The leaseholders of a flat in a separate wing of a country house have succeeded in their appeal...
Property disputes can arise when two or more people own property. These disputes could be when couples or relatives live together, it could be where parents help fund a child’s property purchase, or where individuals invest in property jointly.
How is property held?
Property ownership is divided into legal owners and beneficial owners. The Land Registry will record the legal owners. A beneficial owner has the right to the income from the property, and a right to the proceeds of sale of the property. The legal owners and the beneficial owners do not necessarily have to be the same.
Joint Tenants vs Tenants in Common
When parties purchase a property together, the beneficial interest can be held as joint tenants or tenants in common.
If the co-owners are joint tenants, each has an indivisible share in the property. When one dies, the whole property passes automatically to the other.
If the parties are tenants in common, they can hold unequal shares. On the death of one, their share does not pass to the other, rather it will pass under the deceased’s will or under the intestacy rules.
How does a Tenancy in Common arise?
A tenancy in common can arise where there is an express declaration in the original transfer or conveyance when the property was purchased or where a joint tenancy is severed.
Is a Declaration of Trust Legally Binding?
Yes, unless there are valid legal grounds to challenge it or the beneficial interests are subsequently varied by a deed, or by the operation of a common intention constructive trust or a proprietary estoppel.
What is Severance?
Severance is the act of converting a joint tenancy into a tenancy in common by one beneficial joint tenant. The most common method is to give written notice.
What is the effect of severance on a joint tenancy?
The basic rule is that on severance parties are presumed to hold the property in equal shares. This presumption can be rebutted if one party can establish that a different unequal division can be inferred or imputed from the parties’ conduct.
It is also possible that the division of the beneficial interest can be subsequently varied by the operation of a common intention constructive trust or proprietary estoppel.
What happens if the property is registered in the name of only one person?
Where property is held in the name of only one party, it is presumed that they are the owner of the entire beneficial interest as well, unless:
- there is an express declaration of trust, or
- another party can establish an interest:
- under a resulting trust, or
- under a common intention constructive trust, or
- by the operation of a proprietary estoppel.
It is for the party alleging an interest to prove it.
Why does this matter?
Often when a property is bought jointly, the parties fail to specify the extent of their interests. This can lead to uncertainty and disputes, for example when the relationship breaks down or one party becomes bankrupt or if one co-owner dies.
How does a Resulting Trust arise?
If a party contributes to the purchase price of a property without being one of the parties named on the conveyance or transfer and the money was not provided by way of gift, a resulting trust can arise in favour of that party.
How does a Constructive Trust arise?
A constructive trust can arise where there is some sort of express or implied agreement, arrangement or understanding of a common intention that the beneficial ownership of the property is shared, and the party who is not the legal owner has acted to their detriment in the belief that they were acquiring a beneficial interest.
What is Proprietary Estoppel?
Proprietary estoppel arises where:
- the owner of the property makes an assurance or promise to another party, or has led them to believe, that they have or will enjoy some right or benefit over the property.
- The other party reasonably relies on that assurance, promise or encouragement and suffers a detriment as a result of that reliance.
- The owner of the property seeks to take unconscionable advantage of the other party by denying them the right or benefit which they expected to receive.
What can you do if you believe that you have an interest in a property?
You can apply to the court under the Trusts of Land and Appointment of Trustees Act 1996 (known as TOLATA or TLATA) which gives the court power to resolve disputes about ownership of property. The court has power to determine the nature and extent of the ownership of the property and can order that the property should be sold.
Do you have to go to court?
Before considering any form of litigation, thought should be given to Alternative Dispute Resolution (ADR). The court encourages parties to explore settlement and if a claim is issued, the court may seek to penalise a party on costs for any unreasonable refusal to engage in settlement discussions.
How our Property Dispute Solicitors can help
If you have a dispute with a co-owner of property or if you are not the legal owner of a property but believe that you have an interest in it, we can help. We will take the time to understand what has happened and to provide advice to you on your options, as well as the best approach. Our experienced solicitors can guide you through the process. To speak to a member of our team, call 01689 887887.