Implied trusts and trusts of the family home - Joint ownersh...

Learning Outcomes

This article examines how equitable interests in family homes are determined, particularly when legal title does not fully reflect the parties' contributions or intentions. It focuses on implied trusts (resulting and constructive) and proprietary estoppel. For the SQE1 assessment, you will need to understand the legal principles governing the acquisition of beneficial interests in jointly owned and solely owned family homes, how these interests are quantified, and the role of express declarations versus implied intentions. This knowledge will enable you to analyse scenarios and identify the likely distribution of property rights upon relationship breakdown or sale, as required for SQE1-style multiple-choice questions.

In addition, it explains the interaction of these equitable mechanisms with the statutory framework governing trusts of land (including TLATA 1996), overreaching on sale, and the protection and priority of equitable interests in registered land (including overriding interests based on actual occupation). It also clarifies how formalities apply to declarations and dispositions of beneficial interests, and how the courts balance contributions, domestic arrangements, and fairness when quantifying shares.

SQE1 Syllabus

For SQE1, you are required to understand the creation and operation of implied trusts, particularly in the context of family homes, and how equitable ownership is established and quantified; you will need to apply these principles to practical scenarios involving joint and sole legal ownership, and understand how equity intervenes to determine beneficial interests in property for advising clients in property and family law contexts, with a focus on the following syllabus points:

• the distinction between legal and equitable ownership
• how beneficial interests under express trusts are determined
• the presumptions arising in resulting trusts and how they apply to family homes
• the requirements for establishing a common intention constructive trust in both joint and sole name cases
• how the courts quantify beneficial interests under constructive trusts
• the elements of proprietary estoppel and its potential remedies in family home disputes.
• the effect of TLATA 1996 on trusts of land (including s14 applications and s15 factors)
• overreaching on sale and the protection of equitable interests in registered land (LRA 2002, Schedule 3; actual occupation)
• the role of express declarations of trust in TR1 and the evidential/formality requirements (including s53 LPA 1925; s2 LP(MP)A 1989)
• the limited modern role of the presumption of advancement and its current status.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Where a property is purchased in the joint names of a cohabiting couple with no express declaration of trust, what is the starting presumption regarding their beneficial interests?
   1. Beneficial interests are held as tenants in common in proportion to their contributions.
   2. Beneficial interests follow the legal title and are held as joint tenants equally.
   3. The person who contributed more financially holds a larger beneficial share.
   4. A resulting trust arises based on initial purchase contributions.
2. Which type of trust traditionally arises based on direct contributions to the purchase price of a property where the contributor is not named on the legal title?
   1. Express trust
   2. Constructive trust
   3. Resulting trust
   4. Statutory trust
3. Which of the following is NOT a requirement for establishing a common intention constructive trust where the legal title is in one name?
   1. An express or inferred common intention that the claimant should have a beneficial interest.
   2. The claimant acted to their detriment in reliance on the common intention.
   3. The claimant made a direct financial contribution at the time of purchase.
   4. It would be unconscionable for the legal owner to deny the claimant's interest.

4. True or False: Proprietary estoppel requires a formal written agreement or promise regarding an interest in land.

Introduction

When dealing with the ownership of a family home, particularly upon the breakdown of a relationship between unmarried cohabitants, disputes often arise regarding each party's beneficial share. While legal title recorded at the Land Registry shows the formal owner(s), equity may recognise that the beneficial or equitable ownership differs. This article focuses on how these beneficial interests are determined in the absence of a clear express declaration of trust, primarily through the mechanisms of implied trusts (resulting and constructive trusts) and the doctrine of proprietary estoppel. Understanding these equitable principles is essential for advising clients on their property rights in family home contexts.

Where land is owned by more than one person, a trust of land arises automatically. In modern domestic conveyancing, many couples record their beneficial shares in the declaration of trust panel of the TR1 transfer; that express declaration is generally conclusive. If there is no express declaration, equity may impute or infer a different beneficial ownership that better reflects the parties’ intentions and conduct. The statutory framework (Trusts of Land and Appointment of Trustees Act 1996) governs management and resolution of disputes, including applications for sale or occupation orders, while the registration system (Land Registration Act 2002) determines how equitable interests are protected and when they bind third parties.

