Trusts of the family home Flashcards
Resulting trusts of the family home
(a) 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.
(b) Only contributions made at the time of purchase count. A cash payment towards the deposit (on exchange of contracts) or the completion price gives rise to a resulting trust. No mortgage contributions are counted.
(c) 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 (for instance), a resulting trust would completely ignore B’s non-financial contribution to the family.
Common intention constructive trusts of the family home: Home is jointly owned
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 partners are therefore said to hold the house on a ‘common intention constructive trust’.
If one partner claims that the shares are unequal (particularly because they want to obtain a larger share in the family home while both partners are alive), the onus is on them to prove that the court should depart from the general rule. The court may be persuaded to do so as follows:
(a) If the partners came to a clear agreement as to how the family home would be owned, then the beneficial interests will be that which the partners have agreed.
(b) That agreement or common intention can change over time. For instance, 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 an agreement, the court will survey the whole course of dealing between the partners relevant to their ownership and occupation of the property and will ascertain what is fair having regard to that course of dealing.
Factors that the court may take into account when surveying the whole course of dealing between the partners to decide if the home is jointly owned
(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.
Common intention constructive trusts of the family home: Solely owned
There are two stages that must be followed in cases where the family home is solely owned:
* 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.
Common intention constructive trusts of the family home: Solely owned Stage 1
A claiming partner can only obtain an interest in the family home under a common intention constructive trust if it can be shown that:
(a) there was a common intention between the partners that both were to have an interest; and that
(b) the claiming partner acted to their detriment in reliance on that common intention.
There are two methods of establishing these elements:
(a) In method 1, the common intention is express.
Under this method, you generally need to find a (typically oral) agreement or understanding between the couple that the home is to be shared beneficially, ie that both parties would have an interest in the home
(b) In method 2, the common intention is inferred from conduct
If there is no express common agreement or understanding about how the family home is to be owned (which will often be the case), the court has to look at the couple’s conduct and see whether it can infer a common intention that both partners were to have an interest.
A common intention can generally only be inferred from:
(a) a direct contribution to the purchase price; or
(b) a significant contribution to mortgage payments falling due after the purchase.
Common intention constructive trusts of the family home: Solely owned
Stage 2: Quantifying the beneficial shares
If the partners came to an agreement as to the size of their respective beneficial interests, then that agreement will be respected. However, it is much more likely that there will be no evidence of what shares were intended. In this case, the court will award such shares as it considers fair having regard to the whole course of dealing between the partners in relation to the property.
The list of factors is same as jointly owned
Proprietary estoppel
Proprietary estoppel is another method by which a partner may become entitled to an interest in the family home.
Proprietary estoppel prevents someone from going back on their word in relation to property, when it would be unfair to do so.
When talking about proprietary estoppel, we shall refer to the relevant parties as the ‘claiming party’ and the ‘legal owner’.
Like common intention constructive trusts, there are two stages involved in proprietary estoppel:
* Stage 1 – the estoppel must be established; and
* Stage 2 – the estoppel must be satisfied (remedies).
Proprietary estoppel: Stage 1 - Establishing the equity
There are three key elements to establishing a claim in proprietary estoppel:
(a) Assurance
The legal owner must have made a representation or created or encouraged an expectation that the claiming party would become entitled to an interest in land.
The assurance can either be:
(a) active – the legal owner tells the claiming party that they have or will have an interest in land; or
(b) passive – there is conduct on the part of the claiming party that clearly suggests that they think they have a right to property. The legal owner knows this (or must have known it) but remains silent.
(b) Detriment
The claiming party must show that they acted to their detriment in reliance upon the assurance made.
Things that have been held to amount to detriment include:
(a) spending money on refurbishing a home or improving property;
(b) working without adequate remuneration;
(c) giving up a job and moving to a new area; and
(d) looking after someone who is gravely ill (especially if that involved giving up more remunerative employment).
Must be weighted against any benefits they have obtained
(c) Reliance
The assurance and detriment must be connected to each other. The assurance must cause the claiming party to act to their detriment.
The assurances relied on do not have to be the sole reason for the claiming party’s conduct. However, a claim in proprietary estoppel will fail if it can be shown that the claiming party acted for reasons other than the assurance
Proprietary Estoppel - Stage 2: Satisfying the equity (remedies)
The remedies that the court can grant include:
(a) transfer of the legal ownership in land;
(b) grant of a lease;
(c) some right of occupancy (eg the right to live in a house rent-free for life);
(d) financial compensation; or
(e) a beneficial share in the home.
Finally, a claiming party under proprietary estoppel may find themselves barred from obtaining a remedy:
(a) If the claiming party’s conduct is inequitable or unconscionable (eg they have acted deviously, dishonestly or deceitfully), then they may be denied the relief to which they would have otherwise been entitled.
(b) An unreasonable delay in bringing a claim in proprietary estoppel may defeat the claim. Equity does not assist a party who has failed to assert their rights within a reasonable time – ‘delay defeats equity’.
