legally transfer the property title).
Until the legal documents are signed at closing, the buyer will have a beneficial right or interest in the real estate property.
Eventually, when the real estate transaction formally takes place at closing, the property’s actual ownership is transferred, then the buyer’s equitable title becomes a legal title.
Legal title vs property deed
The terms legal titles and property deeds are sometimes confused and even used interchangeably.
However, a legal title is not the same thing as a property deed.
A person who fully owns a property owns the legal title and possesses the property deed.
To say that you have a legal title to a property is to say that you “own” the property and can exercise the bundle of rights associated with owning land, property or other real estate assets.
However, a property deed is an actual document or legal instrument.
To convey legal title in a property or transfer the rights to someone else, you’ll need to use the property deed to do so.
According to the Statute of Frauds, real estate transfers must be done in writing requiring some contracts to be memorialized in writing.
Legal title in mortgage financing
In the case of a person purchasing a property through mortgage financing, a deed of trust is typically signed where the legal title is transferred from the seller to the buyer.
On the closing date, the following events take place:
- Seller transfers property to the buyer
- The legal title is conveyed by the seller to the buyer
- The buyer acquires both the legal and equitable title in the property
- The buyer gives the property as collateral to secure the bank’s loan
Although the buyer provides the property as collateral to the bank to secure the loan, the buyer keeps the property’s legal title.
Should the buyer (mortgagor) fail to respect the terms of the mortgage or default on payments, the mortgagee (bank) can foreclose the property and acquire the property’s legal title.
So how do you define legal title?
What is the difference between legal and equitable interests?
Let’s look at a summary of our findings.
If you enjoyed this article on the legal title definition, we recommend you look into the following legal terms and concepts. Enjoy!
Related legal terms and concepts
Quiet title action
Title vs deed
Transfer of titles
Types of titles
Tenancy in common
Tenants by entirety