To appreciate the importance of a deed of assignment, we first have to distinguish Legal ownership of a property from equitable ownership.
What is Legal Ownership?
Legal Ownership or Title refers to ownership that is properly registered with the government. True ownership requires legal title.The documented property owner, as visible through the public records,is deemed to have the right to use, maintain and control the property. The bundle of rights that comes with land ownership include:
- Mineral rights
- Easement rights
- Development rights
- Possession and control
- Exclusive use
- Conveyance rights
- Right of disposition
You may assume that your ownership of a property is complete with legal title, but this is not always the case. Another party may have equitable title, restricting some of the ways you can use and enjoy the property.
What is equitable ownership?
An equitable interest indicates a beneficial interest in the property, which the holder claims on equitable grounds. For example, the interest held by a trust beneficiary. Equitable ownership gives the holder the right to acquire formal legal title; however, it is not “true ownership”. In other words, someone with equitable title could not argue that he or she was the legal owner or possessor of the property in a court of law.
Equitable title does, however, grant the person more consistent control over the property. While equitable title does not actually transfer ownership of the property. It gives the individual or entity the right to the use and enjoyment of the property. When purchasing a piece of property, it is important to gain equitable title. This will come with the right to obtain full ownership and property interest in the future.
The main difference between an equitable title and a legal title is that the latter is the only one that gives actual ownership of the property. You do not acquire legal ownership until you register your deed of assignment with the relevant lands registry.
In order to ensure that your property transaction is complete, you should make sure you sign a Contract of Sale with the Equitable owner of the property, and a Deed of Assignment with the Legal owner of the property. Sometimes, legal and equitable ownership resides in the same person. However, in other situations, legal ownership might reside in one person, while equitable ownership resides in another person. This usually occurs where the seller purchased the property from the Legal owner or someone who purchased from the legal owner.
The Importance of A Deed of Assignment
Now that we understand the distinction between legal and equitable ownership of property, we can examine the importance of a deed of assignment in property transactions.
As we stated above, a deed of Assignment transfers legal ownership of property from one person to another. Upon registration, it serves as a valid root of title to the property. Thus, the purchaser can exercise all the legal rights of an owner.
However, where a deed of assignment is not executed, or the deed is not registered, the buyer only acquires an equitable title. Consequently, this is the maximum title they can transfer to another person. This means the legal owner may still be able to transfer valid legal title to a third party. The courts may uphold the transaction if it is established that the 3rd party purchaser had no notice of the prior transaction.