8 - Implied Trusts: Trusts of family home Flashcards
When unmarried couples separate, how may equity help?
When unmarried couples separate, equity does this job and has developed a number of different mechanisms to try and reach a fair result, the two most important being the common intention constructive trust and proprietary estoppel.
How is joint ownership of the family home structured, and what are the implications for legal and equitable title?
Generally, in the case of a family home, the legal and beneficial owners of the home will be the same.
The legal title in the family home must be held by the couple as ‘joint tenants’, unless of course there is a sole owner. Legal title can only be held as joint tenants.
The equitable title may be held by the couple as joint tenants or tenants in common:
- Joint tenants are equally entitled to the family home. As a result, when one partner dies, the other partner becomes entitled to the family home automatically.
- Tenants in common have distinct beneficial interests or shares in the family home. The size of those shares can generally be in whatever proportion the couple wants – equal or unequal.
- When one partner dies, their beneficial interest in the home passes under the terms of their will or under intestacy.
What should couples do to evidence their decision on how to hold the equitable estate in the family home?
- When a couple purchases their family home and have decided whether they want to hold the equitable estate in the home as joint tenants or tenants in common, they should then evidence that decision in signed writing.
- If a settlor wishes to create an express trust over land, the settlor must evidence the declaration of trust in signed writing in order to comply with s 53(1)(b) of the LPA 1925.
- While it is invariably completed, the relevant section is not compulsory, and so it is possible for a couple to purchase their family home in their joint names without creating an express trust.
- The law then needs to work out (or quantify) the beneficial interests or shares each partner has in the home.
What are the implications when one partner is the sole registered proprietor of the family home?
One partner might be the sole registered proprietor of the family home. In this case, that partner owns the legal title to the home but might still hold it on trust for themselves and their partner.
If the couple decides on the beneficial interests each of them have in the house, they should ideally evidence that decision in signed writing to create an enforceable express trust.
However, most couples are unlikely to think of this or realise that it is a good idea.
If there is no express trust, the law still has a role to play in working out (or quantifying) the beneficial interests each partner has in the home.
How does the treatment of the family home differ between married and unmarried couples when they separate?
If couples split up, how the family home is dealt with depends on whether they were married / in a civil partnership (on the one hand) or unmarried (on the other).
Married:
- If the couple were married or in a civil partnership and subsequently divorce, the family courts are given wide redistributive powers under the Matrimonial Causes Act (MCA) 1973 to determine who gets what out of the divorce.
- These wide powers can be used to quantify the beneficial interests in the family home and apply whether or not the couple created an express trust over the home when they purchased it.
Unmarried:
- If the couple were not married, engaged or in a civil partnership (i.e., they were cohabiting), then their affairs are governed by the ordinary principles of trusts law.
What are the key characteristics of express trusts concerning the family home?
- If the couple have created an express trust over the family home, then their beneficial interests in the family home are set out in their declaration of trust.
- The express trust will usually determine who gets what.
- To be enforceable, the declaration of trust must be evidenced in signed writing in order to comply with s 53(1)(b) of the LPA 1925.
- If the couple become registered co-proprietors of the family home, then often (but not always) they will have also created an express trust that deals with the beneficial interests in the home.
- An express trust over the family home is much less likely when only one partner is the registered proprietor.
If an express trust has not been created, we need to consider whether an implied trust over the land has arisen by operation of law.
What are the key principles regarding resulting trusts in the context of purchasing a family home?
If someone contributes money to purchase property in the name of another, a resulting trust will often be presumed that gives that party a beneficial interest commensurate with the amount of their contribution.
However, a resulting trust only focuses on contributions to the purchase price that are made contemporaneous with the purchase itself.
Important consequences when it comes to purchasing family homes include:
- Only contributions towards the purchase price count. The payment of ancillary items – such as conveyancing fees, stamp duty or other bills – does not give rise to a resulting trust.
- Most importantly, a resulting trust only recognises monetary contributions. If a couple agrees to divide their labour, with one partner (A) buying the house and the other partner (B) looking after the children, a resulting trust would completely ignore B’s non-financial contribution to the family.
What is the legal presumption regarding beneficial interests in a family home that is jointly owned by partners?