Key Term: Trust of Land
A statutory trust arising where land is held by one or more trustees for beneficiaries. Co-owned land is held on a trust of land (TLATA 1996), separating legal title (held by trustees) from equitable title (held by beneficiaries).

Establishing Beneficial Interests in Jointly Owned Homes

Where a family home is purchased and registered in the joint names of the parties (typically a cohabiting couple), certain presumptions apply regarding ownership.

The Starting Point: Equity Follows the Law

If a property is conveyed into joint names, there is a strong presumption that the beneficial ownership reflects the legal ownership. This means that equity presumes the parties hold the property as beneficial joint tenants, owning equal shares. This starting point was affirmed by the House of Lords (now Supreme Court) in Stack v Dowden [2007] UKHL 17.

Key Term: Joint Tenancy
A form of co-ownership where the co-owners own the whole property together, without distinct shares. It includes the right of survivorship, meaning if one joint tenant dies, their interest automatically passes to the surviving joint tenant(s).

Key Term: Tenancy in Common
A form of co-ownership where each co-owner holds a distinct, definable share in the property. There is no right of survivorship; a tenant in common's share passes under their will or intestacy upon death.

An express declaration of trust in the transfer document (e.g., the TR1 form) stating how the beneficial interest is held (either as joint tenants or tenants in common in specified shares) is generally conclusive, absent fraud or mistake. However, many couples purchase property without making such an express declaration.

In registered land, where beneficial interests are held as tenants in common, a Form A restriction typically appears on the register to alert buyers that capital monies must be paid to at least two trustees to overreach the beneficial interests.

Key Term: Form A Restriction
The standard restriction entered on the register to indicate that the equitable interest is held as tenants in common. It prevents registration of dispositions for value unless capital money is paid to two trustees or a trust corporation, achieving overreaching.

Rebutting the Presumption of Equality

The presumption of equal beneficial joint tenancy in joint name cases can be rebutted, but only by demonstrating that the parties had a different common intention at the time of acquisition or that their intentions changed later. The burden of proof lies on the party seeking to displace the presumption.

The court will look at the "whole course of dealing" between the parties to ascertain their shared intentions regarding ownership. Factors considered, as highlighted in Stack v Dowden and Jones v Kernott [2011] UKSC 53, include:

• Discussions at the time of purchase.
• The reasons the property was acquired in joint names.
• The nature of the parties' relationship.
• Whether they have children for whom they provide a home.
• How the purchase was financed (initial contributions and subsequent mortgage payments).
• How the parties arranged their finances generally (e.g., separate or joint bank accounts).
• How household expenses and outgoings were paid.

It is considered unusual for the presumption of equality to be displaced in a domestic context. Unequal financial contributions alone are often insufficient. Evidence that the parties kept their financial affairs rigorously separate might support a finding of unequal shares. Where intentions change over time (for example, following separation and unilateral payment of mortgage and expenses by one party), the court may infer or even impute a changed intention and adjust shares accordingly (as in Jones v Kernott).

Severance of a joint tenancy in equity (for example, by written notice or mutual conduct) converts the equitable joint tenancy into a tenancy in common in shares, but it does not of itself determine the size of those shares. The court will still consider the parties’ intentions and dealings to quantify them.

Key Term: Overreaching
The mechanism by which a buyer of land takes free of equitable interests where capital money is paid to at least two trustees (or a trust corporation). The beneficiaries’ interests transfer from the land to the purchase money (LPA 1925, s27).

Worked Example 1.1

Amelia and Ben, an unmarried couple, purchase a house in their joint names. Amelia contributes £40,000 to the deposit, and Ben contributes £10,000. The remainder is funded by a joint mortgage. They do not complete the declaration of trust panel in the TR1 form. They pool their incomes and share household expenses roughly equally for 10 years before separating. Amelia argues she should have a larger share due to her greater deposit contribution.

