Court rules on ownership of property after friendship breaks down

19 Jun 2012

With house prices remaining high and banks still requiring a substantial deposit before offering a mortgage it is becoming more common for friends to pool finances and buy a property together. The following case however provides a sobering warning of what can result when a people co-habit and the friendship breaks down.

The case concerned a dispute between two friends who purchased a flat together. There was no written declaration of trust relating to what share each party had in the flat and the parties made unequal contributions to the purchase price.

Mr Sebastianelli paid the larger contribution and the property was registered in his sole name. The Respondent, Mr Gallarotti argued that the parties expressly agreed that the property would be held in equal shares and that he would pay larger contributions to the mortgage payments to make up for the fact that he made a lower cash contribution to the purchase price. There was a dispute between the parties as to whether or not Mr Gallotteli had made these larger mortgage contributions.

Twelve years after acquisition of the flat, the parties friendship broke down and Mr Gallotteli brought proceedings to obtain a declaration as to his interest in the flat.

In the first instance the Court found in favour of Mr Gallotteli accepting his case that the parties were joint owners of the flat each entitled a 50% share in the property.

Mr Sebastianelli appealed the decision to the Court of Appeal, who reversed the initial judge’s decision and declared that the correct shares were in fact 75% to Mr Sebastianelli and 25% to Mr Gallarotti. This decision was based on the fact that Mr Gallarotti had not produced sufficient evidence to show that he had made the contributions to the mortgage which he claimed. In fact the evidence showed that Mr Sebastianelli had made substantial mortgage repayments and Mr Gallarotti had made very little contribution at all. The Court concluded that the parties had agreed that they would have equal shares in the property which would broadly represent their contributions to it, which was why they agreed that Mr Gallarotti should pay more towards the mortgage to make up for his smaller cash contribution in the first place. The fact that he not subsequently done so, meant that he could not now rely on the agreement as the conditions of it had not been met. These two were sharing a flat, not a family unit so their intentions must be looked at in that light.

If you are considering buying a property with a friend contact our law society accredited property department for advice on how to protect your interest in the property in the event of selling the property.

In other circumstances you may be considering applying for a divorce and are worried as to the breakup of assets, including the marital home. Contact ourexpert divorce lawyers who will be happy to assist you in such matters as well as providing advice in all other family and divorce law issues.

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