Core principles of trust law - Trusts of the family home

Learning Outcomes

This article explains trusts of the family home and the allocation of legal and equitable ownership, including:

• The distinction between legal title and beneficial interests and when equity recognizes non-legal owners
• Express declarations (TR1) and their generally conclusive effect, and when they may be displaced
• Resulting and constructive trusts, focusing on common intention and detrimental reliance
• Evidence capable of proving intention and contributions, including mortgage payments, value-adding improvements, and substituted indirect contributions
• Proprietary estoppel: assurance, reliance, detriment, and proportionate remedies
• Quantifying shares in joint and sole name cases, including inference and imputation where intentions cannot be deduced
• Registration practice, restrictions, and the operation of overreaching on sale
• TLATA 1996 applications under ss 14–15: orders for sale, occupation, and relevant statutory factors
• Key differences between spouses/civil partners and cohabitants in resolving home ownership disputes
• Practical application to SQE2 scenarios: advising on disputes, evidence-gathering, and realistic case analysis

SQE2 Syllabus

For SQE2, you are required to understand the law and practice relating to trusts of the family home, especially in the context of co-ownership and disputes on separation, with a focus on the following syllabus points:

• the identification and distinction of legal and equitable ownership in the family home
• the creation and recognition of express, resulting, and constructive trusts in domestic property contexts
• the principles governing the establishment of beneficial interests for cohabitees or non-legal owners
• the application of the law on constructive trusts, including direct and indirect contributions and relevant evidential requirements
• the use of proprietary estoppel and the quantification of beneficial shares
• advice to clients in cohabitation disputes or relationship breakdown, including claims for occupation and sale
• the effect of express declarations (including TR1) and their conclusive nature, and when they may be displaced
• TLATA 1996 applications (s 14–15), overreaching and registration issues (restrictions; actual occupation)

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. In a case where only one partner is the legal owner of the family home, what must the non-legal owner show to claim a beneficial interest?
2. What is the usual effect of indirect (non-financial) contributions to household expenses in determining beneficial ownership?
3. Briefly, what are the key requirements for a proprietary estoppel claim in a family home context?
4. How does the law differ between married couples and unmarried cohabitants in resolving disputes over beneficial ownership?

Introduction

In the context of the family home, determining who owns what can raise complex questions of trust law. It is common for one partner or spouse to be the sole legal owner of the property, even though another may have contributed financially or otherwise. For the SQE2 exam and legal practice, you must know when and how a trust—whether express, resulting, or constructive—might arise, and how the courts decide if a non-legal owner can claim a share.

Key Term: beneficial interest
The right or share a person has in the economic value of property, even if they are not the legal owner.

Legal and Equitable Ownership

Legal ownership of land is determined by registration—only those named on the title or deed are legal owners. However, equity may recognize someone else as having a beneficial interest.

Key Term: legal ownership
The formal title to land recorded in deeds or at the Land Registry.

Key Term: equitable ownership
The share or right in the property's value recognized in equity, often under a trust.

In co-ownership, a trust of land arises automatically: the legal owners hold the land on trust for the beneficial owners. In most domestic purchases in joint names, equity “follows the law” so that beneficial ownership mirrors the legal title unless displaced by evidence. Beneficial interests can be protected on the register (typically by a restriction rather than a notice, as a bare trust interest is not itself the subject of a notice). Where trustees receive capital monies on a sale and pay them to at least two trustees or a trust corporation, a beneficiary’s equitable interest is overreached and transfers to the proceeds.

Key Term: overreaching
The statutory process by which beneficial interests are detached from land and attach instead to the sale proceeds when purchase monies are paid to at least two trustees or a trust corporation.

Recognizing Trusts in the Family Home

When property is bought in both parties’ names, there is usually a presumption of joint beneficial ownership, subject to evidence of a different agreement or intention. SQE2 focuses on situations where the property is in the sole name of one partner, and the other claims a beneficial share. These claims generally depend on either:

• An express declaration or agreement (rare without documentation).
• A resulting trust (based on direct contributions to purchase price).
• A constructive trust (based on express and/or inferred common intention and detrimental reliance).

Express Agreements

Where there is a written or oral agreement, evidence must be clear as to the parties' intention about who should benefit and to what extent. In practice, an express declaration of trust recorded in the transfer deed (for registered land, the TR1 “declaration of trust” panel) will be conclusive of the beneficial shares except in cases of fraud, mistake, or rectification. In joint names cases without an express declaration, courts start from equal shares, but this presumption can be rebutted by evidence of a different common intention and course of dealing.

In advising, obtain the TR1, any ancillary trust deed, correspondence, and mortgage paperwork—express statements in those documents often determine or strongly influence the outcome.

Resulting Trusts

A resulting trust may arise if a non-owner made a direct financial contribution to the acquisition of the property, such as paying part of the purchase price or deposit. Here, their beneficial share generally reflects their contribution. Resulting trusts, however, are now of limited utility in domestic family-home disputes. Courts prefer constructive trust analysis to reflect the realities of domestic arrangements, especially where the parties intended to share a home rather than to create an investment.

