Understanding Property Ownership Disputes
There are various ways disputes over ownership of property can arise. One of the...Back to News and Events
There are various ways disputes over ownership of property can arise. One of the most prevalent examples is when the relationship between cohabiting couples breaks down. In such instances, the parties often have conflicting ideas about the proportions of interest each party has in the property. The legislation that has been implemented, with the aim of resolving such disputes, is the Trusts of Land and Appointment of Trustees Act 1996 or TOLATA.
There are two distinct ‘starting-points’ for the court when they come to evaluate a TOLATA case. These are, whether the parties held the property in joint names or whether it was held in one of the parties’ sole names. To aid the understanding of TOLATA cases it is best to look at each ‘starting-point’ individually.
If the property is held in joint names both parties have an interest in the property and the main thing that needs to be established is the size of their shares. There are a multitude of scenarios that could be explored when it comes to ownership disputes. We will explore two common examples. Firstly, we will look at what may happen if an express declaration of trust can be established, then we will look at what happens if no such declaration can be established.
Scenario A: If the parties hold the property in their joint names and it can be evidenced that they ‘expressly agreed’ the extent of their respective interests, it is extremely likely that the court will hold them to these proportions.
This express agreement is evidenced by an ‘express declaration of trust,’ such a declaration must be signed and in writing. A good example of an express declaration of trust is the signed transfer form (TR1) of the property, where the couple have completed the option box which sets out how they agreed to hold the shares at the time.
As noted above if there has been a valid express declaration of trust it is likely the court will hold the parties to the declaration. That is unless there are grounds to rescind the agreement based on fraud or mistake.
Scenario B: If there is no express declaration of trust then the court will rely upon the well-established presumption that the parties own the property in equal shares (50/50).
This presumption can be challenged. The court will consider the ‘common intention’ of the parties at the time the property was purchased (i.e. how they originally intended to hold the property). They will also consider whether this intention later changed. To establish common intention the court will evaluate the parties conduct throughout the course of the relationship, including things said or done that could help evidence how the parties believed they held the property.
If the presumption is successfully challenged the court will then quantify the new shares. To do so they look at a variety of factors such as, any financial contributions made to the property and any discussions between the parties.
If the property is in the sole name of one party, the other party must prove they are entitled to a share in the property before that share is quantified.
Scenario C: Where the property is held in the name of one of the parties the court will presume that party owns the property in its entirety.
Again, this presumption can be challenged. To rebut the presumption the person claiming to have an interest in the property must convince the court that it was not the couple’s intention for the sole legal owner to own all the interest in the property.
First, there may be a ‘resulting trust’ this arises where the claimant has made financial contributions towards the purchase of the property, for example, contributions towards the deposit or the mortgage. If such contributions are established a share of the property is said to be held by the legal owner ‘on trust’ for the non-legal owner.
If there is no resulting trust or it is not appropriate to rely on one the courts will look to see if a common intention constructive trust (CICT) can be established. There are two types of CICT’s, express or inferred. Express CICTs arise if there is some sort of express agreement between the parties. This may be in the form of a written document or it may arise from discussions throughout the relationship. If an express agreement is established there must also be evidence that the non-legal owner relied to their detriment on this express agreement.
Inferred CICTs are explored if there is no express agreement. The court looks at the parties conduct to see if an inferred CICT can be established. Such conduct may include contributions to household expenses or substantial improvements to the property. They will also consider the ‘whole course of dealing,’ meaning they will look at the ‘overall picture’ of the case.
If either an express or inferred CICT can be established the court will need to quantify the shares. With an express CICT, the courts will apply the expressly agreed shares or if the quantity of each share is unclear they are able to infer what they believe the parties meant the shares to be. With an inferred CICT the courts will take a more holistic approach and again consider the shares in light of the ‘whole course of dealings.’
Once the size of the shares has been established the court has the power to declare the party’s beneficial shares in the property as well as order the sale of the property. They also have the ability to apply equitable accounting principles and make financial orders to help compensate both parties in the circumstances.
Disputes over ownership of property can become extremely convoluted and outcomes of cases in this area are ultimately extremely fact-dependent. This article should not be relied upon as a substitute for full legal advice. If you find yourself in a dispute, do not hesitate to get in touch with Poole Alcock’s experienced team.