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What is a "Mere Equity"?

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  • What is a "Mere Equity"?

    Why is the classification of equitable interests difficult to
    understand?

    I can't seem to grasp the concept of a "mere equity". "It's not a
    right to property, but a right in the nature of a chose in action
    which is ancillary to a right in property" ??

    I understand the 'equitable proprietary interest' and 'personal
    equities', but after consulting several texts, I am having significant
    trouble trying to determine when a mere equity exists and when it
    doesn't.. It's easy for the other two, but a mere equity seems to be
    confusing..

    Can anyone shed some light on this concept and explain to me what a
    'mere equity' is? I'm racking my brain with this 2nd level equitable
    interest of hierarchy's.. It seems to me that a mere equity can be a
    personal right or a proprietary right, but this becomes confusing
    because you have 3 levels, at the top of the hierarchy you have the
    equitable proprietary interest, where the holder has rights that can
    be exercised against the property tself and against some 3rd parties,
    followed by a mere equity, followed by a personal equity.. Is it
    incorrect to say that if a right isn't entirely a personal interest or
    a proprietary interest, then it is therefore a mere equity?

    Confused!

  • #2
    What is a "Mere Equity"?


    "Inqtress" <[email protected]om> wrote in message
    news:[email protected] om...
    Confused!
    -----

    See this and search the page for the term "mere equity" as used in context.
    http://www.sjrm.com/articles/wjr02.htm

    This is a discussion of the relationship of a named property holder to
    recourse and non-recourse debt arrangements and the taxable position of that
    property holder on sale or other disposition. Where non-recourse debt is
    involved, a transfer of the property and subsequent settlement of the
    non-recourse debt (is) directly with the beneficiary of that debt and also
    engenders a willingness of the property holder to transfer any interest they
    hold. That interest may be "mere equity" not a tangible financial interest.

    Therefore the willingness of the property holder to consent to the transfer
    of the property "It's not a right to property, but a right in the nature of
    a choice in action [e.g. to sell or not sell] which is ancillary to a right
    in property"

    In non-recourse debt the debt is secured on the property itself without
    recourse to the named property holder. If the property is sold (e.g. on
    repossession) for less then the debt is worth the loss is carried by the
    holder of the debt. In recourse debt the debt is that of the named property
    holder personally and in full; usually satisfied on sale of the property
    between the debtor and the financial institution. The choice, when initially
    set up, is often one of the anticipation of tax liabilities on ultimate
    re-sale - but in UK practice also allows a financial "negative equity" to
    remain with the debtor. This has tax implications as to capitol gains and
    losses for tax purposes.

    Where payments have been made on property debt that amount to only debt
    service rather then pay down of principal, then the holder of that property
    may, absent an appreciation in market value, have no real equity but only
    "mere equity" - the right to exercise, or agree to, the choice of sale or
    not.

    Better?

    Journalist


    Comment


    • #3
      What is a &quot;Mere Equity&quot;?

      Journalist-North wrote:
      "Inqtress" <[email protected]> wrote in message news:[email protected] om...
      Confused!
      ----- See this and search the page for the term "mere equity" as used in context. http://www.sjrm.com/articles/wjr02.htm
      This question was cross-posted to uk.legal (amongst other places) and
      the answer concerns US tax law (at least it appears so to me). I am not
      convinced that the answer given in the above link will necessarily hold
      in England and Wales (my own jurisdiction).

      Surely there is nothing complicated going on here once one realises

      (1) not all equitable rights are proprietary
      (2) not all equitable remedies are proprietary
      (3) equity always acted in personam (which explains most things about
      its modern operation)

      Francis Davey

      Comment


      • #4
        What is a &quot;Mere Equity&quot;?


        "Francis Davey" <[email protected]> wrote in message
        news:[email protected]
        Journalist-North wrote:
        "Inqtress" <[email protected]> wrote in message news:[email protected] om...
        Confused!
        ----- See this and search the page for the term "mere equity" as used in
        context.
        http://www.sjrm.com/articles/wjr02.htm This question was cross-posted to uk.legal (amongst other places) and the answer concerns US tax law (at least it appears so to me). I am not convinced that the answer given in the above link will necessarily hold in England and Wales (my own jurisdiction). Surely there is nothing complicated going on here once one realises (1) not all equitable rights are proprietary (2) not all equitable remedies are proprietary (3) equity always acted in personam (which explains most things about its modern operation) Francis Davey
        ----------

        As far as I can tell there are notable similarities between the two
        jurisdictions (US-UK) in several respects - assignment of the debt to either
        the property itself or to an individual; and in computation of tax
        liabilities as well. There are also thrid party considerations.

        There may NOT be a direct comparison across the board, but the use of the
        term, and it's meaning, would be similar in both jurisdictions, and that is
        why I selected the contextual discourse on that particular website.

        I am in the UK as well. You could also refer to (UK) practice here and see
        the similarities - in the case discussed here of a tenancy interest:
        http://webjcli.ncl.ac.uk/articles5/todd5.html
        Occupation for Life: Satisfying the Equity

        Australian commentary here:
        http://www.law.uts.edu.au/~davidb/bl6b.html
        EQUITY AND TRUSTS / MAXIMS OF EQUITY

        Journalist

        Comment


        • #5
          Mere Equities

          As I understand it, the term "Mere Equity" is an extremely unhelpful one. It can either refer to a) a personal right, or b) a property right (i.e good against the rest of society).

          a) e.g. A deserted wife's equitable right to stay in her home (of which the legal title is held by the husband). This is a personal right against the husband, and as such is only a "mere" equity in personam - it is weaker than other rights in rem. If the husband mortgaged the house (even equitably) the bank's right would take priority (Westminster Bank v Lee)

          This case was of course decided before the courts became willing to find constructive trusts in favour of non-legal home owners (see Stack v Dowden) A constructive trust will be stronger than a mere equity.

          b) A mere equity can be a property right, but it will be one which is inferior to other equitable rights (Philips v Philips). For example, the right to rescind a contract of sale formed as result of fraud is a property right. But it will not affect an equitable estate in land (even if the estate was acquired after the Right to Rescission). This is one of the exceptions to the "first in time rule" regarding priorities.

          Very late I know, but I thought I'd write it out anyway to clarify my own thoughts!

          Comment


          • #6
            LawStudent 7- Please do not reply to old threads. This thread is from 2004. Thanks.
            Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

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