The recent cases of Stack v Dowden and Jones v Kernott have introduced a large degree of uncertainty to joint ownership which has far reaching implications for property owners.
These cases make this area a potential litigation minefield. We are able to advise our clients to ensure that they are aware of the potential consequences of not making a declaration of trust at the time of acquisition. Many of our clients may not want details of their interests in the property to be be a matter of public record (by using the Land Registry forms on purchase for example). If our clients wish these details to remain confidential we may advise our clients to make a separate declaration of trust. There are many traps for the unwary and it is best to avoid litigation, costs and personal conflict by getting it right in the first place. That is what Broomhead and Saul prides itself in doing.
The Legal Bit – It is complicated, so we have broken it down to assist digestion!
Where a property is purchased in joint names, the parties will hold the ‘legal estate’ as joint tenants and the ‘beneficial interest’ in the property as either ‘joint tenants’ or ‘tenants in common’. Joint tenants are entitled to the property equally, whereas tenants in common are able to hold the property in either equal or unequal shares. An example of tenants in common is that Mr X and Ms Y hold the property on trust, 60% as to Mr A and 40% for Ms B.
Most disputes in this area occur where things go wrong between unmarried co-habitees, but such disputes can also arise between family members, friends or business partners who purchase property together.
An express declaration of trust may help to avoid disputes in the case of death, relationship breakdown or sale of the property, as it is generally conclusive as to the parties’ respective interests in the property. The declaration can be made using a Land Registry form or a separate trust document.
If the owners expressly declare themselves to be ‘joint tenants’ and the property is subsequently sold, the assets will be divided between the parties in equal shares. If the owners are ‘tenants in common’ and expressly declare the shares in which they hold the property, the proceeds of sale will be divided in those proportions.
Most problems arise if an express declaration of trust is not made. It can be extremely difficult to determine the share in the property that each party is entitled to if their individual interests are not recorded at the time of acquisition. Where a property is purchased in joint names and there is no express declaration of trust, the general presumption is that the parties hold the property as joint tenants. However, there is considerable uncertainty in this area of the law due to the effect of recent cases.
In a case called Stack v Dowden, where no express declaration of trust had been made, the parties will be presumed to be ‘joint tenants’ and entitled to equal shares in the property unless one party can show that the property was intended to be held differently.* A wide range of factors can be taken into account to show this but it will only be in exceptional or unusual cases that a court will be persuaded that the parties intended something other than equal shares.
In a case called Jones v Kernott, they added that if it could be shown that the parties had intended to hold the property in separate shares, but that it was not possible to determine the size of the shares they had intended each to have, then the court would have to decide what was fair based on the whole course of dealing between the parties in relation to the property.
Conclusion – All very messy if an express declaration is not made. Please contact our Property team to assist.[*Note: This presumption of entitlement to equal shares does not apply to commercial property or to property purchased as an investment. In such cases, in the absence of any relevant discussions or agreements between the parties that show they intended otherwise, their beneficial shares will reflect the size of their contributions.]