Monday, November 9th, 2020
What happens when you buy a property with another person, whether it is a friend or a partner, and then relations sour? One or other may want to sell or buy the other out but what if you cannot agree what share you each hold or the value of the property? Or what if one person refuses to engage in attempting to resolve the issue at all? if you are married or in a civil partnership with your co-owner then you will be able to make claims within dissolution or divorce proceedings. If not however, the law applicable to dealing with such matters is the common law of trusts and the relevant statute is The Trusts of Land Act and Appointment of Trustees Act 1996.
There is a huge body of case law but quite a lot is confusing and contradictory.
It must be remembered that this area of law is not in any way akin to dividing assets on divorce; there is no general power to redistribute assets to produce a fair result and to meet parties’ needs. There is no such thing as a common law wife or husband and if the parties are not married (or in a civil partnership) they will not be able to make claims for general redistribution of assets, maintenance or pension sharing as if they were.
What is the position then?
The main point to appreciate is that there are 2 levels of ownership under English Law:
- The legal ownership
- The beneficial (or equitable ownership)
The legal ownership is essentially who is named as proprietor at the Land Registry. However, it is quite possible and not uncommon for someone to hold the legal title on behalf of another or on behalf of themselves and others. For example, minor children cannot hold title of real property at the land registry and so a trustee would hold the legal title on their behalf. The trustee would be the legal owner but the children would be the beneficial owners.
Sometimes a couple will buy property together but for one reason or another the title is registered solely in the name of one of them. This does not mean the other does not have an interest but if they are not on the title the onus will be on them to prove they have a beneficial entitlement.
If a property is owned in joint names, there is likewise a strong presumption that it is owned in equal shares (50:50). The burden is on the owner asserting a greater share to prove why this should be the case.
So, as a general rule the law assumes that the legal title reflects the beneficial interests. You are in a considerably weaker position if you are not on the title unless your interest is formalised – usually by way of a Deed or Declaration of Trust which acknowledges the interests of a beneficial owner and sets out the shares. An express Deed of Trust is a formal document usually drawn up by your solicitor (on or after the completion of the purchase) to reflect the beneficial interests. The Deed of Trust will be binding on you in the absence of certain vitiating factors such as fraud or duress. However, even with such a document, unless the wording is carefully and precisely crafted there can still be room for dispute.
Without any express Deed of Trust, the position can become more complicated.
As a solicitor one would always check the Land register, the TR1 (the transfer document) that conveyed the property to the registered proprietors, make enquiries as to the existence of any Deed of Trust and take a detailed background as to the purchase of the property, the contributions and the intentions before advising.
The other aspects any solicitor should consider is whether there are arguments for an equitable account to be taken (whether any credit should be given to one party once the shares are determined for payments made by them that increase the value of the property) and whether the concept of occupational rent applies (whether credit should be given for the fact one party has had to leave the property since separation).
At Hanne & Co we would always look at settling matters and would consider with clients all forms of dispute resolution such as mediation or solicitor negotiation rather than proceeding to court. Court should be a last resort as you litigate at your peril. The usual rule in such proceedings is for the loser to pay the winner’s costs so you have to be confident in your case and follow the pre-action protocols before embarking on a court application.
Lastly a brief note if you have children with your co-owner. There may be an application you can make for financial provision for your children even if you are unmarried. We are not referring to child support which is now generally assessed by a government agency – The Child Maintenance Service. We are referring to lump sums for the children and also for provision of a home. Such applications originate from Schedule 1 of the Children Act 1989 – and will be the subject of another blog, another time.
Liz Francis is a Partner in Hanne & Co’s Family & Divorce Law Department