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Co-ownership on Family Home Paper

Land law can be rigid sometimes and show an unkind hand to those deserving but are lacking in legal formality. This scenario is particularly an issue in marital breakdown cases, especially where only one spouse possesses the legal title1. Where trust deems unfounded; ingested with bitterness and emotional turmoil, having to fulfil many strict requirements can leave deserving parties sometimes losing much more than a relationship.

Nevertheless, the law tries to protect the weaker party in equity but this is no easy task. Even more difficult for partners that are not legally married2 as seen in Burns v Burns3 or those defined under the Civil Partnership Act 2004, whom are not protected by any statutory provisions. Where only one party has the legal title, the other party has to establish his/her equitable interest in the land which is usually not already recorded on the land register or deed. If established, the interest is overriding by virtue of the Land Purchase Acts and the Land Registration Acts.

This is usually done via the vehicles of equitable trusts, along with proprietary estoppel. Hence, if the non-legal owner establishes his/her equitable interest, the property is co-owned in equity and this is binding upon the legal owner in relation to the division of rights to and in the family home4 in lieu of relationship breakdown5.

Problems will not arise if there is an express trust made by the legal owner. In order for an express trust to be valid, it must satisfy Section 53(1) (b) Law of Property Act (LPA) 1925, whereby the declaration is ‘manifested and proved by some writing’. The legal title of a family home will usually be transferred into their joint names by deed or transfer in accordance with Section 52 (1) LPA 1925. In addition, persons who are parties to the writing that establishes the trust cannot, thereafter, plead a resulting or constructive trust to establish different interest as seen in Goodman v Gallant6, with the exception of eg. fraud7.

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However, a person who is not a party to any valid express declaration of trust may still be able to establish a beneficial interest in the property. This vital exception to the requirement of express trust is stated in Section 53(2) LPA 1925 that exempts resulting and constructive trusts from the need for writing. Hence, the rights in equity may arise because there have been contributions made by the other party despite not being the legal owner.

A resulting trust is where the law presumes, in the absence of an express trust, an intention to create a trust, and implies one, where the non-legal owner had made a contribution to the initial cost of the property8. Hence, the claimant may have an equitable interest in the land in direct proportion to the contribution made to the purchase price as held in Tinsley v Milligan9.

In regard to constructive trust, however, no identifiable financial contribution need be made but the applicant prays to the court to look at the conduct and dealings of the parties to infer an intention to share ownership. The core elements of constructive trust, thus, are proving a ‘common intention’ and detrimental reliance.

Previously, it seems that the law is more lenient in granting interest to parties in relation to the contributions made as seen in Eves v Eves10 and Cooke v Head11.Later, the law on constructive trusts is governed by the decision of the House of Lords in Lloyds Bank v Rosset12, whereby, Lord Bridge stressed the necessity for a ‘direct financial contribution’ to justify the imposition of a constructive trust in the inability of proving an express agreement, to prove common intent. Otherwise, his Lordship said that there must be ‘any express agreement or understanding reached that the property is to be shared beneficially’13. Nevertheless, the courts currently adopt a wider view of the type of ‘contributions’ that would be acceptable to found a common intention as seen in Le Foe v Le Foe14, in regards to ‘indirect’ contribution to the mortgage.

In establishing common intention, there must be proof that a conversation took place; it can be inferred from surrounding circumstances that there was a conversation agreeing to share the property as seen in Springette v Defoe15. Lord Bridge had also accepted that it is not easy to prove an oral agreement and such difficulties have been recognized by judges as seen in Hammond v Mitchell16 by Waite J. Mere ‘common intention’ is usually insufficient. There must be detrimental reliance on such an intent, as emphasized in many cases, e.g. Chan Pui Chun v Leung Kam Ho17.

The mechanism for proprietary estoppel is similar to that of constructive trust. The elements that need be established are assurance, reliance, detriment and unconscionability as found in Taylor Fashions v Liverpool Trustees18. However, the Court of Appeal in Gillet v Holt19 has stressed that the crucial principle underlying proprietary estoppel is conscionability i.e fairness. Hence, proprietary estoppel cannot be tied down to a firm set of rules: each case turns on what is conscionable in all circumstances.

The law on ownership of the family home has been heavily criticized partly due to the fact that it may lead to injustice as revealed in the dicta of Johnson J in T v S20. Some cases prior to Rosset21 have suggested that the court could find a constructive trust if it thought fairness of the case demanded it or a constructive trust could be found if it accorded with the parties’ intentions, but that these intentions could be inferred by the courts. However, such approaches would lead to much uncertainty and hence it is more plausible for the courts to base their decision on the strict rule laid down by Lord Bridge in Rossett22.

