What is TOLATA and how can it help me?

/ dispute resolution

Right, first let’s get legal terminology out of the way: TOLATA  or TLATA is an abbreviation of the Trusts of Land and Appointment of Trustees Act 1996. But what is TOLATA, and how can it help me?

The Land Registration Act 1925 (LRA 1925) introduced a scheme of land registration whereby when land was sold, the new owners would need to register it. This was with the aim of there eventually being a single register of all land, which one could consult and which would give clarity as to who the legal owners are. We are almost 100 years on, and there has been a further Land Registration Act 2002 – which further extended compulsory registration.

But if these Acts of Parliament meant that the legal owners are all names on the Register, doesn’t that put an end to property ownership dispute? The short answer to that is ‘no’, because the majority of disputes tend to focus on beneficial ownership, not the legal ownership. The difference is that whilst a legal owner has some rights and responsibilities, the beneficial ownership concerns other matters, including who has the right to the equity in the property? Equity is what is left once a mortgage, any other charges, and costs of sale are deducted.

In this day and age, relationships and family structures are more varied than they were 50 years ago, and so too are the arrangements underlying the ownership of property. One example (and there are more) being that far more couples co-habit and own property without being married. Another example is that people may decide to buy a property, but for whatever reason they decide one will be the legal owner, but they both contribute to the purchase price, or contribute in another way.

How does TOLATA come in to this?

The importance of TOLATA is that, in a situation of co-ownership, or beneficial ownership not recognised on the register for the property in question, provides a mechanism for the Court intervening and determining disputes, and making declarations. This doesn’t mean these avenues did not exist before 1996 when the Act came into force, but it made it a little easier, and County Courts are now familiar with the provisions of TOLATA.

In addition to disputes over who owns the equity, other issues frequently arise such as: who is entitled to sell the property; who is entitled to receive rent and profits from letting out. TOLATA enables parties to go to Court for a declaration as to ownership, to order an account be taken of profits, and to order a sale of the property, and the removal or addition of trustees.

Before looking at the provisions of TOLATA, it is worth explaining that the Act is to deal with ‘trusts of land’. That is relevant to co-ownership cases, because two or more legal owners of a property will likely be holding that property on trust. This means the legal owner or owners are responsible for looking after the property for certain beneficiaries. In this way, they are ‘trustees’, and the beneficiaries will depend on the situation. Some examples are as follows:

  • Example A: Two owners own a property as tenants in common in equal shares. They are both legal owners and hold the property on trust for each other in equal shares.

  • Example B: Two owners own a property as joint tenants. They are both legal owners and hold the whole of the property on trust for each other.

  • Example C: One person is the only legal owner (C), but holds the property on trust for themselves and another person (D) who contributed to the purchase or in some other way.

TOLATA might be important in different ways, which can be explained by worked examples from the above.

Order for sale

Let’s assume the owners in Example A have a disagreement. Whilst they initially bought the property to be their home, the relationship has since broken down, and one party (C) has moved out and wishes to sell to release their equity. The other (D) wants to stay living in the property.

How can TOLATA help?

Under section 14 TOLATA C can apply to Court for an order that the property is sold. The Court will have regard to the purpose for which trust came into existence (and other matters such as welfare of any minors), but in this example the Court is likely to order a sale if parties cannot reach agreement.

Account of profits

Let’s assume the owners in Example A have a different disagreement. This time, D is renting out the property after C has left. D is paying the interest-only mortgage and utility bills of the property, but still making a profit from the rental.

How can TOLATA help?

C can claim under s14 TOLATA for an order that the property is sold, but can also ask the Court to order an account of profits. This is on the basis that D has used the property (jointly owned by C and D) to make a profit. D may be able to off-set the income from rental against the cost of the mortgage and utilities, but may need to account to C for profit beyond that.

Declaration

If we take Example C, assuming the parties C and D have fallen out, and D denies that there is any trust or that C has an interest in the property.

How can TOLATA help?

C can apply to Court under s14 TOLATA for a declaration that C is also a beneficial owner of the property, and can declare the percentage. These cases tend to be complex and the Court may award a different percentage of beneficial ownership than the one sought by C, or none at all.

Summary

The above are just a few examples of how useful TOLATA can be. The law relating to beneficial ownership, and procedure to have interests recognised by the Courts, can be complex. Specialist advice should be taken at an early stage. See more here for an article covering how beneficial interests in property might arise.

This article was written by Toby Walker, Head of Dispute Resolution Partner at Allan Janes LLP. Toby and his team deal with cases where parties are seeking to uphold agreements for an interest in property or business.  You can contact Toby directly on 01494 893512 or at toby.walker@allanjanes.com