What is the likely starting point for determining their shares, and is Amelia likely to succeed in rebutting the presumption?

Answer:
The starting point is the presumption that, as joint legal owners, they hold the beneficial interest as joint tenants in equal shares (Stack v Dowden). Amelia has the burden of rebutting this. While her initial contribution was larger, the fact they pooled incomes and shared expenses suggests a common intention to share equally in a domestic context. It is unlikely her contribution alone would be sufficient to rebut the presumption, especially given their subsequent conduct. The court would likely find they hold the beneficial interest equally.

Worked Example 1.2

Dev and Priya purchased their home in joint names without an express declaration. They initially shared costs. After separating, Dev moved out; Priya remained in the property and for the next 12 years paid the entire mortgage, all household costs, and funded a substantial extension. Dev made no contributions in that period. Dev now claims half.

Answer:
The joint names starting point is equality. However, the court can find that the parties’ intentions changed over time. Priya’s long-term sole payments and funding of improvements may support an inference or imputation that the beneficial shares altered (Jones v Kernott). A fair quantification might award Priya a larger share reflecting the whole course of dealing since separation, rather than a strict 50/50 split.

Establishing Beneficial Interests Where Legal Title is in One Name

Where the family home is registered in the sole name of one partner, the starting point is that the legal owner is also the sole beneficial owner. The non-legal owner (the claimant) bears the burden of establishing a beneficial interest, typically through a resulting trust, a constructive trust, or proprietary estoppel.

Key Term: Common Intention
A shared understanding between parties that the property is to be owned beneficially in a certain way. It may be express (by agreement) or inferred from conduct.

Key Term: Detrimental Reliance
Action by the claimant that is disadvantageous or a significant change of position, taken in reliance on the common intention (e.g., funding deposit or mortgage, paying for substantial improvements).

Resulting Trusts: A Limited Role

Historically, if a person contributed directly to the purchase price of a property but was not named on the legal title, a resulting trust was presumed in their favour, proportionate to their contribution.

Key Term: Resulting Trust
An implied trust arising where property is transferred to someone who pays nothing for it and is implied to hold the property for the benefit of another person, or where an express trust fails. In the family home context, it traditionally arose from direct contributions to the purchase price.

The significance of resulting trusts in the family home context has diminished following Stack v Dowden. The courts now prefer the common intention constructive trust approach, which allows consideration of a broader range of factors beyond initial financial contributions. Resulting trusts are now generally considered more appropriate for properties purchased in a commercial context or as investments, rather than as a family home (Laskar v Laskar [2008] EWCA Civ 347). However, a direct contribution to the purchase price remains relevant evidence when inferring a common intention for a constructive trust.

In voluntary transfers within families, a counter-presumption known as the presumption of advancement may arise. Traditionally it applied to transfers from father to child (and in certain in loco parentis relationships). Its statutory abolition in s199 Equality Act 2010 has not been brought into force, so the presumption can still operate, although the court will examine all the circumstances and it is readily rebutted by evidence of a different intention.

Key Term: Presumption of Advancement
A rebuttable presumption that a transfer (or purchase in another’s name) by certain close relations (traditionally father–child) was intended as a gift, displacing the presumption of a resulting trust. Its abolition has not been commenced, so it may still apply.

A further point concerns voluntary transfers of land: s60(3) LPA 1925 prevents a presumption of a resulting trust merely from the fact of a voluntary conveyance. The presumption can still arise based on evidence of contribution or intention, but a bare voluntary transfer of land alone will not automatically trigger it.

Common Intention Constructive Trusts

This type of trust arises where equity seeks to give effect to the parties' shared intentions regarding ownership, even if not formally expressed, where it would be unconscionable for the legal owner to deny the claimant's interest.

Key Term: Constructive Trust
A trust imposed by equity regardless of the parties' intentions, often to prevent unconscionable conduct or give effect to a common intention regarding property ownership.

