9 Jun 2022 | James Mayall
london property

Table of Contents

What are trusts of land?

Property ownership is not always a straightforward legal issue, particularly where the parties are cohabitees or there is disagreement as to the nature of the ownership.

We can assist if you need specialist advice about your property ownership and rights, whether or not you are married or separating. Our specialist property litigation solicitors are experts in this complex field, working to protect your financial and property interests.

Your legal rights are relatively weak if you are a cohabitee but are unmarried. Were you and your partner to separate, you do not enjoy the same rights as a married couple. This means you cannot bring property claims under family law as spouses can.

Instead, your property rights will likely be determined depending on how you own the property. A key principle is that where more than one person is the legal owner, the joint owners hold the property on trust. The trust can be created:

  • Expressly by way of a formal declaration of trust
  • By a transfer of the property to two more people or
  • By virtue of the parties’ conduct.

In the case of a relationship breakdown or other family dispute, complicating issues can arise. For example, a non-owner contributed towards the purchase price or has made ongoing financial contributions to the mortgage or improvements to the property.

Property Co-ownership

Two or more people who are registered at HM Land Registry as the joint legal owners of the property can hold the beneficial interest in one of two ways joint tenants or tenants in common:

  • As joint tenants in equity – Each owns the whole property. None owns a specific share in the property, nor can they sell or leave a specific share to someone else. On the death of a joint tenant, the survivor/s automatically inherits the property.

Spouses often own the family home in this way, with the effect that the surviving spouse becomes the sole owner of the property on death

  • As tenants in common – Each co-owner owns a specific share in the property, whether in equal or unequal shares. Each can leave their identifiable share to someone other than the other co-owner/s on death.

For instance, three siblings decide to buy a property and contribute a third each to the purchase price. They can elect to co-own the property as tenants in common, thus protecting their individual share.

Importantly, a joint tenancy can be ‘severed’ – converting it into a tenancy in common. This can be done simply by one owner giving ‘notice of severance’ to the other/s (the notice will also ideally be registered at HM Land Registry).

In the event of a relationship breakdown, it is wise to consider severing any joint property tenancy to protect your share in the property. A joint tenancy is automatically severed by divorce or by the bankruptcy of one of the parties.

The registered title of the property at HM Land Registry will indicate the nature of the co-ownership, but this is not necessarily conclusive.

Is there an implied or constructive trust?

In some cases, the nature of co-ownership can be less certain – particularly if nothing is set out in writing. The parties may have bought the property and contributed unequal amounts to the purchase price – but the registered title indicates they are beneficial joint tenants.

However, it is not always the case that the nature of your ownership is conclusive based on the land registry records alone: we may be able to prove that an implied or constructive trust exists in your favour.

What is an implied trust?

It may be treated as an implied trust where you have evidence to show it was the common intention that there would be a tenancy in common (or you can demonstrate you and your co-owner later decided that your respective shares would alter).

Relevant factors include who paid the deposit, who paid the mortgage instalments, and in what contributions.

What is a constructive trust?

Similarly, a constructive trust may arise where it is inequitable or unfair that one party, because of their conduct, denies the other their beneficiary interest in the property.

While these are general rules, each case is considered on its own strengths and merits. Gathering as much evidence as possible and discussing your situation with our specialist lawyers as early as possible is prudent.

What is TOLATA?

TOLATA stands for the Trusts of Land and Appointment of Trustees Act 1996. It is a piece of legislation that primarily deals with disputes relating to co-owned properties, trusts, and the appointment of trustees.

The main purpose of TOLATA is to regulate the rights and responsibilities of individuals who jointly own property, especially residential properties, and are in dispute over ownership, use, or management. It provides a legal framework for resolving conflicts and determining the interests and shares of the co-owners.

Under TOLATA, the court has the power to make various orders, including orders for the sale of the property, the transfer of shares in the property, and orders specifying the rights and obligations of the co-owners. The court aims to achieve a fair and equitable resolution based on the case’s individual circumstances.

In any property ownership dispute, we work hard with our clients to resolve with the co-owner/s to avoid expensive court action.

If an agreement cannot be agreed, we may advise that an application be made to the County Court under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) to determine the nature and extent of property ownership.

A dispute may involve, for instance, an argument as to the proportion each of you should receive on the sale of the property; or which party should buy the other out to enable the other to remain living there.

TOLATA is a complex area of law, and our specialists will guide you through how we can help protect your interests.

To prepare an application, we will need evidence of your intentions and those of your co-owner(s) when you purchased the property, and anything since then that shows a change in your intentions. This will need to be supported by documentary evidence of, for instance, who pays what proportion of the mortgage instalments and who foots the bill for service bills, repairs and home improvements.

When considering an application, the court must consider various factors, including:

  • The purpose for which the property was purchased and the wishes of the beneficial owners.
  • The welfare of any child in occupation
  • The interests of any secured creditor of any beneficiary.

