“Unmarried couples have very few rights on separation compared to married couples. But TOLATA claims can help. TOLATA gives the court the power to resolve property disputes between them by determining the legal and beneficial owners of the property and in what proportions. TOLATA also enables the court to order the sale of a jointly owned property.”Mike Hansom, Head of Property DisputesContact the Team on 01225 462871 or by email. |
TOLATA claims
Contrary to popular belief, there’s no such thing as a ‘common law’ spouse, and few legal remedies are available to cohabitees on separation, even after living together for many years.
In part, cohabitees can address these limitations by agreeing and signing a cohabitation agreement. And if they intend to co-own property, a declaration of trust is strongly advisable. However, many couples have neither in place, and that’s where TOLATA can help.
What is TOLATA?
The Trusts of Land and Appointment of Trustees Act 1996 (known as TOLATA) gives the court certain powers to resolve property ownership disputes, including:
- forcing a sale of a property.
- determining the party’s respective shares in a property.
- allowing a party to reoccupy the former family home if the other party refuses to leave.
- allowing a party’s parent or grandparent to recover their financial interest in a property.
Moreover, TOLATA claims are particularly useful if the property is in one party’s sole name. Typically, that arises when one partner purchases a property before the period of cohabitation. However, the non-owning partner can ask the court to determine whether they have acquired a beneficial interest (also known as an equitable interest) in the property. And if the court agrees, the judge will determine the parties’ respective shares.
How can a beneficial interest arise?
A beneficial interest can arise in three ways:
- constructive trust.
- proprietary estoppel.
- resulting trust.
Unfortunately, trusts law is highly complex, and whether you are an owning or non-owning partner, you should contact us for advice at a very early stage.
Constructive trust example
So, by way of illustration, let’s consider how a beneficial interest can arise for a non-owning partner through a constructive trust. Two elements must be present:
- a common intention to share ownership; and
- the non-owner’s detrimental reliance on that intention in contributing.
For example, let’s say the non-owning partner has made significant contributions towards the mortgage. And further, the non-owner can show that it was the intention of them both that in making those contributions, the non-owner would acquire a share. Therefore, both elements are present.
However, the non-owner’s contribution does not have to be regular payments or even money at all. Indeed, paying for or contributing to major home improvements may be sufficient. Or even the time and physical effort expended in undertaking those works themself. The detriment may even be that the non-owner has given up their own home to cohabit.
Proving common intention
In most cases, the non-owner relies on their partner’s express words and conversations over a period of time, possibly years. And ultimately, it may come down to one person’s word against the other. But after considering the evidence, if the court accepts it was more likely than not that:
- the non-owning partner was promised a share, and
- relying on that they made a financial or other contribution,
the court can find that a beneficial interest has arisen.
Can common intention be implied?
Sometimes, a non-owner alleges that common intention should be implied, although the subject was never discussed. So, in other words, their partner knew the non-owner’s contribution was always on the understanding they had a share. However, if the court accepts that nothing was said about ownership, they will generally not imply a common intention unless the non-owner contributed towards the original purchase cost.
Stack v Dowden
The landmark case of Stack v Dowden [2007] concerned the issue of how to determine beneficial ownership where a couple holds legal title to a property jointly. In summary, the House of Lords held that the starting point is that they hold the beneficial interest in equal shares. However, that presumption is rebuttable if there is evidence of a different intention at the time of purchase.
Ms Dowden and Mr Stack purchased a property together as joint tenants. There was no evidence of an agreement regarding the extent of their respective interests. When they separated, Mr Stack moved out, while Ms Dowden continued living in the property with their children.
The issue before the court was whether there should be an equal division of the beneficial interest, as might be expected with a joint tenancy. Ms Dowden argued that her greater financial contributions towards purchase and maintenance entitled her to a greater share.
The court held that the parties’ common intention at the time of purchase was crucial in determining the beneficial ownership of jointly owned property. That intention should be determined objectively based on the parties’ words, conduct, and other relevant circumstances.
Although Ms Dowden had contributed more towards purchasing the property, Mr Stack had undertaken significant renovation work. In addition, the court found that they had always conducted their financial affairs separately and never intended to share the property equally.
Considering all these factors, the court held that Ms Dowden was entitled to a 65% share, reflecting her greater financial contribution. Mr Stack’s contribution through the renovation work entitled him to a 35% share.
Kernott v Jones
In the subsequent case of Kernott v Jones [2011], the Supreme Court (the successor to the House of Lords) held that if the court finds that the parties’ intentions have changed since buying the property, they can imply a further alteration to their respective shares.
Bank of Mum and Dad
Exacerbated by the cost-of-living crisis, the so-called ‘Bank of Mum and Dad’ (BOMAD) is now one of the UK’s largest mortgage lenders. In fact, according to research published by the Institute of Fiscal Studies, parents and/or grandparents gift or loan informally an incredible £17 billion each year to their adult children or grandchildren.
However, contributing parents and grandparents are often concerned about what happens if their child or grandchild separates from the partner they buy the property with. And even if they are currently single, a partner can always move in later. So, how can their contribution be protected?
The best methods of protecting gifted deposit monies are with a declaration of trust or a loan agreement.
See: Protecting gifted deposit monies
Failing that, a TOLATA claim offers the only possible legal route for a contributing parent or grandparent to recover their money.