- If both partners are registered as co-proprietors, they hold the legal title to that home jointly and equally.
- If the couple have not created an express trust that addresses the beneficial interests in the home,** it is presumed that each partner’s beneficial interest in the home is also joint and equal**.
- The trust is implied to prevent unfairness between the partners, working out what the partners would have intended had they given the matter any thought.
- The partners are therefore said to hold the house on a ‘common intention constructive trust’.
What must a claiming partner demonstrate to persuade the court they should be entitled to a larger beneficial share of the family home when it is jointly owned?
A claiming partner must evidence an agreement or common intention to that effect.
They must also show that they relied on that agreement/intention to their detriment.
Example:
(a) If the partners came to a clear agreement as to how the family home would be owned on which the claiming partner relied to their detriment, the beneficial interests will be that which the partners have agreed.
(b) If an agreement or common intention as to the shares of the family home have changed over time, that change must be supported by detrimental reliance.
Example: If one partner finances the construction of an extension or major improvement to the family home, it might have been intended that, going forwards, that partner would have a greater interest in the property than at the time of acquisition.
(c) In the absence of any clear agreement as to each partner’s share of the family home, the court will require evidence that the parties intended to share the house unequally and so acted to their detriment, before it will survey the whole course of dealing between the partners relevant to their ownership and occupation of the property to ascertain what is fair having regard to that course of dealing.
What factors may the court take into account when surveying the whole course of dealing between partners regarding a family home when a partner is claiming to have a larger beneficial share of a jointly owned property?
Factors (Stack v Dowden) that the court may take into account include:
(a) Advice or discussions at the time of purchase;
(b) The reasons why the home was transferred into their joint names;
(c) The nature of the partners’ relationship;
(d) Whether they had children for whom they had a responsibility to provide a home;
(e) How the purchase was financed, both initially and subsequently;
(f) How the partners arranged their finances; and
(g) How they discharged the outgoings on the home and other household expenses.
However, the courts have been keen to stress that it will be a very unusual case where partners will be taken to have intended that their beneficial interests should be anything other than equal. It is a heavy burden to prove this point.
Merely contributing unequally to the initial purchase price is unlikely to displace the general rule; evidence that the couple intended to keep their financial affairs separate is usually needed.
In what circumstances will the courts depart from the presumption of joint tenancy of the family home?
The case law suggests that the courts will only depart from the presumption in exceptional cases.
- In Stack, the court was persuaded the presumption was rebutted by the rigid separation of the couple’s finances.
- Fowler v Barron demonstrates that unequal financial contributions alone are not enough to rebut the presumption of joint tenancy.
- Adekunle v Ritchie: The presumption was rebutted because the primary purpose of the acquisition was as a home for the mother.
What did Jones v Kernott clarify about ambulatory intention and joint tenancy?
- Jones v Kernott clarified that intention can be ambulatory. This means it is possible for the common intention of the parties to change over time.
- The parties may initially intend to hold the property as joint tenants, but this intention can change, for example, following the end of a relationship.
- At this point, their interests in the property ‘crystallise’, and subsequent events, like capital growth, are considered when quantifying their respective interests.
How is quantification determined in Jones v Kernott?
- The court inferred that Mr Kernott’s interest crystallised when he moved out.
- He stopped contributing to the mortgage and the couple divided the life assurance policy equally.
- Ms Jones continued paying the mortgage and expenses for 14 years, leading to her receiving 90% of the house, with Mr Kernott receiving 10%.
- Imputation can occur at the quantification stage, based on “what their intentions as reasonable and just people would have been had they thought about it at the time”.
What are the stages that must be followed in cases where the family home is solely owned and a claiming partner wishes to secure a beneficial interest?
Stage 1: The common intention constructive trust must be established (where the home is jointly owned, this is presumed).
Stage 2: The beneficial interests under the trust must be determined or quantified.
What is required for a claiming partner to secure a beneficial interest in a family home that is solely owned?
If only one partner is the registered proprietor of the family home, then in the absence of an express trust, the other partner may be able to secure a beneficial interest in the home if a common intention constructive trust can be established.
There is no presumption of joint beneficial ownership; the partner whose name is not on the legal title has the burden of establishing that they are entitled to a beneficial interest.
