Equitable Ownership

Seeking to own property in England and Wales is usually one of the largest financial decisions a person can make. It involves years of savings, hard work and investment either alone or with family/a partner.

Where there is more than one owner of property, there will be a trust of land in place. While it might be clear from an inspection of the title deeds how property is owned, it is not always as clear how the beneficial interest (the equity in the property) is held.

With costs of living rising, there are a number of different ways to seek to purchase a home – but what happens when someone wishes to challenge their share in the ownership?

This article seeks to talk about common ways that property can be owned and some of the pitfalls that their loved ones may fall into.

Equitable Ownership

Existing Owner Disputes

There is a longstanding line of caselaw which exists as a result of one landowner seeking to make arrangements or a person they met when they owned their property before this person entered their life. Disputes can often occur after the legal owner dies, especially if the other person’s interest was never formalised by entry into the title deeds (say, because there is a lender, and the other person had a poor credit rating).

Trusting One Another – Constructive Trusts

In these types of situations, if the beneficiaries of the owner’s estate seek to exclude you from the property or sell it and not provide you any sums, you could seek to prove you have a ‘constructive trust’. The most common way these arise is when there is a clear common intention between the parties and their intention is that they would both own the property. What is very important here is that not only is the intention clear, but the extent of the proposed ownership is clear. Having a written expression of this interest is often one way to go about establishing this.

Trusting One Another – Constructive Trusts

A Promise is a Promise

Another way you could seek to establish an interest is through a practice called ‘promissory estoppel’. This is where a Court acknowledges that a promise was made to a party which was relied on to their detriment and would be unfair to prevent the follow-through of. These situations, as compared to constructive trusts, can be unilateral but still require the element of certainty as to what exactly was promised and on what terms.

Fiancé Fixer-Uppers

Another way that those who are engaged or married can seek to establish a beneficial interest in a property is provided by parliament under section 37 of the Matrimonial Proceedings And Property Act 1970. This states that contributions made by a spouse (or to a fiancé) of either money or similar worth to the improvement or property in which either of them have an interest is presumed to similarly be for the acquisition of an interest in that property.

For these types of claims, the court would determine (in default of any agreement) what the fair portion of the equity would be, subject to a number of other factors which would need to be accounted for.

Joint Purchasers

The above situations outline when a property owner has someone claim an interest in the property after it was initially acquired. Separate to this is what can occur at purchase: where someone provides funds towards the purchase price of a property. In the above situations, there will be presumptions that the funds are provided in exchange for an interest in the property. For these reasons, individuals should think long and hard before accepting money from family, friends or business partners without a clear understanding of what the funds are for. Lenders often require parties to sign a ‘Deed of Gift’ to show a clear intention that they do not seek an interest in the purchased property.

The Benefits in Hindsight

As stated above, these matters often only arise when matters do not go according to plan. This can be when a relationship ends, through an unexpected death or even in situations of insolvency. These types of disputes can be resolved either through an application to the Court or via an application under the Trusts of Land and Appointment of Trustees Act 1996. The clearer the intentions of the parties (whether in repeated words, promises or written documents) the easier it can be to establish your position and seek the Court’s acknowledgment.

For advice or assistance in a matter relating to beneficial interests, our Dispute Resolution lawyers who focus on Property Litigation are happy to advise you on how the law impacts your situation. We try to help you map out how you could regularise your interest in a property and we offer a result-based approach for home owners.

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