Following Lloyds Bank plc v Rosset [1991] 1 AC 107, establishing a common intention constructive trust traditionally required:

1. A common intention (either express or inferred) that the claimant would have a beneficial interest.
2. Detrimental reliance by the claimant on that intention.

While the principles from Stack and Jones primarily addressed joint name cases, they have influenced the approach in sole name cases, suggesting a more comprehensive view may be taken. But direct financial contributions to the price or mortgage remain powerful evidence—general domestic contributions alone are unlikely to suffice.

Express Common Intention

This requires evidence of an actual agreement, arrangement, or understanding reached between the parties that the property was to be shared beneficially. This is usually based on express discussions.

An example could be the legal owner telling the claimant, "This house is as much yours as mine". Sometimes, an excuse given by the legal owner for not putting the property into joint names (e.g., "it would prejudice your divorce proceedings" or "it would complicate my mortgage application") has been accepted as evidence of an express common intention (Grant v Edwards; Eves v Eves [1975]). However, not all “excuses” suffice: courts distinguish placatory statements from genuine acknowledgments that joint ownership was intended (Curran v Collins [2015]).

Compliance with the formalities for declarations of trust of land (s53(1)(b) LPA 1925) is not fatal to equitable claims: implied trusts (including constructive trusts) are exempt (s53(2)), so oral discussions can underpin a constructive trust where the claimant then acts to their detriment.

Inferred Common Intention

Where there is no evidence of express discussions, the court may infer a common intention from the parties' conduct. Traditionally (Rosset), only direct contributions to the purchase price (initial payment or mortgage contributions) were considered sufficient.

However, post-Stack, the range of conduct considered may be broader, although direct financial contributions remain significant evidence. Substantial improvements to the property by the non-owner might also support an inference, particularly where they are far beyond ordinary decoration and materially increase value. Mere payment of household expenses generally does not, unless it enables the legal owner to pay the mortgage (Le Foe v Le Foe [2001]/[2002]).

Domestic contributions such as childcare and homemaking are highly valued in family law but are not, by themselves, sufficient to found an inferred common intention in trusts law without more. They may nevertheless play a role in quantification once a beneficial interest is established.

Detrimental Reliance

The claimant must show they acted to their detriment or significantly altered their position based on the common intention. Financial contributions (deposit, mortgage instalments) or significant improvements usually satisfy this. Non-financial contributions (e.g., giving up work to facilitate mortgage payments by the other) may sometimes suffice when they have a clear causal link to acquiring or maintaining the home.

Quantifying the Share

Once a common intention constructive trust is established in a sole name case, the court must quantify the claimant's share.

• If there was an agreement about the specific shares, the court will usually enforce that.
• If there was no agreement on shares, the court will determine what is fair having regard to the whole course of dealing between the parties in relation to the property (Stack v Dowden; Oxley v Hiscock [2004] EWCA Civ 546; Jones v Kernott). This allows the court to consider a wide range of contributions, both financial and non-financial, over the entire relationship.

Quantification is not a purely arithmetic exercise. It is comprehensive, assessing mortgage payments, capital contributions, improvements, the parties’ arrangements of finances, childcare responsibilities, and any periods of occupation or separation. In appropriate cases, the court may infer a changed intention over time and adjust shares accordingly.

Disputes about sale or occupation and the timing of realisation of shares are resolved under TLATA 1996, usually via s14 applications, with s15 factors guiding the court (including the intentions of the creators of the trust, the purposes for which the property is held, the welfare of any minor occupying the property, and the interests of secured creditors).

Key Term: TLATA s14/s15
TLATA 1996 s14 allows a trustee or beneficiary to apply to court for an order relating to the exercise of trustees’ functions (e.g., sale or occupation). Section 15 lists factors the court considers, including trust purposes, intentions, children’s welfare, and secured creditors’ interests.

Worked Example 1.3

Chloe purchases a house in her sole name using her savings and a mortgage. Her partner, David, moves in. There are no express discussions about ownership. David pays for a significant extension to the house, doubling its value. He also contributes to household bills occasionally. They separate after 15 years.

