Trusts of Land
If you have read our previous pages you may be surprised to note we are discussing land when we previously discussed property. That is because the 2 things can become confused due to conflicting definitions. Your property is everything you own, from your toothbrush, car or watch to land. When you discuss land people know you are talking about your home.
The law in relation to land is the same whether you are co-habiting or just claiming an interest in the property. If you live in rented property your rights will depend on whether you are named in the tenancy agreement or rent book. If you are not then you have no legal right to stay in the home. Where you are named in the agreement you are jointly and severally liable under it. This means if your partner does not pay their share you can be forced to pay it.
The main legislation in respect of land which is owned is the Trusts of Land and Appointment of Trustees Act 1996. This replaced the Law Of Property Act 1925. The Trusts of Land and Appointment of Trustees Act 1996 is known as either TLATA or ToLATA for short. Our notes on these issues are a very simplified explanation of what is a complicated area of law. They are not intended as a substitute for proper legal advice.
ToLATA does not create an interest in land. What it does is set out the framework for determining the extent of any interest when disputed and also how that interest can be dealt with. When relationships break down one or other of the parties usually moves out of the house, yet both parties may have an equal entitlement to remain in occupation. Long-term the non-resident party will usually want the property to be sold and to receive their share of the proceeds or for their share to be bought out by the other party. They will also want to be freed from any obligations they have on the mortgage on the property. ToLATA sets the framework for this to be dealt with.
The leading case is currently Jones v Kernott and you can access our summary of this by clicking here.
The first thing to do is establish what legal rights or title each party has to the land. There are 2 sets of rights regarding land, namely the legal title and the beneficial title. The legal title is usually what is registered with the Land Registry. The beneficial title is what people are truly entitled to. Beneficial rights can be acquired irrespective of whether a legal title has ever been registered in a person's name.
The starting point for determining a person's interest in land is any declaration or deed which sets this out. This may be in a form registered with the Land Registry, in a formal deed entered into between parties or in a contract. There are strict requirements to comply with for this to be valid and binding.
Where there is no express, binding declaration then the matter falls to be dealt with under the old law of trusts. Where a party contributes to the purchase price of property, including to mortgage instalments, a resulting trust may arise. Where there is a common intention for a party to have an interest in the property a constructive trust may arise. If one party makes a promise to the other that they will have a share in the property and they act in reliance on this issues of estoppel may arise. All of these can be used to establish legal rights in a property.
Once an interest in property is established then, using ToLATA, the Court takes into account the parties intention, the welfare of any child who lives there and the interests of any secured creditor when deciding if and when the property should be sold to buy out the person's title.
Co-owners can hold the property as tenants in common or as joint tenants. If a joint tenant dies the property automatically passes to the other joint tenant(s). If a tenant in common dies their share in the property passes in accordance with their will or the intestacy rules. A joint tenant can sever the joint tenancy by serving notice. Whether it is sensible to do so is another thing.
If one party dies then any endowment or insurance may go to their estate, not the other person. The mortgage may not be paid off and without a will the other person has no entitlement to the money. Also, there is no inheritance tax exemption for cohabitees. At the same time the survivor may adopt all the financial liabilities of the dead person.
Ideally every couple buying a house together would enter into a trust deed setting out how the interests in the house are to be divided if they split up and make wills. They would then keep their wills up to date to make sure they continue to express their current wishes.
In the real world the parties either fail to address their minds to this, seek to save money by not doing this and later find out how much this error cost or their solicitor fails to advise them properly about the situation. This means they may have signed some of their rights away and have little recourse to anything other than claiming against the solicitor. Lawyers make more money out of arguments over things that go wrong than they ever make over getting things right in the first place.
One of the main difficulties in this area of law is that conveyancers often fail to advise the parties, when buying the property, of the legal position. As long ago as 2002 in the case of Goodman v Carlton the Court of Appeal stated: "I despair how often this Court has to remind conveyancers that they would save their clients a great deal of later difficulty if only they would sit the purchasers down, explain the difference between a joint tenancy and a tenancy in common, ascertain what they want and then expressly declare in the conveyance or transfer how the beneficial interest is to be held because that will be conclusive and save all argument. When are conveyancers going to do this as invariable standard practice? This court has urged that time after time. Perhaps conveyancers do not read Law Reports. I will try one more time. ALWAYS TRY TO AGREE ON AND THEN RECORD HOW THE BENEFICIAL INTERES IS TO BE HELD. It is not very difficult".
We can help with arranging your affairs if you are moving in together or coming out of a relationship. We know it lacks romance, but can prevent a whole load of headaches further down the line. However, should you be in a position where you were inadequately advised initially and have signed your rights away as a result we can also advise regarding any possible claim against the conveyancing solicitors.
If you need our help, either e-mail us anytime, or call 01935 823883.