• Contributions that typically count for a resulting trust include part of the completion price or deposit paid at acquisition and mortgage payments made at or near the time of acquisition in one name where understood as part of the purchase price.
• Payments of ancillary acquisition costs (stamp duty land tax, conveyancing fees) and later household bills usually do not, of themselves, create a resulting trust.

Constructive Trusts in the Family Home

Where there is no express agreement and the resulting trust analysis does not apply, the courts turn to constructive trust principles. The leading approach for cohabitants is:

1. Was there a common intention that both should have a beneficial interest? This may be expressly stated or inferred from conduct.
2. Did the non-owner act to their detriment in reliance on that common intention (e.g., financial contributions, substantial renovations, career sacrifices, etc.)?
3. Once common intention and detrimental reliance are proved, the court quantifies the share—starting with what was intended, but, if unclear, the court may infer or impute a fair share having regard to the whole course of dealing.

Key Term: constructive trust
A trust imposed by equity when it would be unconscionable for legal owners to deny another person's beneficial interest due to their contributions.

Key Term: common intention
An agreement or understanding—express or inferred from conduct—that both parties are to have a beneficial interest in the property.

Courts accept a wide variety of evidence to establish an express common intention (e.g., “this will be our home; it’s as much yours as mine”), and will infer common intention primarily from direct contributions to the purchase price or mortgage, but also, in defined circumstances, from substantial indirect financial contributions that enabled the mortgage to be paid. The detrimental reliance requirement ensures there is a sufficient link between the intention to share and the claimant’s actions.

Indirect Contributions and Evolving Principles

The courts may infer a common intention from patterns of shared finance, such as paying household bills, but typically only if these are linked to mortgage repayments or acquisition (rather than general living expenses). Non-financial contributions alone (such as childcare or homemaking) do not generally suffice unless accompanied by explicit understandings or dealings.

Important points in practice:

• Express assurances are powerful. Where a legal owner explains that title is not in joint names for a specific external reason (e.g., to avoid prejudicing a divorce) but indicates the home is “for both,” this can evidence a common intention coupled with subsequent detriment.
• A claimant’s financing of significant improvements (structural; value-adding) may, together with other evidence, support inference of a common intention.
• Regular contributions to mortgage instalments are strong evidence. Intermittent or very small contributions may be insufficient alone.
• Paying other household expenses can be relevant where they were “substituted contributions” enabling the mortgage to be met.

Worked Example 1.1

Cara and Jordan, an unmarried couple, buy a house in Cara’s sole name. Jordan pays for an extension and regularly contributes to the mortgage by transferring money to Cara's account. After their separation, Jordan seeks a share. What likely arguments support Jordan’s claim?

Answer:
Jordan can argue a constructive trust case. Regular contributions to the mortgage and funding the extension can evidence both a common intention and detrimental reliance. The court is likely to find that Jordan has a beneficial interest, with the size of the share determined by the extent of their contributions and evidence of intention.

Proprietary Estoppel in the Family Home

Proprietary estoppel is an alternative route for non-owners to claim an interest where there is a promise or assurance, reliance, and detriment. It is particularly flexible where contributions are non-financial or where the parties envisaged future benefits rather than immediate shares.

Key Term: proprietary estoppel
An equitable remedy preventing a legal owner from denying rights in property where another relied on an assurance to their detriment.

Key Term: detriment
A disadvantage or loss suffered from acting on another’s assurance.

Assurance can be clear and specific, but does not need to be formally precise. Courts assess objectively what a reasonable person in the claimant’s position would have understood. Reliance and detriment must flow from the assurance, and overall unconscionability is the touchstone. Remedies are discretionary and proportionate; they may reflect the claimant’s expectation or provide an alternative that avoids injustice, including monetary awards or time-limited occupation.

Worked Example 1.2

Sam tells Alex that the house will "one day be yours" if Alex helps pay for home improvements and looks after Sam in old age. Alex invests time and money as agreed. Years later, Sam tries to sell the house. Can Alex claim an interest?

Answer:
Yes. If the court finds clear assurance, Alex’s reliance, and resulting detriment, proprietary estoppel will apply. The court may order a proprietary share, a right to stay in the property, or compensation reflecting Alex’s loss.

Quantifying and Enforcing the Interest

Where a beneficial interest is established, the court must decide its size. If there is no express agreement, the court makes findings based on financial and other substantial contributions, the facts, and what is fair. The court’s decision can grant a share of net sale proceeds or sometimes a right to occupy.

In joint legal ownership cases with no express declaration of shares, the starting point is equal beneficial ownership, displaced only by convincing evidence that both parties intended different shares at purchase or that their common intention changed over time. Relevant indicators include how finances were arranged (pooled or separate), who paid capital and mortgage, and whether significant improvements were funded by one party.

In sole legal ownership cases, quantification follows proof of common intention and detriment. If the parties’ actual intentions as to shares cannot be deduced, the court may impute a fair division having regard to the whole course of dealing, including contributions, arrangements for children, and long-term financial decisions.

