Can a Declaration of Trust Stand in Matrimonial Homes?

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Matrimonial Homes: Can A Declaration Of Trust Of Beneficial Ownership Stand?

Resolving issues relating to ownership of the former matrimonial home can be challenging, particularly in the absence of a consent order or a decision of the Judge. A recent case highlights the risks of the parties agreeing to change their beneficial ownership without backing it up with a formal agreement.

At Osbornes Law, the experienced financial remedies solicitors support clients in London and the surrounding regions in property and other financial matters on separation and divorce.

When a change in the legal ownership of property occurs, certain legal formalities must be complied with. But what’s the legal position where there is a purported change in beneficial ownership that is done informally?

What’s the background?

[1Nilsson v Cynberg (2024 EWHC 2164 Ch]

The parties (H and W) purchased their property in 2001 as beneficial joint tenants (meaning they jointly owned the whole property and neither had a divisible share of the property).

H had an affair and the parties separated in 2009. They verbally agreed that W would keep the property as long as she would eventually leave it to their two children. W took on the mortgage repayments and all other expenses in relation to the property. She also paid substantial sums on home improvements. H did not contribute anything, having made clear he wanted no interest in the property.

They eventually divorced in March 2018; and around 18 months later H was declared bankrupt – at which point the matrimonial property became the subject of a dispute.

H’s trustees in bankruptcy took the view that H still had a beneficial share in the property, notwithstanding the agreement reached. They wanted an order for possession of the property and a subsequent sale. The impact on W and the children if this was to happen would be significant.

W argued that on the basis of their post-separation discussions, there was a ‘common intention constructive trust’ and/or a proprietary estoppel and she was therefore the sole beneficial owner.

The proprietary estoppel doctrine prevents someone from reneging on a promise concerning property. A key element that must be satisfied is that the party arguing the doctrine has relied on that promise to their detriment.

Declaration of trust

In the landmark 2007 decision in Stack v Dowden, the Judge stated that an express declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel. While this was helpful, it still left a level of uncertainty.

Here, the issue was whether ‘subsequent agreement’ could include a subsequent informal common intention constructive trust – and therefore, the informal agreement reached by the parties in this case.

The court ruled that it does, and clarified:

  • An express declaration of trust (arising, in this case, under the original transfer deed) will be conclusive unless there is rectification or rescission – or varied by subsequent agreement or affected by proprietary estoppel
  • A subsequent agreement is not limited to a formal agreement complying with legal formalities – it can include a common intention constructive trust
    The Judge described this as “the sensible outcome”. The Trustees in bankruptcy failed in their claim and W’s enjoyment and ownership of the property could continue undisturbed.

As for proprietary estoppel, the court found W had suffered a detriment which was – contrary to the argument of the Trustees – far from minimal. It was in fact sufficient to show a proprietary estoppel.

The decision provides important clarification on the legal implications of informal discussions and agreements relating to matrimonial property. But it’s an abject lesson in demonstrating the importance of taking formal steps, such as a Financial Remedy consent order (on divorce), or a properly drafted and signed/witnessed declaration of trust, to document the change in beneficial ownership of the property.

How we can help

Expensive disputes such as the above can be avoided with specialist legal advice and representation from the experienced divorce and financial remedies solicitors at Osbornes Law.

For expert advice and representation, please contact us by:

  • Filling in our online enquiry form below; or
  • Calling us on 020 7485 8811

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