I am often taken aback by the amount of instructions I receive from owners of property who have current problems where they own a property jointly with either a family member or cohabitee.
Circumstances have changed over the years and they have often fallen out with the cohabitee or family member and, for example, when they are approaching the end of the mortgage they need further funding, but cannot do so without consent of the other owner. The principle of recording an agreement with respect to share of ownership is crucial in these circumstances. Recording that agreement can be a simple express declaration of trust in the relevant panel in the transfer document when the property has been bought. That would remove considerable uncertainty later on.
Write down your Property Agreement
A record of that agreement would then create an “express declaration of trust”, which sets out the percentages in which each owner holds the property. However, in practice that does not always happen either because the parties have not put their minds to how to record their percentage shares. The Land Registry does not of its own initiative record the percentages that each party unless the parties note this on the Transfer document. Where the parties do not decide, the property will be held jointly as joint tenants.
This creates an assumption that they both own 100% , so that on the death of either party, the surviving owner inherits the property. That could create disastrous results, particularly where there has been a separation and each family have dependents who wish to make a claim against the property.
In the absence of an express declaration of trust, the Courts have to resort to principles of whether a trust can be inferred from common intention or conduct so the trust then reflects each parties interest or, in difficult circumstances, the Claimant co-owner can try to assert some form of property law interest which would mean that it would be unreasonable to deny their interest.
What will the Court do?
The Court would then consider the following principles:
- Assurance. Does the owner persuade, encourage or allow the Claimant to believe that the Claimant has or will have some right or benefit over the property? The assurance can take a number of different forms, including express representation, passive or active encouragement, expenditure or alteration of the legal position. Commonly this is when the Claimant spends money on the property on the basis of believing they have an interest in it.
- Detrimental reliance. The Claimant relies on this belief and in doing so acts to their detriment to the knowledge of the property There must be a sufficient link between the assurances relied on and the conduct that causes the detriment (Wayling v Jones (1993) 69 P&CR 170).
- Unconscionability. The property owner tries to take unfair advantage of the Claimant by denying the Claimant the right or benefit that the Claimant expected to have and it is unconscionable to deny the Claimant his relief.
As you can see from the above, these are very difficult principles to prove and a simple solution would have been the express declaration of trust
We are very experienced in dealing with these issues and if you wish any further advice on these matters please either call me on 020 8959 6090 or email me via this link>