One might be forgiven for thinking that the owner of property is the person named on the deeds or named as proprietor at the Land Registry. There are however a number of ways in which it is possible to establish a beneficial ownership of property. Beneficial ownership is a right to the equity in the property, sale proceeds and rights for an account relating to property expenses, and even forcing a sale of the property to release that share. There are an increasing number of properties that are owned by more than one person, be it living together as couples (but not married), parents helping their adult children get on the property ladder, those wishing to invest formally or informally in the property, and business partners owning assets together. There are frequently circumstances whereby people are assured of an interest in property, but without a paper trail to support it. This all gives rise to the kind of claims dealt with in this article. As will become clear, the question of "who owns what?” is not always a simple one, and often the paperwork does not tell the whole story.
There are three equitable principles (going beyond strict legal rights) by which one can establish a beneficial interest in property:
Constructive trusts; and
The considerations are slightly different when there are business assets involved, and this note focuses on cohabitees and those with a non-business interest. There are also different implications where couples have purchased property and who were at the time engaged, but that is not covered within this article.
Importantly, where there is an express declaration of trust, for example where two co-owners have stated on a transfer of property form they are to " hold the property on trust for themselves as tenants in common in equal shares", that express declaration will defeat any claim for a constructive trust. It may, however, still be subject to a claim for proprietary estoppel – see below – or to cases of fraud, mistake or undue influence.
The starting point for any case is that equity follows the law, meaning that on the face of it the beneficial interests will reflect the legal interests, namely who is named on the Land Registry title for the property. Where the title to the property is in joint names, the co-owners hold the beneficial ownership in equal shares, unless the contrary is proven. If there is one legal owner, the starting point is that he or she owns all of the beneficial interest in the property. There may also be a case where co-owners of a property have severed their joint tenancy, which will mean that they each hold distinct shares, and it is open for either party to argue for the relative proportions.
Constructive Trusts – What Were the Common Intentions?
The most important factor to ascertain is what the parties’ common intentions were in relation to the property, often from contemplation of purchasing right through to the present day. This includes those things said, or ideally written down, but also intentions can be inferred from their conduct, for example payment of a lump sum or discharging a liability of the property.
Establishing common intention as to how the property is to be held and in what proportions will be a matter of evidence, including what those parties say their recollection is, but also documentary evidence such as bank statements, emails, invoices and many other factors. Where it is clear that beneficial interests were to be shared between the co-owners, but it is not possible to establish by the evidence proportions, the Courts will impute what it considers the intentions were (Jones v Kernott). This means that the Court will establish what percentage should reflect beneficial ownership by considering what is fair having regard to the whole course of dealing between them.
It is possible that the parties’ intentions may change over time, such as whether one party invests heavily in improvement of the property, or where one party abandons the property for a time without contributing to the expenses.
In summary, if claiming a constructive trust, a party needs to establish a) that there was an agreement they would have a beneficial interest in the property, even if uncertain as to amount, and b) ask the Court to determine what that beneficial share should be.
In preparing for a constructive trust claim (whether bringing one or defending it) it is important to gather evidence covering: discussion at the time of the purchase or transfer (and any advice obtained), the reason why the property was acquired in sole or joint names, the purpose of the purchase, the nature of the relationship, whether there are any children, how exactly the purchase was financed, and how household expenses were discharged.
The Court will consider financial contributions, both initial capital and ongoing, particularly mortgage liabilities, and can also consider child maintenance contributions (or lack thereof) and other domestic contributions including child care and upbringing (Graham-York v York and others (2015) EW CA Civ 72).
Resulting trusts arise when A makes a direct financial contribution (deposit, outright purchase, mortgage repayments) to the purchase of the property conveyed into the name of B. A will on the face of it be entitled to a beneficial interest proportionate to the amount contributed.
There is a presumption that A did not intend to make a gift to B, and as such the money or property is then held on trust for A. This is however only a presumption, which can be rebutted by evidence of A's intention to make an outright gift.
In the case where an entire property is transferred from A to B, it would be unusual for the solicitors involved not to record whether this was intended as a gift or whether B is to hold on trust for A.
In other, more frequently encountered, cases, where direct financial contributions are made it would be important to gather evidence of the paper trail of those contributions.
It may be that resulting trust claims are more cut and dried than constructive trust or proprietary estoppel claims and will usually focus on transactions which are a matter of record.
Where one has a constructive or resulting trust claim, it is possible to claim at Court under the provisions of Trusts of Land and Appointment of Trustees Act 1996 (TLATA) for a number of remedies, including i) a declaration as to beneficial interest, ii) an account of sums paid in relation to expenses paid to for property, and, depending on the circumstances, iii) an order for the property to be sold to enable the beneficial share to be released.
This is the doctrine which arises from Court's ability to provide a remedy where strict legal rights would give an "unconscionable" outcome. There are key ingredients to be established, as follows:-
An assurance - the owner represents clearly to another person that they will have a right or benefit in the property;
detrimental reliance - that person relies on the assurance and does so to their detriment. The detriment does not need to be financial but must be something substantial and the Court will consider all the facts of the case as to whether going back on the assurance is unconscionable in all the circumstances (Gillett v Holt  EWCA Civ 66). The detriment can be financial but may also take other forms including a change of position, for example: giving up a job, moving from owned or rented property, changing children’s schools, or providing care to an elderly person who made an assurance they will be looked after from their Estate. It is important that the detriment suffered was in reliance upon the assurance e.g. working for the less than market wages because of the promise of inheriting a farm;
unconscionability - it is not enough to have an assurance and detrimental reliance; the purpose of the doctrine is to avoid an unconscionable result. This will depend on the facts of each particular case and the Court will view it in the round.
If a claim for proprietary estoppel is established, the Court has a very wide discretion as to how it deals with the unconscionability. This can range from ordering that the promise is made good, but in other cases the Court may award damages such that equity is restored. The doctrine of proprietary estoppel may be used in the alternative, or as a backup, to claims for a constructive trust.
Alternative Dispute Resolution
It should be noted that, as with any litigation, the costs and risks of resolving a claim at a trial are significant. Whilst the successful party may be awarded and recover some of their costs, there is usually a shortfall in costs, and at least some risk of losing. Once the groundwork has been done and the key evidence obtained and exchanged as part of the pre-action correspondence, these cases are ripe for being resolved at a mediation with the help of an independent third party facilitating a settlement discussion.
This article was written by Toby Walker, Dispute Resolution Partner at Allan Janes. Toby and his team have specialist expertise in the area of property disputes including constructive trusts and proprietary estoppel claims. Please do not hesitate to contact us for a free no obligation telephone discussion.