Claims about the Joint Home
When a couple lives together in an owner-occupied home, this can be registered in the name of only one of them or both of them jointly. In either case, there may be a dispute about the beneficial interests in the property.
In English law there is a general distinction between the “legal” interest (the owner or owners registered at the Land Registry) and the beneficial interest. This is called a trust. An easy example is a trust arising out of a will on death where, say, a grandfather gives his estate to his grandchildren (who are still under 18). The estate will be held on trust for them until they reach 18 by the executors, who may be their parents or may be professional trustees. The trustees have no personal interest in the assets and cannot use them for their own benefit. They may have a right to get paid for their work if they are professional trustees, but nothing more. They also have a duty to look after the assets for the benefit of the beneficiaries.
When two people who cohabit buy a home it can be held by one of them for just that person himself or herself, or for the benefit of both of them. Alternatively, it can be bought in joint names. Even then it does not necessarily mean that the beneficial interests are 50/50. In rare cases one of the owners only lends their name and has no beneficial interest in the property themselves; sometimes one of the joint owners has a larger share, for example if they put down a substantial deposit.
This page explains in very rough terms how the court approaches these cases. There is no statute, no Act of Parliament, which governs how the court should approach this area and all law is set out in case law. It is therefore complex and you should obtain advice on your specific circumstances. The Trusts of Land and Appointment of Trustees Act 1996 governs how to make an application to the court and therefore this area of law is sometimes called “TOLATA claims”.
Please note that the law in Scotland and in most European countries is very different. The law as set out only applies to England and Wales.
Essentially, the law relating to joint ownership is based on three broad principles, namely:
Deed of Trust
If the parties make an express declaration by deed about the beneficial ownership of a property, this is conclusive, unless there has been an obvious error or fraud. If they do not, one of the following scenarios are possible:
If there is a common intention between the parties, before the property is bought, about the beneficial ownership, the court can imply a constructive trust. This means that the court will imply that the parties came to an agreement and the court will effectively pretend there was a written trust deed. It is not necessary for the parties to have had an explicit conversation about this agreement before the property was bought, but the court has to make a finding that they did come to such an understanding or agreement. It may be that the court will only make such a finding by looking at the conduct of the parties later on. Obviously if someone bought a property before they even met their new partner, there can be no constructive trust, although it is arguable that a new situation arises if there is a major change, for example, if someone pays for an extension or pays off the mortgage.
If the property was bought as a joint home in the name of only one of the partners, the court will certainly look more closely into the circumstances of why it was not put into joint names. Sometimes there is a good explanation for this, for example, if one of the parties still owned another house and was on the mortgage for that other property and the couple were told (maybe erroneously) that they could not buy the new home in joint names.
If a couple buys a property in joint names, the starting point is that they also wanted the beneficial interest to be joint and equal.
The court will also look at who contributed what and can adjust beneficial shares accordingly. This is called resulting trust, although in recent case law this has been absorbed into the constructive trust doctrine. Whichever way it is reasoned, contributions are a good indication that there should be an adjustment in the beneficial shares. Contributions can be either direct contributions to the purchase price or being a party to a mortgage. Direct contributions to the purchase price or deposit will nearly always result in a corresponding beneficial interest under this doctrine, especially if the property is in the name of the other person. Similarly, if someone takes on the burden of a mortgage, alone or jointly, this should also result in a corresponding share in the equity. Sometimes, however, someone only lends their name to the mortgage while there is an agreement that they will not be liable to it as between the joint owners. In that case that person has no beneficial interest in the property as a result.
On the other hand a couple often pool their savings and one contributes a few thousand pounds more to the deposit than the other, but it is clear from the circumstances that the understanding was that the joint home, often bought in joint names, should be owned equally. The shares are therefore seldom adjusted in such a case.
To get to the bottom of a situation, it is almost always necessary for a lawyer to talk to the client in a lot of detail about the period before the property was bought and also to analyse any documentary evidence. Courts place a lot more weight on documents than on what witnesses say because they know that parties have had the benefit of legal advice and hindsight and the judge sees the evidence in that light.
Documentary evidence that needs to be considered includes:
- the conveyancing file; this may be difficult to get if the property was bought in the sole name of the other person;
- the file of any mortgage adviser if applicable;
- bank statements and other financial documents for the time before the property was bought and also since then; people do not usually keep bank statements for decades, but sometimes banks can retrieve the data from their computer systems; and
- any written communication between the parties at the time of purchase (or separation), such as emails, chats or other messages which can be retrieved.
Most couples living together do not account for every penny they spent on their joint lives. Some have a joint account into which they pay (sometimes equal, sometimes unequal) amounts each month, in other relationships one person pays for the mortgage and the bills while the other pays for the food shopping and other expenses. Yet others have a life where one person works and contributes financially while the other looks after the home and the children. The courts do not usually make adjustments to the way the sale proceeds of a joint property are shared for these different living arrangements.
However, when a couple separate and one moves out and the other one stays in the property, the situation can be different.
In boom years this has not been an issue because the person who leaves usually wants to get their share of the increased equity sooner rather than later. If people do not deal with the ownership at the time of separation, the issue arises about whether there should be any adjustment for the payments each party made since the separation. Typically the person staying in the property pays for the mortgage while the one who moved out pays rent elsewhere. Sometimes the person staying in the belief the house is solely theirs invests in a new kitchen or bathroom or pays for other major works without consulting the other joint owner.
The strict law in this area provided that if one party chose to move out (but could move back in at any time), they still had to pay half of the outgoings including the mortgage instalments and the buildings insurance (but not council tax, water, gas, electricity and telephone bills etc.) and for repairs. However, if they had been excluded from the property, either because the person staying on had changed the locks, or because the one who moved out had to do so because of domestic violence or an intolerable situation, the situation was different. Although they still had to account for half the outgoings, the person staying on had to pay rent into the account, which in most cases would have evened itself out.
More recently the courts have taken an approach that looks more at the overall picture. So if there was an implicit financial separation without any transfer of the property, the equity could still all go to the person who stayed on and paid the mortgage if the leaver took another asset (say the endowment policy) instead of the equity in the property at the time of separation.
It it is best for a couple who separate and decide not to sell their home because of the state of the housing market, to have a deed of trust regulating these issues for the future, so that there will be clarity and no dispute in the future.. .
25 May 2016 by Andrea Woelke