What’s mine is yours?
Date: 23 October 2009
Authors: Toby Atkinson
Issue: Vol 159, Issue 7390
Categories: Features, Property
An unmarried person’s rights in relation to property are significantly affected by whether or not there are children of the relationship. If there are it is open to a parent to make an application under Sch 1 of the Children Act 1989 (ChA 1989), for a lump sum, settlement or transfer of property order.
However, since the law is still that the cohabitant herself (it is still usually the mother making the claim) has no claims in her own right, any capital which is awarded to purchase a property is likely to be held in trust until the child’s majority or the end of full-time education, whereupon the capital sum will revert to the payer.
This obviously causes difficulties to the parent with care if that parent’s career has been adversely affected by parental duties.
Most unmarried couples in dispute over property must rely upon the provisions of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996), which deals with trusts of land whether express, implied, resulting or constructive. It is now standard practice for parties with children to bring proceedings under TOLATA 1996 at the same time as any proceedings under ChA 1989.
TOLATA claims
It is advisable to obtain as full a picture as possible before issuing a claim under TOLATA 1996, as they can be fraught with problems.
Express trusts
The starting point in every case is to check whether or not there is an express trust, or any documentation containing a declaration of trust, which clearly sets out the parties’ beneficial interests, whether as beneficial joint tenants or as tenants in common. Although all conveyances should set out expressly the parties’ beneficial interests, in practice this is not always the case particularly if the property concerned was conveyed prior to 1998 when the transfer forms did not prompt conveyancers to set out the beneficial interests intended.
A declaration of trust is key because it is conclusive in the absence of mistake or fraud and will exclude the possibility of the principles of implied trusts being applied (Goodman v Gallant [1986] Fam 106, [1986] 1 All ER 311).
In Goodman v Gallant it was held that if there is a declaration that a property is held as a joint tenancy, when it is severed the parties become entitled in equal shares and not in the proportions in which they contributed to the purchase price.
The case of Clarke v Harlowe [2005] EWHC 3062 is a further illustration of the importance of a declaration of trust. Here the court ruled that, because the parties had made a declaration of trust at the time of transfer to hold the property for themselves as joint tenants, the fact that one partner had paid for extensive refurbishments, and all the mortgage instalments, had no impact on the shares of the parties.
It should be borne in mind that it is possible for an express declaration as to beneficial interests in a property to be varied formally at a later stage and also, in certain rare circumstances, informally when the party seeking to enforce it has acted upon an informal agreement to her detriment in the reasonable belief, shared by her partner, that the agreement was valid. It is also possible for a declaration of trust to be varied by the doctrine of proprietary estoppel, discussed briefly below.
Constructive trusts
Where there is no express trust, it is necessary to consider whether a resulting or constructive trust exists. The question of whether or not a constructive trust has arisen might be asked in cases where cohabitants own a property jointly or where one is claiming an interest in a property in the other’s sole name.
In each case the evidential burden of showing that such a trust has arisen is on the person claiming that the parties’ beneficial interests are different to the legal title (see Stack v Dowden [2007] 1 FLR 1858). To establish a constructive trust, the following two-stage enquiry is necessary (Lloyds Bank plc v Rosset [1991] AC 107, [1990] 1 All ER 1111):
Was it intended that the beneficial interest in the property was to be shared?
If the answer to question above is yes, what were the nature and proportions of the parties’ respective shares of the beneficial ownership?
In cases where parties own the disputed property jointly, the first stage of this test will usually have been passed.
Where one is the sole legal owner, however, the claimant will need to show that the parties intended that she should have a beneficial interest in the property, and that in reliance upon that common intention she acted to her detriment.
This “common intention” as to shared beneficial interests might be established either: by express discussions evidencing an agreement or understanding (known as Rosset I); or by drawing inferences from conduct (Rosset II).
A claimant will need to provide as much detail as possible, both as to language and circumstance, to prove there have been express discussions evidencing agreement or understanding.
If there have been none, one must consider whether inferences can be drawn from conduct and in doing so the following questions should be asked:
Has the claimant made a direct contribution to the acquisition costs? If so, the court will infer an intention that both parties should have a proprietary interest in the property.