However, there is still a need to change this area of law due to its shortcomings. It has been argued that it is unrealistic to expect all couples to discuss the legal ownership of their property as required in Rossett23. In addition, the emphasis on requiring a spoken promise in both trusts and estoppel works against a less articulate or assertive partner, who may not seek an unequivocal promise from the owner24.

Even where the land is jointly owned legally, it might not necessarily mean the same in equity. However, this seems to have been settled in Stack v Dowden25, where it was ruled that the legal owners are also equitable owners. Nevertheless, this case does not prove an easy way out where the law is elusive. It applies to cohabitants 26and same-sex couples but does not address other relationships like siblings or other property in question like a couples’ ‘second home’. The case also sheds light on the bluntness of remedies provided by land law, in resolving financial disputes on marital breakdown.

In order to determine on what basis the law should decide upon the division of rights to and in the family home on the break up of a relationship, it is important to analyse a different approach practised in other countries27.

In Australia, the division of rights to and in the family home in lieu of relationship breakdown had to be established and pursued under the common law. Here, parties claiming an interest in property owned by a de facto spouse had to try to bring themselves within one or more of a broad spectrum of possible common law or equitable remedies including contract, trust, quantum meruit, proprietary estoppel, unconscionable conduct, and/or unjust enrichment/restoration28.

During the 1980s, the courts moved significantly towards a more equitable approach in de facto property cases though further development of the concept of constructive trust. In Muschinski v Dodds29, the court applied the general equitable principle which restores to parties contributions made to a joint endeavour which fails, and declared that the parties held their respective interests upon trust to repay to each their respective initial contributions and the residue equally.

Later , in Baumgartner v Baumgartner30, the court held that the foundation for the imposition of a constructive trust was that a refusal to recognise the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that. The majority of the judges here considered the determination of the terms of a constructive trust in such cases.

The Baumgartner 31principles, if properly applied, may achieve a reasonable degree of justice and equity in the determination of de facto property issues. However, there lacked clear guidance and reasonable predictability, and hence a difficulty to advise clients. The non-recognition of non-financial contributions means that, to succeed, a party must establish a Baumgartner 32type constructive trust or other equitable device.

While the current position is a significant advance on the common law regime for resolving property issues between cohabitants on relationship breakdown, it remains imperfect and fragmented.

In Canada, the Supreme Court of Canada in Pettkus v Becker33 used the constructive trust to award a woman an equal share in property acquired by her partner during a nineteen-year relationship, in which both were working together on a farm, concluding that he would be unjustly enriched if her contribution to the acquisition of this property was not recognised.

The constructive trust in Canada has evolved into a broad equitable remedy for giving property based recognition for domestic contributions at the end of a non-marital relationship. This is seen in Peter v Beblow34, whereby, MacLachlin J made it clear that this constructive trust claim could be based on purely domestic contributions and in Nowell v Town Estate35 where the Court invoked the related doctrine of unjust enrichment to award a woman $300,000 after the end of a 30-year ‘quasi-spousal relation-ship’, despite the fact that the man continued to maintain his primary residence with his wife throughout the relationship.

It is clear that the corpus is made up of English thinking with the traditional analysis, Australian bringing about quasi-marital property division with a constructive trust but on the basis of ‘unconscionability’, and in Canada ‘good conscience’ as well as unjust enrichment.

However, it remains unclear how receptive the courts are to the notions of unconscionability and unjust enrichment being the underlying principles of estoppel. This willingness does not appear to be obvious across the board and the approach of the English courts has become too rule-orientated.

One of the significant shortcomings in the English law is that the courts may have become too rule-orientated, in searching for legal clarity, as reflected by the rigid interpretation of Rosset36 and, in particular, the requirement for direct financial contributions. Once the courts recognise that the common intention approach need not be dictated solely by the rigid rule, it allows greater flexibility for the courts to take into consideration a wider range of contributions, direct and indirect.

The court’s assessment should include consideration of the whole course of conduct between the parties, as well as the effects of sexual division of labour in the relationship and how that may impact on the claimant’s resources in terms of making contributions, whether direct or indirect, towards the relationship. Refocusing on these issues may cover the way for a principled basis of deciding family property disputes which is less gender biased.

No doubt, it would be an easier approach to protect the cohabitants through the passing of legislation similar to those that protect married couples and civil partners and this seems to be the case today after the suggested reforms seen in ‘Cohabitation: The Financial Consequences of Relationship Breakdown’37 and ‘Sharing Homes’38 by the Law Commission.

The vital importance throughout common law history of the trust creator’s intent has left instead a shifting sand of theory of what it is that constitutes a ‘trust’. All the adjectives – express, implied, resulting, and constructive – merely had us chasing the peripheral. Hence, it is undeniable that a better change is needed to mend the imperfection identified above.

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Co-ownership on Family Home. (2017, Dec 06). Retrieved from https://paperap.com/paper-on-co-ownership-family-home/

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