Can David establish a beneficial interest, and if so, how might his share be quantified?

Answer:
David needs to establish a common intention constructive trust. There is no express common intention. His substantial contribution to the extension is significant conduct from which a common intention to share might be inferred (post-Stack). This contribution also constitutes detrimental reliance. If a trust is established, the court will quantify his share based on the whole course of dealing. His contribution to the extension, which significantly increased the property's value, will be a key factor. The court would likely award him a share reflecting this contribution and potentially other aspects of their financial dealings, aiming for a fair outcome rather than just the proportion of his financial input.

Worked Example 1.4

Kara bought the home in her sole name. Before exchange, she and Leo agreed orally that “we will both own it; I’ll put it in my name for the mortgage.” Leo paid half the deposit and then made irregular mortgage payments for four years. He later stopped paying but built a high-quality loft conversion increasing value by 15%. They now dispute shares.

Answer:
There is evidence of an express common intention to share, reinforced by Leo’s deposit and mortgage contributions. Leo also acted to his detriment by funding the deposit and undertaking valuable improvements. A constructive trust arises. On quantification, the court will consider the agreed intention, Leo’s initial payments, the later cessation, and the value added by the conversion. A fair share for Leo will likely exceed a nominal contribution-only share and reflect both capital and the overall course of dealing.

Key Term: Actual Occupation
Physical presence on the property sufficient to count as occupation in fact. An interest of a person in actual occupation may override a later registered disposition (LRA 2002, Schedule 3, para 2), subject to caveats about disclosure on enquiry and obviousness on inspection.

Where interests are unregistered, they may still bind purchasers as overriding interests if the beneficiary is in actual occupation. If a buyer makes enquiries of occupiers and the occupier fails to disclose their interest, or the occupation is not obvious on reasonable inspection and the buyer has no actual knowledge, the interest may not override.

Proprietary Estoppel

Proprietary estoppel is another equitable doctrine that can create an interest in property. It operates to prevent a person (A) from going back on a promise or assurance made to another person (B), where B has relied on that assurance to their detriment, making it unconscionable for A to renege.

Key Term: Proprietary Estoppel
An equitable doctrine preventing a party from denying a right or interest in their property which they allowed or encouraged another to assume to their detriment.

The necessary elements are:

1. Assurance: A representation or assurance by the property owner to the claimant relating to an interest in the property. This can be express or arise from conduct. Assurances can be general (“this will be yours one day”) in domestic contexts, provided they are sufficiently clear in context (Thorner v Major).
2. Reliance: The claimant must have relied on the assurance.
3. Detriment: The claimant must have acted to their detriment as a consequence of the reliance (e.g., spending money, giving up opportunities, providing long-term unpaid labour or care).
4. Unconscionability: It must be unconscionable in all the circumstances for the owner to deny the claimant's expectation.

Where the ingredients are proved, the equity arises and the court then fashions a remedy. The aim is to satisfy the equity that has arisen, doing the minimum necessary to achieve justice. The remedy is not necessarily what was promised but must be proportionate to the detriment suffered (Jennings v Rice [2002]).

Assurance need not satisfy formal writing requirements. Section 2 LP(MP)A 1989 does not prevent estoppel claims because s2(5) preserves the operation of resulting, implied, and constructive trusts, and equity recognises that an estoppel can give rise to a proprietary equity; LRA 2002 s116 confirms that an equity by estoppel has proprietary effect. Nevertheless, protecting such equities by appropriate entries (e.g., notices) and being in actual occupation can be important for priority against purchasers.

Remedies can range from granting the promised interest, a lesser interest (e.g., life interest or right of occupation), or monetary compensation. In domestic family home disputes, courts often calibrate relief to avoid windfalls while honouring reliance—sometimes awarding a sum equivalent to expenditures or a right to reside for life rather than the fee simple.

