Trusts of Land

9 Jun 2022 | James Mayall
london property

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.

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

If you are a cohabitee but are unmarried, your legal rights are relatively weak. 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 in the way spouses can.

Instead, your property rights are likely to 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 where 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:

  • As joint tenants in equity – Each owns the whole property. None owns a specific share in the property and nor can they sell or leave a specific share to someone else. On the death of a joint tenant, the survivor/s automatically inherit 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 in 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 property joint tenancy to protect your share in the property. A joint tenancy is automatically severed by divorce or on 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 a constructive trust?

In some cases, the nature of co-ownership can be less certain – particularly if there is nothing 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 on the basis of the land registry records alone: we may be able to prove that an implied or a constructive trust exists in your favour.

What is 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), it may be treated as an implied trust.

Relevant factors include who paid the deposit and who has 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. It is prudent to gather as much evidence as you can and discuss your situation with our specialist lawyers as early as possible.

Trusts of Land and Appointment of Trustees Act 1996 (TOLATA)

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

If agreement cannot be agreed, we may advise that an application should 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 ownership in the property.

A dispute may involve, for instance, argument as to the proportion each of you should receive on 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 clearly 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.

How we can help

The specialist property litigation solicitors regularly consult with the divorce and family experts here at Osbornes to ensure our clients’ interest 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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