Posted by Calum Campbell, Senior Associate
Your property? Your choice?
You would think that the beneficial ownership of your house or property portfolio should be fairly straightforward and obvious, all the more so if you are the sole legal owner. You should also be free to leave your property, or your share in it, to whoever you choose under your will… right?
Well, a steady stream of cases continues to arise ranging from non-owners claiming a beneficial interest in residential (or even investment) property, to joint owners claiming an enlarged share, to cases involving investment properties, to joint tenancies being severed without written notice being served, to (a case in which we acted for the successful claimant) a joint tenancy not being severed despite written notice ostensibly being given in accordance with the Statutory requirements.
It is also very common, particularly in a cohabitation context, for a couple or one partner to have only a limited understanding of what their rights in relation to a shared property are, particularly if it was pre-acquired by one of them and becomes a shared home. Many cases arise because one party made certain assumptions and did not consider the (admittedly unromantic) option of seeking legal advice at the outset.
When disputes as to ownership arise the courts regularly grapple with the principles to be applied, particularly as the leading cases in this area were both “joint names” cases in a domestic cohabitation context rather than “sole name” cases or cases involving investment properties. In the latter types of case the starting point and the principles to be applied can and do differ.
To broadly summarise, the principles developed in “joint names” co-habitation cases are:-
- a presumption of equal sharing where a couple buy a property in joint names (i.e the legal and beneficial interests are the same)
- in the absence of evidence of express agreement (this does not have to be written agreement), the court can infer the parties’ agreement or “common intention” from the “whole course of conduct” between them. Their common intention is to be deduced objectively from their word or conduct.
Whilst it was initially thought that there was no scope for these principles outside a “domestic consumer context” they have since been applied in cases involving property investment portfolios where the parties’ personal relationship had a commercial aspect.
However, context is still everything and there is still some life in the “old school” approach in a quasi-commercial case. Put simply, this suggests that where the parties’ contributions to the purchase are unequal, their beneficial shares will reflect their financial contributions.
The principles applied in “sole name” cases have been differentiated from “joint names” cases and arguably, a would-be claimant has a far more difficult task in this context. There can be and is no presumption of equal sharing and the starting point is that both the legal and beneficial interests vest in the legal owner.
For the would-be claimant, whilst a direct contribution to the purchase price or mortgage payments is no longer a pre-requisite, the present position in “sole names” cases appears to be that the circumstances will need to be exceptional before the court will infer that the parties mutually agreed that beneficial ownership should be shared.
Given the difficulties and misunderstandings which can arise, it is important that couples regularly review their arrangements and ideally take steps to clearly record their intentions both in relation to the family home and any investment property. This does not have to be limited to the time of purchase; circumstances can change and it might be appropriate to review matters when, for example, making a will or buying investment property.
A common feature of many of the reported cases is the absence of a Declaration of Trust prepared by a solicitor, a straightforward document which can and in most cases does obviate the scope for uncertainty and litigation. A court will only go behind a Declaration of Trust in exceptional circumstances so where certainty is desirable, it is a wise investment.
Whilst the standard transfer from used in conveyancing does now include a box which can be ticked (where a property is being purchased jointly) which indicates how a property is to be held and this in itself constitutes a Declaration of Trust, this is often left incomplete, gives little scope to include more detailed provisions and there have been cases where the box ticked did not in fact represent the parties’ intentions or instructions.
For any queries, please contact Senior Associate Calum Campbell on
01793 847 698 Email us