Trusts over land

Written evidence of an express trust over land is required to comply with s 53(1)

(b) of the LPA 1925. Nevertheless, an implied trust (such as a resulting trust) can be created without any such formality, as is made clear in Section 53(2) of the LPA 1925.

Trusts of the Family Home

If two or more people own land, that land is deemed to be held on trust. For example, a husband and wife who buy a home together are both the legal owners and the beneficial owners. Legal title in the family home must be held by the couple as ‘joint tenants’, who are often referred to as registered co-proprietors, given that most land is registered.

As for the equitable title, this may be held by the couple either as joint tenants or tenants in common.

Joint tenants are both equally entitled to the family home, which means when one dies, the other is automatically entitled to the family home.

Tenants in common, in contrast, have distinct beneficial interests in their family home. The share of that benefit may be equal or unequal depending on the couple’s wishes.

Whatever arrangements are favoured by the couple should be put in writing and signed during the purchase. Otherwise, one party may find they are deemed not to have a relevant interest in their property.

Express trusts of the family home

If the couple create an express trust, their beneficial interests are set out in their declaration of trust. The declaration of trust must be evidenced in signed writing in order to comply with s 53(1)(b) of the LPA 1925 and become enforceable.

Even without such an express trust, the law can quantify the  beneficial interests each partner has in the home, which is obviously important if the partners split up and have to decide how much of the interest each partner can take.

If the couple were married or in a civil partnership and subsequently divorce, or dissolve their civil partnership, the family courts have wide redistributive powers to decide who gets what under the Matrimonial Causes Act (MCA) 1973.

If the couple were not married, engaged or in a civil partnership, the matter will be governed under the ordinary principles of trusts law. Contrary to popular myth, neither party has any rights under so-called ‘common law marriage’.

Resulting trust of the family home

Moreover, in the absence of an express trust, there may in fact be a resulting trust in favour of one or other partner. Such trusts are subject to important qualifications, however:

(a)       Only contributions towards the actual purchase price of the property count. Payment of conveyancing fees, stamp duty or other ancillary bills  does not create a resulting trust.

(b)       Only those contributions made at the actual time of purchase count. This does include cash payments towards the deposit (on exchange of contracts) or the completion price itself.

(c)       A resulting trust only recognises monetary contributions. It will completely ignore any non-financial contribution, such as one partner caring for children while the other contributes financially.

Common Intention Constrictive Trusts of the Family Home

In the absence of an express trust addressing beneficial interests in the family home, it will be presumed that both partners have a joint and equal beneficial interest. Because such a trust was not expressly entered into by the parties, however, any trust found by the Court would be a so-called constructive trust.

If one partner claims they should have a greater share than the other, the onus is on them to prove it. Otherwise, the Court will stick to the general rule that both parties’ shares are joint and equal.

Factors the Court may take into account include:

(a)       any advice taken or discussions had at the time of purchase;

(b)       the reasons for transferring the home into their joint names;

(c)       the nature of the partners’ relationship;

(d)       whether they had children and a responsibility to provide a home for them;

(e)       how the purchase was initially and subsequently financed;

(f)        how the partners arranged their finances; and

(g)       how they discharged outgoings on the home and any other household expenses.

Sole Ownership

If one partner alone is registered as the proprietor of the family home, the other partner may still be able to secure a beneficial interest in the home, without an express trust, provided a common intention constructive trust can be established. This does not involve a presumption of joint beneficial ownership.

Two stages must be followed in such cases:

•          Stage 1 – the common intention constructive trust must be established (where the home is jointly owned, this is presumed); and

•          Stage 2 – the beneficial interests under the trust must be  determined or quantified.

With regards to stage one, the partner making this claim must show:

  1. there was a common intention between the partners that both were to have an interest;    and that
  2. the claiming partner acted to their detriment in reliance on that intention.

Such a common intention between the parties may be express or it may simply be inferred logically based on the conduct of both parties.

If an express common intention can be demonstrated through an agreement or understanding between the couple, the claiming partner must still show they acted to their detriment or significantly altered their position in reliance on the agreement.

In the absence of an express common agreement or understanding about how the family home was to  be owned, the court must consider the couple’s conduct and see if it can infer a common intention.

Relevant evidence might include:

  • a direct contribution to the purchase price; or
  • a significant contribution to mortgage payments after the purchase.

Such evidence can be said to establish both a common intention and the fact that the claiming partner acted upon it.

Quantifying beneficial interest

Whether the existence of a common intention constructive trust is established through an express agreement or simply inferred, it is then necessary to quantify the beneficial interest.

Any explicit agreement as to the couple’s respective beneficial interests must be respected, but it is rare for such an agreement to exist.

Proprietary estoppel

Proprietary estoppel is a means to stop someone going back on a promise in relation to land. For it to be invoked, certain factors must be in place:

Assurance: The legal owner of the property must at some point have created or encouraged an expectation  that the claiming party would be granted an interest in land.

Detriment: The claiming party have acted to their own detriment on the assumption that this interest would be forthcoming. This does not have to involve spending money.

Reliance: The two things must be related: ie, it was the assurance that causes the claiming party to act as they did.

Such assurances do not have to be the only reason the claiming party acted to their detriment, but a claim will fail if it can be shown they acted for other reasons altogether.