Property Co-Ownership Disputes
- AuthorJanet Moreton
When might a dispute arise?
Many of the cases we see in this area are when couples split up and they disagree with the proportion each of them should receive when the property is sold, or the ownership is transferred.
Party A and Party B are in a relationship. They are not married or in a civil partnership. They purchase a property, contributing 50/50 to the deposit and mortgage repayments, but only Party A is shown on the legal title. Party B is not an owner of the legal estate, but is a beneficial owner. The relationship breaks down and Party B wants to assert their beneficial interest in the property. If the parties cannot reach an agreement, Party B can apply to the court for a declaration as to the nature and extent of their beneficial interest, i.e. their share of the money when the property is sold. The court would look at not only their financial contributions when determining the interest, but also any evidence of ‘detrimental reliance’ - that is where Party B has relied on the understanding that they have a beneficial interest in the property to their detriment. Detrimental reliance comes in all shapes and sizes and is not just limited to financial contributions to the running of the home.
Party A and Party B are both named as owners of the legal estate, and they hold it on trust for themselves as beneficial owners. Party B would like to sell the property to realise his beneficial interest, but Party A disagrees. Party A is not able to buy Party B out but refuses to sell. Party B is left with no alternative but to make an application to the court. In these circumstances, the court has to consider a number of factors, including the intentions of the parties when the property was bought, the welfare of any minors living in the property and the interests of any secured creditors.
This sounds like a situation I’m currently in. What should I do?
- Gather together your evidence. Regardless of which type of claim you think you might have, the court will want to see any and all evidence as to how and why you think you have a beneficial interest in the property.
- Be open-minded. Claims can often be resolved before proceedings need to be issued, if the parties are willing to negotiate.
- Call us! We are experts in dealing with property ownership dispute matters; both those arising from the breakdown in relationships and other situations such as bankruptcy, and will be able to give advice on your situation.
We will always recommend alternatives to court proceedings, to settle any dispute.
There are many types of alternative dispute resolution (ADR) procedures; the most popular being mediation and although not compulsory, alternative dispute resolution is actively encouraged by the courts and penalties can be imposed if the parties do not consider, or refuse to consider (ADR).
What is ToLATA and what does it mean?
The process of declaring and deciding the nature and extent of a person’s interest in property and/or for an order for sale of the property is found in the Trustees of Land and Appointment of Trustees Act 1996 (more commonly known as “ToLATA”).
The Act, which came into force on 1 January 1997, defined the concept of a ‘trust of land’ which separates the ‘legal estate’ from the ‘beneficial ownership’ of land.
What’s the difference?
Think of the legal estate as being the physical land or property. If we take a house as an example, there is one house and that cannot be halved or quartered. It can be owned jointly, but the physical property cannot be split into halves to be owned by different people.
In contrast the beneficial ownership is the money that the house turns into when it is sold. That can be shared between two or more people.
The owner of the legal estate holds the house ‘on trust’ for the person or people with the beneficial ownership – that is those who are entitled to a share in the money when the house is sold. The legal and beneficial owners can be the same person, or the beneficial owners may be different to the legal owner.
When would the owners be different?
There are lots of reasons why a beneficial owner might not be the legal owner. The most obvious example is in a relationship, when one party is named as the legal owner, but both parties have contributed to the purchase price.
A mortgagee, such as the bank that has loaned money towards the purchase price, can be considered to have a beneficial interest in a property but is not normally named as a legal owner (unless the house has been repossessed). They are entitled to money due under the mortgage when the property is sold.
Likewise, when a person is made bankrupt, if they own property they will be considered to be holding the legal title on trust for their trustee in bankruptcy, who will use the proceeds of sale towards payment of the debts.
So where does the Act get involved?
S14 ToLATA gives the court the power to make an order as to:
a) the exercise of the owner of the legal estate’s powers (e.g. making an order for sale, make orders in connection with the occupation of the property); and
b) the existence and/or the extent of a person’s beneficial interest in the property.
For further information or to discuss how we might assist you with your ownership issues, please contact us on 0800 118 1500