Does the claimant make significant and regular direct contributions to the mortgage instalments? Is she liable under the mortgage? If so, this should be enough for an inference to be drawn.
Has the claimant made indirect financial contributions? If so, the court may, in certain limited circumstances, infer the “common intention”.
Has the claimant made any non-financial contributions? Although purely domestic contributions will not count there is a possibility that undertaking improvements that enhance a property’s value might be sufficient to establish an interest (see Stack v Dowden).
Finally, it should be noted that a common intention that a property be jointly owned is not sufficient in itself; it must also be shown that in reliance upon the common intention a party has acted to her detriment.
In cases where the common intention has been inferred from the parties’ conduct, such conduct usually also establishes that the claimant has acted to her detriment in reliance on the common intention.
In other cases, making financial contributions, undertaking renovation projects and carrying out tasks for which one would usually be rewarded will usually be sufficient for this element of the test to be passed.
If you are able to establish a beneficial interest, in quantifying it it will be necessary to consider any express discussions or agreements between the parties as to quantum.
If there have been none, the court will look at the parties’ whole course of dealing and any conduct which sheds light on the question of what shares were intended (such as any arrangements made to meet the outgoings, see Oxley v Hiscock [2004] 2 FLR 669).
This applies to cases where properties are owned solely or jointly although the starting point will be different in each case: in joint ownership cases the presumption is that the beneficial interest is held under a joint tenancy, whilst in cases of sole ownership there is no assumption that the claimant is to have an equal share in the property.
Resulting trusts
A resulting trust may exist where one party makes a direct financial contribution to the acquisition of a property conveyed into another party’s name (or indeed into their joint names and where a Declaration of Trust is not made).
The presumption used to be that that person will, unless sufficient evidence can be produced showing that some other result was intended, be entitled in equity to a share in the property commensurate with the contribution made.
However, in Stack v Dowden it was held that the presumption was no longer relevant where the dispute concerned the matrimonial or “quasi-matrimonial” home. In other words, it could no longer be presumed that cohabiting couples would intend their beneficial interests to be proportionate to the amount of their respective financial contributions.
The presumption of the resulting trust has, however, continued to have relevance in cases where there is a commercial context ie in cases where the primary purpose of the purchase of the property was as an investment, not as a home, and in such cases the following points should be borne in mind when trying to identify which contributions will be relevant:
Non-financial contributions will not be taken into account.
Direct financial contributions to the initial purchase price of a property, such as paying the deposit, will be relevant (but not contributions to general expenses of the purchase, see Curley v Parkes [2004] EWCA Civ 1515, [2004] All ER (D) 344 (Oct)).
Any discount to which one party is entitled under the right-to-buy legislation will be regarded as a contribution (Springette v Defoe [1992] 2 FLR 388).
If a party simply makes mortgage payments but is not liable under the mortgage a resulting trust will not arise.
On the other hand, assuming liability for a mortgage will potentially give rise to a resulting trust, although this is not always the case and the presumption may be rebutted on the facts (Carlton v Goodman [2002] EWCA Civ 545, [2002] All ER (D) 284 (Apr)).
Proprietary estoppel
A person may also be entitled to make claims pursuant to the principles of proprietary estoppel where representations have been made to that person and she has acted to her detriment on the basis of those representations so that it would be inequitable for her partner now to deny her these entitlements.
It is usually necessary for a clear promise or representation to have been made although a mutual understanding is not essential. There must be a sufficient link between the promise relied upon and the conduct that constitutes the detriment, which need not necessarily consist of financial detriment so long as it is substantial (see Gillett v Holt [2001] Ch 210, [2000] 2 All ER 289).
There may be an overlap between cases of proprietary estoppel and constructive trusts. A claim for proprietary estoppel does not require “common intention” in respect of beneficial ownership which may make it a more obvious route than, for example, the constructive trust.
It is important to check the facts of a case for the possibility of proprietary estoppel as this has been invoked successfully in a wider range of family relationships than the other remedies discussed in this article.
Toby Atkinson, solicitor, Charles Russell.
E-mail: Toby.Atkinson@charlesrussell.co.uk
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