Disputes between co-owners of property – where to start?

Disputes can arise between co-owners and cohabitees of properties such as unmarried couples, friends, or family.

There are a number of circumstances where disputes can arise between cohabitees/co-owners of a property. For example: between unmarried couples (there is no such thing as a ‘common law spouse’), friends may purchase property together, or parents or grandparents may help contribute towards the deposit (is it a gift or is it a loan?).

Let’s start by giving a brief overview of the basics of property law and how property is held.

Firstly, there is a difference between legal ownership and beneficial ownership. Whilst it is very common for a legal owner and beneficial owner to be the same person, in some circumstances a legal owner may not have a beneficial interest and vice versa. For example, a person under the age of 18 cannot be a legal owner of the property, but they can have a beneficial interest in that property. In those circumstances, the legal owner of the property (also known as the trustees) would hold the property on trust for the benefit of the person under 18.

Types of Co-ownership

There are two types of co-ownership: joint tenancies and tenancies in common. Legal owners can only hold a property as joint tenants; beneficial owners can hold property as either joint tenants or tenants in common.

The main difference between joint tenancies and tenancies in common is that on the death of a joint tenant, the property passes automatically to the remaining joint tenants(s). This is known as survivorship.

On the other hand, on the death of a tenant in common, the property passes in accordance with the deceased’s will or under the intestacy rules.

Joint tenants own the entire property, meaning they do not have different shares; tenants in common may own notional shares (which may be unequal). There is a presumption that tenants in common own the beneficial interest equally, however evidence suggesting otherwise can rebut this presumption e.g. if there is an express Declaration of Trust.

The Trusts of Land and Appointment of Trustees Act 1996 (‘TOLATA’)

When more than two people own property, a trust of land automatically arises. The dispute may be to determine the parties’ beneficial interest in the property; to force the sale of the property if one owner refuses to sell, or to enable a non-legal owner to recover their financial contribution. A court application for these types of disputes would be pursuant to TOLATA. These are known as TOLATA claims.

Trusts

There are two types of trusts which can arise for a person to acquire a beneficial interest in property: resulting trusts and constructive trusts.

A resulting trust arises where a non-legal owner of the property has a made financial contribution towards the purchase of the property. For example, where a parent or grandparent contributes towards the deposit. A dispute may arise where the parent or grandparent says the financial was a loan and not a gift. There is a presumption that the non-legal owner would acquire a beneficial interest in the property in proportion to their contribution to the purchase price.

A constructive trust arises if there is an express common intention (evidence is required) to show that there was an intention to share ownership of the property; or an inferred common intention, meaning that the court will infer a common intention based on the conduct of the parties. In both cases the must be representations (statements) made by the owner of the property to the party claiming an interest, and they must rely on those representations to their detriment.

How to avoid a dispute

These types of disputes are often difficult and hard-fought. Furthermore, they can be time-consuming and costly to resolve.

Here are a few simple steps to help you avoid a dispute from arising in the first place:

1. agree a Declaration of Trust which sets out how the beneficial interest in the Property should be held
2. if someone is helping you with the deposit, discuss whether it is intended to be a gift, or if a loan, discuss the repayment terms. You may wish to consider having a Loan Agreement or Deed of Gift in place
3. if you own property and invite someone to live with you, discuss the terms of their occupation of the property. You may want to think about having a Cohabitation Agreement prepared (https://www.ashtonslegal.co.uk/your-life/family-law-solicitors/cohabitation-disputes/). A Cohabitation Agreement may be appropriate for people purchasing a property together as well.

In some cases, a dispute is inevitable. Our Dispute Resolution Lawyers are experienced in resolving these types of disputes, including TOLATA claims and would be happy to assist you.

We Can Help You

If you want to bring a TOLATA claim or need assistance with a claim which has been brought against you please do get in touch with our Dispute Resolution team on 0330 404 0749.

If you need a Declaration of Trust, Deed of Gift or Cohabitation Agreement prepared, please contact our Family Law team using our online enquiry form.