Worked Example 1.5

Nadia tells her adult son, Omar: “This house will be yours; move in and look after me.” Omar leaves his job to become Nadia’s carer, pays for major repairs over 10 years, and forgoes income. Nadia dies leaving the house to her daughter by will. Omar claims.

Answer:
There is an assurance (“the house will be yours”), reliance (moving in, caring, funding repairs), detriment (forgoing income, spending money, caring), and unconscionability if Omar is left with nothing. A proprietary estoppel arises. The appropriate remedy is discretionary and proportionate. Depending on the detriment and expectation, the court could award Omar a life interest or a sum equating to his expenditure and lost opportunities; in some cases the full transfer may be ordered, but courts often tailor relief to the reliance rather than the exact expectation (Jennings v Rice; Gillett v Holt).

Exam Warning

While both common intention constructive trusts and proprietary estoppel can establish an interest in a family home based on intention/assurance and detriment, they are distinct doctrines. Constructive trusts identify the beneficial ownership shares based on common intention. Proprietary estoppel provides a remedy to satisfy an equity arising from an assurance relied upon detrimentally, with the remedy being discretionary and proportionate to the detriment. Be clear which doctrine applies to the facts presented in an SQE scenario.

Protecting and Realising Equitable Interests: Priority, Overreaching and TLATA

In practice, parties must consider how their equitable interests are protected against third parties and how the property may be sold.

• Overreaching allows a purchaser who pays capital money to two trustees (or a trust corporation) to take free of equitable interests; the beneficiaries’ rights attach to the sale proceeds. This is central to conveyancing of co-owned homes.
• In registered land, certain unregistered interests can override registered dispositions. The interest of a person in actual occupation can override, subject to enquiries and the obviousness of occupation on inspection (LRA 2002, Sch 3 para 2).
• Disputes over sale or occupation are brought under TLATA 1996 s14. The court applies s15 factors to decide whether to order sale or regulate occupation. The presence of minor children and the trust’s purpose (e.g., providing a home) can delay sale, though secured creditors’ interests are also significant.

Key Term: Express Declaration of Trust
A statement, typically in the TR1 transfer, recording in signed writing how the beneficial interest in land is held. It is usually conclusive as to shares unless set aside for fraud, mistake, or variation.

Key Term: Mortgage Contributions
Payments towards the capital or interest of the purchase mortgage. Direct mortgage payments are strong evidence of inferred common intention in sole name cases and are highly relevant to quantification.

Key Point Checklist

This article has covered the following key knowledge points:

• In jointly owned family homes, equity presumes equal beneficial ownership unless a contrary common intention is proven.
• The court considers the parties' whole course of dealing to determine or quantify beneficial interests under a common intention constructive trust.
• In sole owner cases, the non-owner must establish a common intention (express or inferred) and detrimental reliance to gain an interest via constructive trust.
• Resulting trusts based solely on purchase price contributions have a limited role in modern family home cases.
• Quantification of shares in sole name cases involves assessing fairness based on the whole course of dealing.
• Proprietary estoppel requires assurance, reliance, detriment, and unconscionability, leading to a discretionary remedy proportionate to the detriment.
• TLATA 1996 s14/s15 provides a mechanism and factors for resolving disputes over sale and occupation of co-owned homes.
• Overreaching protects purchasers who pay capital money to two trustees; beneficiaries’ interests then attach to the sale proceeds.
• In registered land, actual occupation can give an overriding interest that binds a purchaser unless enquiries are made and occupation is not disclosed or is not obvious on inspection.
• Express declarations of trust in TR1 are generally conclusive, whereas informal arrangements engage equitable principles to determine shares.

Key Terms and Concepts

• Joint Tenancy
• Tenancy in Common
• Resulting Trust
• Constructive Trust
• Proprietary Estoppel
• Trust of Land
• Common Intention
• Detrimental Reliance
• Overreaching
• Actual Occupation
• Form A Restriction
• Presumption of Advancement
• TLATA s14/s15
• Express Declaration of Trust
• Mortgage Contributions