One of the most important questions that a separating couple will have to resolve is what to do with the property they lived in together.
Will it be sold immediately, or at some future date?
How will the proceeds of sale be split?
Trusts of Land and Appointment of Trustees Act 1996
One of the most important questions that a separating couple will have to resolve is what to do with the property they lived in together. Will it be sold immediately, or at some future date? How will the proceeds of sale be split?
There is still a misconception that a long-term cohabiting couple are a ‘common law husband and wife’, who have acquired the same legal protections afforded to married couples. In fact cohabitees have fewer rights than married couples. The rights they have in relation to the property are enshrined in the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
The principle underlying TOLATA is that the equity in the property is held in a ‘trust of land’ on behalf of the ‘beneficiaries’. If you can prove you are a beneficiary, you may have rights over the property even if you are not the legal owner. Beneficiaries may include not only the parties to the cohabitation, but also third parties, such as a friend or family member who helped fund the couple’s purchase of the property.
Applying the case law in this area, we can advise you whether a court is likely to find that you have rights as a beneficiary under TOLATA and if you do, the extent of those rights. We can further advise how you should exercise those rights to meet your objectives on the termination of the cohabitation.
The rights could include:
- The right to continue to occupy the property (at least in the short term);
- The right to receive an ‘occupation rent’ from the occupier in return for you living elsewhere;
- The right to require the property to be sold;
- The right to receive some or all of the sale proceeds of the property.
All disputes must be managed sensitively, with a strategy adopted at the outset to achieve the objective sought. The strategy will be reassessed as the case proceeds and fresh information and evidence comes to light. Our acclaimed specialists in the fields of family and real estate disputes will work closely together to ensure you achieve the best result.
As well as being technically excellent, we pride ourselves on our pragmatic and commercial approach. While litigation is an important tool, it is usually the most time-consuming and costly method available to resolve any dispute. Therefore, we will ensure that you are advised as appropriate about alternative means of dispute resolution, which include:
- Negotiation (either between the parties, or solicitors);
- Mediation (a voluntary process using an independent third party to facilitate a settlement);
- Making settlement offers.
In some cases, it may be that a dispute between cohabitants (and any third parties) could have been avoided if at the time the property was purchased the parties had been advised to consider how they intended that the property be owned, and to make a clear record of that intention. Any failure to do so might amount to negligence on the part of the conveyancing solicitor instructed to handle the purchase. We will also advise you whether we consider that you may have a viable claim against the conveyancing solicitor in those circumstances.
The Trusts of Land and Appointment of Trustees Act 1997 (commonly known as “TOLATA”) regulates the relationship between owners of land, and their occupiers.
As the name suggests, TOLATA concerns itself with trusts of land. The principle behind a trust of land is that the legal owner of a property (the trustee) may be different from the person benefitting from it (the beneficiary). This means that one member of a cohabiting couple may own a share of the family home despite not being a legal owner. Alternatively, both partners may be legal owners, but the equity in the family home is not divided equally between them. If a separating couple cannot agree on these matters, they may apply to the Court under TOLATA to determine a range of issues, including whether they both own a share in the family home (and if so, the proportion each of them owns); who may occupy it; and whether (and if so when) it should be sold
The starting point in any trust case is for the Court to ask what the parties intended when setting up the trust. In many cases there is no express agreement between the cohabitees describing who owns what, and the Court will have to try and infer the parties’ common intention from their actions. Each case is unique and turns on its own facts. The Court will look at the whole background of dealing between the parties, including any discussions the parties had before acquiring the property; the reason the couple bought the property; why it was acquired in sole (or joint) names; whether the couple had children; and how they arranged their finances.
The Court’s job in a TOLATA case is to determine how the parties intended to own their property. It is a backwards-focused exercise. By contrast, in divorce proceedings the Court (usually applying the Matrimonial Causes Act 1973) will carry out a forward-focused exercise, dividing the property based on what is “fair” having considered the parties’ present and future needs. These two exercises can result in very different outcomes.
Are there any other differences?
Divorce litigation and TOLATA claims are governed by different court rules. This may sound esoteric but it is of critical importance. One important difference is on costs, where a successful party in a TOLATA claim might receive an award of 60-70% of their costs, whereas the general principle in family proceedings (with some important exceptions) is that each party bears their own costs. Hence a party wishing to bring a TOLATA claim must also factor in their potential costs liability to the other side before taking a case to trial.
The family courts generally rely on matrimonial legislation when determining ownership of property held by divorcing couples, but there is scope for a party to a marriage to use the TOLATA regime to seek a share in the home that he or she might not otherwise be entitled to.
Obviously the best time to think of these issues is before purchasing a property, as we can help you take steps to ensure that your intentions are clearly recorded. Otherwise, please contact us for a consultation. We can advise you what rights you have under TOLATA, and whether it makes tactical sense to issue a Court application.