If the court confirms an implied or constructive trust exists, it is usually binding on the parties.


Bagum V Hafiz And Hai [2015]

In the case of Bagum v Hafiz and Hai [2015] EWCA Civ 801, the Court of Appeal considered, for the first time, whether the extent of its discretion under section 14, Trusts of Land and Appointment of Trustees Act 1996 (“TLATA”) permitted the Court to order one of the beneficiaries of the trust to sell his interest in a property to one of the other beneficiaries. The Court also considered the powers of the Court under s14 and s15 of TLATA when making an order for sale.

The property was owned by the Claimant, Mrs Bagum (C) and her two sons, the Defendants, Mr Hafiz (D1) and Mr Hai (D2). All parties had been living in the property. There was then a family breakdown which resulted in D2 and his wife moving out. The parties executed a declaration of trust, resulting in C, D1, and D2 becoming trustees of the property, holding the property on trust for themselves in equal shares. Following various attempts by D2 to force C to sell the property, C issued proceedings seeking an order that D2 sell his share to D1, or in the alternative order for sale. C wanted, if possible, to remain in the family home (purchased by her late husband). D1 supported this position.

A preliminary issues trial was ordered to consider whether the Court could force D2 to sell his share of the property to D2. The first instance Judge found that TLATA did not provide power to the Court to make such an order. However, the judge made an unusual order to sell the property. The property was initially to be offered for sale to D1 at a price to be determined by the Court. If he did not complete the purchase within six weeks, it would be offered for sale on the open market. This, in effect, gave D1 the first opportunity to purchase the property. This was an order C and D1 were content with in that it allowed them and their other family members to remain in the property, provided D1 could purchase the property within the 6-week. The Judge made a finding that the purpose of the trust was for the property to continue to be used as a family home and to protect the financial interest of all three parties in respect of the property.

D2 appealed against this order to the Court of Appeal. The Court of Appeal held, agreeing with the first instance Judge, that a direction to one beneficiary to sell to others would not be an exercise by the trustees of their functions and thus not something that the Court could order under s14 of TLATA. The ambit of section 14, TLATA, gives the Court a wide discretion in relation to “the exercise by the trustees of any of their functions”. However, directing one beneficiary to sell to another was not one of those functions.

The Court of Appeal then considered whether the order was open to the Judge. This was the point that D2 had appealed. The court held that, whilst it did not have the power to direct disposal of a beneficiary’s interest, it did have the power to direct trustees of land to sell the trust property to particular beneficiaries without the consent of the beneficiary or beneficiaries to whom the land is not being sold to. This power is not excluded merely because it has the same effect as the sale of one beneficiary’s share to another, which is excluded.

Lord Justice Briggs commented, at [23], that “the clear object and effect of sections 14 and 15 is to confer upon the court a substantially wider discretion, exercised upon the basis of wider considerations, than might be enjoyed by the trustees themselves, acting without either the consent of their beneficiaries or an order of the court. … All this departs from the general rule of equity which requires the trustees single-mindedly to advance the interests of the beneficiaries as a class, without preferring some of them over others”. The Court of Appeal thus found that the Court is not rigidly constrained in exercising its discretion by principles of the law of equity. However, such principles constrain the trustees themselves.

The Court of Appeal also found that the Judge was entitled to make the order she had, even though it was not the usual order for sale that would be made (whereby all beneficiaries would be entitled to bid for the property). In reaching her decision, the Judge had properly considered the purpose of creating the trust: to provide a home for C and D1 while securing D2’s financial interest. The Court did not consider there to be a significant risk of an undervaluation by an expert. D2’s appeal was therefore dismissed.

Kingsley v Kingsley [2019]

This case has been followed and applied in a number of cases and more recently in the case of Kingsley v Kingsley [2019]. This case involved the termination of a farming partnership on the death of one of the two sibling partners. The partnership between a brother and sister had for nearly 40 years operated from the family farm. The brother passed away and his interest passed to the widow who wished to sell the farm on the open market. The sister resisted the order as he wanted to continue the farming business and wanted an opportunity to acquire her brother’s interest so that she could do so.

Co-owners of property

Following Bagum v Hafiz, the court accepted that he had jurisdiction to make the order and gave the sister two months to purchase her brother’s share. There were a number of factors the judge took into account namely:

  • That an expert could value the farm with sufficient certainty to allow a judge to be satisfied that the brother’s widow would receive a proper value for her share.
  • The purpose of the trust which the court determined was to run a family farm
  • He also determined that the widow’s interest was purely financial.

It appears the Bagum case has allowed co-owners when being forced to sell a property to retain property historically owned by a family within the family.

How can we help with TOLATA claims?

The specialist property litigation solicitors regularly consult with the divorce and family experts here at Osbornes to ensure our clients’ interests are properly protected.

For strategic advice on trusts of property and land law and how we can protect your interests, contact us today.

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