Establishing a beneficial interest in property
Lucy Raho Jeavons takes a look at the steps that a non-legal owner may wish to take in order to establish a beneficial interest in property.
Many non-married couples may decide to purchase a property together and register both their names as legal owners on the title deeds.
If they are contributing different amounts to the purchase price they may also want to record their contributions and therefore the proportions of the property they own in a declaration of trust.
That way when the property is sold they will get a respective share of the net proceeds.
A declaration of trust is also a useful tool to protect one partner’s beneficial interest in the property if for whatever reason they are not registered as a joint legal owner.
However, if none of these steps has been taken, then the non-legal owner may look to establish a beneficial interest in the property in the following ways.
1. To establish a common intention constructive trust
There must have been a common intention to share ownership
This is to say that there was a common intention for one of them as legal owner to hold the land on trust for both of them.
This can only be achieved by evidence of the parties’ actual intentions, express or inferred, ascertained objectively (Thompson v Hurst).
In a straightforward case, a declaration of trust would be express evidence of the parties’ intention and agreement to share ownership of the property in the terms stated.
In cases where there is no evidence of an express written or oral agreement, arrangement or understanding between the parties, a common intention to share the property can be inferred from the parties’ conduct, which includes:
- Contributions to the purchase price and/or mortgage
Direct contributions to the purchase price by the partner, who is not the legal owner, whether initially or by payment of mortgage instalments, will justify the inference necessary to create a constructive trust (Lloyds Bank v Rosset).
- Contributions to outgoings including food and entertainment
The necessary common intention could not be inferred from a partner’s natural concern with the well being of the household (Burns v Burns). The partner’s contributions to outgoings may be explained by the fact that the parties were making their lives together, rather than by the belief that a greater interest in land was being acquired (Morris v Morris). However, the House of Lords has stated that a wide view should be taken of what amounts to a contribution to the acquisition of a property (Stack v Dowden) and the parties’ whole course of conduct in relation to the property must be taken into account (Abbott v Abbott). The court has since decided that it was entitled to infer that the parties intended that a wife should have a beneficial interest as a result of what were to be seen as her indirect contributions to the mortgage (Le Foe v Le Foe).
One partner acted to their detriment in reliance on that common intention
This may be satisfied by the same conduct which gives rise to the inference of common intention. The partner could argue that they have suffered financial detriment having contributed to the family’s outgoings, as whilst they were making these payments they were not investing money elsewhere.
Quantifying the interest
Once a common intention constructive trust is established, the parties are entitled to whatever share of the property they are found to have intended. Otherwise, the parties’ common intention as to shares has to be deduced objectively from their conduct.
If this is not possible then the court will impute an intention to the parties and each will receive a share which the court considers fair having regard to the whole course of dealing between them in relation to the property (Oxley v Hiscock).
This is where the partner’s contributions can be taken into account.
The question of a constructive trust can arise where the parties are joint legal owners of the property, but where they never had a declaration of trust drawn up as to the percentage of their beneficial interests.
2. To establish proprietary estoppel
Proprietary estoppel applies where someone has acted to their detriment upon a belief encouraged by the legal owner of the property that they have (or will have) an interest in that property.
The sole legal owner will need to have given their partner some sort of representation, assurance, or encouragement that if they paid towards outgoings such as utility bills, food or holidays for example they would receive a beneficial interest in the property.
Unlike with a constructive trust, there does not have to be a common intention and so propriety estoppel is more often found in cases where one party had intended to take advantage of the other.
If propriety estoppel is established then it is for the court to decide in the exercise of its discretion what remedy is appropriate.
The court may declare that a party is entitled to a share of the property, order the owner of the property to pay back to the other party the money they have spent or order that the other party can remain in the property for a period of time.
How can we help?
Despite the rise in cohabitation, unmarried couples still only have limited rights upon the breakdown of their relationship to make any claim against assets that are not held jointly between them. If you are a non-legal owner of a property in which you currently cohabit it is important that you know your rights and understand how to protect your interest.
This is a complicated and technical area of law and if you wish to seek advice before purchasing a property with your partner or pursue a claim in equity upon the breakdown of your relationship you should seek advice from our family law solicitors.