What is a cohabitation dispute?
Disputes about property ownership can occur in a variety of circumstances. You may be going through a divorce, may have bought property with family and/or friends, you may be contesting a will, or you may have inherited some property. One common scenario is cohabitation disputes.
Cohabitation disputes can arise when an unmarried couple, who have been living together, separate. In this situation, one of the parties usually moves out and wants to receive their share of the net proceeds of sale or wishes for the other party to buy them out. They will also want to be freed from any obligations they have on the mortgage on the property.
Trustees of Land and Appointment of Trustees Act 1996 (ToLATA)
There is no such thing as a ‘common law’ husband/wife and the law around cohabitation disputes is dealt with under the Trusts of Land and Appointment of Trustees Act 1996 rather than under family law as in matrimonial proceedings. This legislation allows the court to determine the extent of each party’s interest in the land or property and also how that interest can be dealt with. It can also allow them to order the sale of a property.
Is there joint or sole ownership of the property?
The first thing to identify in a cohabitation dispute is how the parties’ own the property; is it owned jointly or in one parties’ sole name?
If the property is held in joint names both parties have an interest in the property and the main thing that needs to be established is the size of their share. It will need to be considered whether it can be evidenced that the parties agreed the extent of their respective interests through an express declaration of trust. An example of an express declaration of trust is where the parties have completed the option box on the transfer form (TR1) as to how they wish to hold their shares in the property. If there is a valid express declaration of trust, then it is likely the Court will hold the parties to this declaration unless there are grounds to rescind the agreement based on fraud or mistake.
If there is no express declaration of trust, the Court will rely on the presumption that the parties’ own the property in equal shares. This can be challenged and there are many factors the court will consider including the parties’ intentions when they purchased the property, the parties’ conduct, discussions which took place between the parties and what financial contributions were made to the property. The court will consider whether there was an agreement in place, either verbally or in writing which should rebut the presumption of equal shares.
Proving a beneficial interest in the property
If the property is in the sole name of one party, the other party in a cohabitation dispute must prove they are entitled to a share in the property before that share is quantified.
The presumption where the legal title is in one person’s sole name is that they also own the whole of the beneficial interest in the property. To rebut the presumption, the person claiming to have an interest in the property must convince the court that it was not the couple’s intention for the sole legal owner to own all the interest in the property. They may be able to do this by evidencing a resulting trust; this arises where the non-legal owning party has made financial contributions towards the purchase of the property (deposit/mortgage).
If there is no resulting trust, or it is not appropriate to rely on one, the courts will look to see if a constructive trust can be established, either expressly or inferred. An express constructive trust arises if there is an express agreement between the parties where the party has acted to their detriment. A constructive trust can be inferred if there is no express agreement. The court looks at the parties conduct to see if one can be established. Such conduct may include contributions to household expenses or substantial improvements to the property. They will also consider the ‘whole course of dealing,’ meaning they will look at the ‘overall picture’ of the case. If a constructive trust can be established the court will need to quantify the interest.
Once the size of the shares has been established the court has the power to declare the party’s beneficial shares in the property as well as order the sale of the property. They also have the ability to apply equitable accounting principles and make financial orders to help compensate both parties.
Disputes over ownership of property can become extremely complicated and this article should not be relied upon as a substitute for full legal advice.
If you find yourself in a cohabitation dispute, do not hesitate to get in touch with us for further information and advice.