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.
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.
An understanding of how equity intervenes to determine beneficial interests in property is important for advising clients in property and family law contexts.
As you work through this article, remember to pay particular attention in your revision to:
- 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.
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.
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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?
- Beneficial interests are held as tenants in common in proportion to their contributions.
- Beneficial interests follow the legal title and are held as joint tenants equally.
- The person who contributed more financially holds a larger beneficial share.
- A resulting trust arises based on initial purchase contributions.
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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?
- Express trust
- Constructive trust
- Resulting trust
- Statutory trust
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Which of the following is NOT a requirement for establishing a common intention constructive trust where the legal title is in one name?
- An express or inferred common intention that the claimant should have a beneficial interest.
- The claimant acted to their detriment in reliance on the common intention.
- The claimant made a direct financial contribution at the time of purchase.
- It would be unconscionable for the legal owner to deny the claimant's interest.
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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.
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.
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.
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.
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.
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.
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:
- A common intention (either express or inferred) that the claimant would have a beneficial interest.
- 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.
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 complicate my mortgage application") has been accepted as evidence of an express common intention (Eves v Eves [1975]).
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, but mere payment of household expenses generally does not, unless it enables the legal owner to pay the mortgage (Le Foe v Le Foe [2001]).
Detrimental Reliance
The claimant must show they acted to their detriment or significantly altered their position based on the common intention. Financial contributions or significant improvements usually satisfy this. Non-financial contributions (e.g., raising children) are less likely to suffice on their own, though the overall context is considered.
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, applied to sole name cases in Oxley v Hiscock [2004] EWCA Civ 546 and implicitly by Jones v Kernott). This allows the court to consider a wide range of contributions, both financial and non-financial, over the entire relationship.
Worked Example 1.2
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.
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:
- 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.
- Reliance: The claimant must have relied on the assurance.
- Detriment: The claimant must have acted to their detriment as a consequence of the reliance (e.g., spending money, giving up opportunities).
- Unconscionability: It must be unconscionable in all the circumstances for the owner to deny the claimant's expectation.
If established, the court has discretion in awarding 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]). Remedies can range from granting the promised interest, a lesser interest, a right of occupation, or monetary compensation.
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.
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.
Key Terms and Concepts
- Joint Tenancy
- Tenancy in Common
- Resulting Trust
- Constructive Trust
- Proprietary Estoppel
