Beneficial Ownership vs Legal Ownership
(Last Updated: 08/12/2023)
28/07/2022
102
5 min read
In the vast majority of jointly owned property the legal owners and the beneficial owners are the same. You can however be a beneficial owner but not a legal owner, for example:
- Husband owns a buy to let but has assigned the beneficial interest to his wife for tax purposes; or
- An unmarried couple live in a property together and pay for all the property costs jointly however the property is only registered in one of their names.
Do you have shares for legal ownership?
The legal ownership isn't a percentage share like the beneficial interest. The legal ownership is whoever is named on the legal title at the Land Registry. If two people are legal owners they don't share legal ownership 50:50 they simply jointly own the property however they could own the beneficial interest 90:10 or 60:40.
Beneficial Ownership vs Legal Ownership
What is a legal owner? | What is a beneficial owner? |
The legal owner of property is registered at the Land Registry on the title deeds They will also be stated within the mortgage offer as mortgage lenders require all legal owners to be jointly and severally liable for the mortgage. You can have a maximum of 4 legal owners registered on the title and they have control over when the property is sold or transferred. Legal owners are also known as nominees or registered owners. | Beneficial ownership is "an interest in the economic benefit of property"Your beneficial ownership in property reflects your share of any gain/loss from the property including rent and profit/loss on sale. This information is not stored at the Land Registry. To evidence you have beneficial ownership of property you can provide:
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Joint Tenants vs. Tenants in Common
When there are joint legal owners, they hold the property on trust for each other; either as tenants in common (separate shares) or as joint tenants (owned 100% between a maximum of 4 legal owners - normally married couples or civil partners). The beneficial interest for the latter is simple, the married couples own 100% of the beneficial ownership so any gain or loss from the property is 100% theirs jointly (shared 50/50 on their tax return).
If you hold the property as tenants in common, then you can agree to hold the legal title on trust equally and then declare a separate beneficial interest that reflects your contribution towards the property. This is normally shown as a direct percentage of the amount of money paid towards the purchase deposit (purchase price less the mortgage), however it could take into account other contributions towards the property such as mortgage repayments and renovation work. Read this article which explains more complex beneficial interests.
What is an example of beneficial ownership and legal ownership?
Jane and Tom are not married and want to buy a home with each other for £250,000. Tom doesn't want to be a legal owner, however he is contributing £100,000 towards the purchase price of the property. Jane and Tom agree to own the property as tenants in common and draw up a Deed of Trust to reflect their separate interest in the property. Jane is 100% the legal owner of the property and only her name is registered at the Land Registry as an owner of the property, however she only owns a 60% share of the beneficial ownership (£150,000 / £250,000) and Tom owns 40% (£100,000 / £250,000).
If in a few years Jane & Tom sell their property for £300,000, using their Deed of Trust to distribute the gain, Jane will receive 60% at £180,000 and Tom will receive 40% at £120,000.
If Jane & Tom were getting a mortgage, then the they would need to get the mortgage lender's consent to the Deed of Trust. Some mortgage lenders offer Joint Mortgage Sole Proprietor mortgages that suit relationships where one party on the mortgage doesn't want to be a legal owner. Read more about joint mortgage sole ownership mortgages here.
Made a gain from sale of the property?
Capital gains from sale of a second home or rent from property income need to be split in accordance with your beneficial interest in the property. For example, you cannot share the beneficial interest in the property 50/50 and declare the income in your tax return 99/1.
For more information on this read our article on the Form 17 Income Tax declaration of beneficial interest in joint property and income.
You should speak to a tax specialist for further advice.
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Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