Key Term: TLATA order
An order under s 14 Trusts of Land and Appointment of Trustees Act 1996 determining issues such as sale, occupation, and the extent of parties’ beneficial interests.

On enforcement or dispute about sale/occupation, parties can apply under TLATA 1996 s 14. The court must have regard to the s 15 factors, including the intentions of those who created the trust, the purposes for which the property is held (e.g., family home for children), the welfare of minors who occupy, and the interests of secured creditors. Outcomes include an order for sale, postponement of sale, occupation directions, or declaration of beneficial shares.

Worked Example 1.3

Ant and Jamie cohabit for ten years. The house is legally in Ant's name, but both pay towards the mortgage and major works. After splitting, Jamie asserts a 50% share. Ant claims Jamie's contributions were mere rent. What will the court consider?

Answer:
The court will examine evidence of a common intention, the pattern of contributions, and conduct. If the payments and actions show a joint enterprise towards home ownership rather than rent, the court may award Jamie a substantial share.

Worked Example 1.4

Rae and Kim buy in joint names without an express declaration of shares. Rae pays a higher deposit; both service the mortgage equally for 12 years, but Kim alone later funds a substantial extension. Following separation, Kim seeks more than 50%. Is the presumption of equality displaced?

Answer:
Possibly. The presumption of equal beneficial shares may be rebutted by evidence that the parties intended different shares or that their common intention changed. The initial unequal deposit alone often does not suffice; however, where subsequent conduct (e.g., funding a large extension) indicates a shift, the court may infer a later change in common intention and adjust shares accordingly, awarding Kim a greater share.

Worked Example 1.5

Olivia owns the home. She tells Pat: “It’s your home too; I couldn’t have it without you,” and explains she cannot add Pat to the title due to Pat’s credit issues. Pat pays most household bills and pays the mortgage for 18 months while Olivia retrains. After 9 years, they separate. What is the likely route and outcome?

Answer:
Pat can claim under a common intention constructive trust based on express assurance plus detrimental reliance. Paying household bills alone is usually insufficient, but taking over mortgage payments significantly strengthens the case. If the court cannot deduce the parties’ actual shares, it may impute a fair division based on the whole course of dealing and award Pat a substantial but not necessarily equal share.

Married Couples, Civil Partners, and Cohabitants

The rules for married couples and civil partners are partly governed by family law statutes, which may authorize courts to reallocate property on divorce or dissolution regardless of strict trust law principles. Unmarried cohabitants must rely on trust law as explained above.

Key Term: cohabitant
A person living with another in an intimate relationship, but not as a spouse or civil partner.

Key contrasts:

• On divorce/dissolution, the family court may make wide-ranging property adjustment orders; beneficial ownership can be reallocated to achieve a fair outcome having regard to statutory factors.
• Spouses/civil partners may have statutory “home rights” (to occupy the matrimonial/civil partnership home) during subsistence of the relationship; cohabitants do not have equivalent statutory home rights but may seek occupation orders in appropriate cases.
• Cohabitants resolve property disputes over the family home under trust principles and via TLATA 1996 applications. The court cannot redistribute assets simply to achieve fairness unless the trust or estoppel claim is made out.

Summary

Key Points:

• Trusts of the family home deal with the split between legal and beneficial ownership.
• Express, resulting, or constructive trusts may give non-legal owners a beneficial share.
• Proving a constructive trust or proprietary estoppel requires evidence of intention, contributions, or assurances, and detriment.
• Married and unmarried couples may have different rights and remedies in property disputes.
• Express declarations of trust (e.g., in TR1) are generally conclusive of shares absent fraud or mistake.
• Resulting trusts are comparatively rare in domestic disputes; constructive trusts and proprietary estoppel are the main routes.
• Quantification depends on actual intention where possible; otherwise, courts assess what is fair in light of the whole course of dealing.
• TLATA 1996 provides the procedural framework for orders about sale, occupation, and declarations of interests; overreaching and registration practice affect third-party purchasers.

Key Point Checklist

This article has covered the following key knowledge points:

• The law distinguishes between legal and beneficial ownership of the family home.
• Where there is no formal written agreement, express, resulting, or constructive trusts determine non-legal owners’ rights.
• Demonstrating a beneficial interest commonly relies on evidence of intention and detrimental contributions.
• Proprietary estoppel may provide a remedy where promises or assurances have been relied upon to one's detriment.
• Married couples may seek relief under family law statutes, while cohabitants must prove a trust or estoppel claim.
• Express declarations of trust are powerful; in their absence, the court looks to common intention and detrimental reliance.
• Indirect contributions can count where they are tied to meeting the mortgage or acquisition, or in combination with express assurances.
• TLATA 1996 s 14–15 applications determine whether to order sale or regulate occupation and require the court to consider purpose, minors’ welfare, and creditors.

Key Terms and Concepts

• beneficial interest
• legal ownership
• equitable ownership
• constructive trust
• proprietary estoppel
• detriment
• cohabitant
• common intention
• overreaching
• TLATA order