How do you record what share you have in a property?
When parties buy a house together they will sign a transfer form called a TR1. Box 10 of the TR1 contains a Declaration of trust. A property can be held as tenants in common in equal shares, unequal shares or as Joint tenants.
If the parties have contributed in unequal shares to the purchase price they may well wish to have the TR1 record that they hold the property as tenants in common in unequal shares and for the percentage shares to be noted.
What is a Deed of Trust and why should I have one?
In property law a Deed of trust is simply a legally binding document setting each parties obligations in respect of financial contributions and their rights and importantly how the proceeds of a future sale are to be divided between the parties.
Where unmarried couples own property or land disputes often arise as to how the assets should be divided on separation. The starting point will be to consider what the parties intended at the time the property was purchased or transferred to the parties. Couples are usually (and should be) advised by their conveyancers to consider how property is to be divided on separation or death of a party and for this to be recorded in a Deed of Trust.
Whilst a Deed of trust is not always the end of matters as far as disputes go they can be extremely helpful ascertaining what was intended and give the parties opportunity to consider their position and the obligations in respect of the properties outgoings.
Unmarried couples often hold property as tenants in common in unequal shares to reflect their unequal contributions to the purchase of the property but they may hold the property in equal shares or as Joint tenants.
Where an unmarried couple have agreed the shares in which they hold a property can financial contributions made after the agreement of each parties share be taken into account on the properties sale?
Yes they can. The Court can by the process of equitable accounting make adjustments to each party’s entitlement to the equity in the property to take account of claims for occupation rent, mortgage payments (capital and interest) and major improvements to the property.
It should be noted that equitable accounting is not an exercise to alter the shares each party is entitled to. The purposes is to ensure a fair division of sales proceeds between the parties and to ensure credit is given.
How does a co-owner sell a co-owned property where one party refuses to co-operate and sell the property?
It is important to remember that a co-owner is entitled to sell the property. If negotiations break down the party who wishes to sell the property will have to obtain an order from the Court.
The co-owners ability to achieve an Order for Sale rests on the Trusts of Land and Appointment of Trustees Act 1996 (Tolata) Section 14. A Power of Sale also arises under Civil Procedure Rule 40.15 and to Deliver up possession Civil Procedure Rule 40.16. All parties need to be aware that Tolata applications can be significant and whilst costs are a discretionary matter for the Court it is usually the case that the losing party is ordered to pay the winning parties costs to be assessed by the Court if not agreed.
Can a co-owner be excluded from a property by another co-owner ?
Without an order of the Court a co-owner cannot be excluded from a property. Under Trusts of Land and Appointment of Trustees Act 1996 (Tolata) Section 13 – Trustees may not (a) Unreasonably exclude any beneficiary’s entitlement to occupy land or (b) restrict any such entitlement to unreasonable extent.
Where locks have been changed a co-owner can simply contact a locksmith to regain entry and should any threats be made by the co-owner the matter should be referred to the police. This may sound good in practice but there are many cases where re-entering the property is not deemed to be worth the risk or upset. It should be remembered that there are equitable remedies such as claims for equitable rent that can be sort from a co-owner who has excluded one or more co-owners from the property.
Will a party in sole occupation have to pay the co-owner equitable rent ?
It may well be the case that a co-owner who remains living at a property whilst the other party leaves will be liable to account for equitable rent from his or her share of the property on sale should the co-owner demand this. This should be factored into any settlement negotiations should a dispute arise.
Typically where one party is excluded from the property and attempts are made to prevent a return the situation is fairly straightforward in that the co-owner who continues to enjoy the property will be liable for a notional market rent.
How is equitable rent calculated ?
First one should look at the shares in which the parties own the property. If each party owns 50% of the property the starting position would be to obtain expert evidence as to the market rent of the property and to seek half of this sum for each month the co-owner retains the property for their exclusive use less any set off against any mortgage payments.
Do not assume rent and mortgage payments equal each other out and ensure that you have current mortgage statements to be able to verify what has been paid. It maybe that the party in occupation has paid nothing towards the mortgage or merely contributing fifty percent if this is the case there is nothing to offset however if the party has been paying all of the mortgage or above 50 percent then there will be an offset.
Does the presence of children at the property prevent a claim for equitable rent?
Children at the property will complicate matters however in the case in Dennis v McDonald it was held that the occupying party would be liable to pay occupation rent even thought they were caring for children. This was a pre TLATA case but is still useful.
How are mortgage payments dealt with ?
In Re Pavlou Millet the Court explained that entitlement to a contribution for mortgage capital repayments from the none paying party can be likened to a claim for improvements to property. Clearly one party paying the mortgage has benefit to the none paying party. Interestingly in this case the Court determined that the co-owner could recover a contribution in the share the property was held for capital and the interest element of the mortgage payment.
How are improvements to the property dealt with ?
Minor decorations and other trivial property improvements are not likely to be considered by the Court. So for the purposes of this question we are talking about major remedial works, new Kitchen, bathrooms, new roof, conservatories structural alterations and or extending the property.
The case of Re Pavlou (A Bankrupt) [1993] 1 WLR 1046, ChD held that where the Court is determining how sales proceeds are to be divided it “must have regard to any increase in its value which has been brought about by means of expenditure by one of them”.
Valuing such claims will require evidence as to the cost of the works along with expert evidence regarding the the increase in the value of the property due to the works. The Court will use the lower of the figures and therefore if the building works costs £50,000 and increase the value of the property by £100,000 the non paying party will be liable to contribute towards the £50,000 building costs. The non paying party will be liable to contribute towards the £50,000 building costs in the percentage share they hold the property. If the non paying party has a 50% share in the property in this example that party would have £25,000 deducted from their share of the proceeds of sale.
We appreciate cohabitee disputes are extremely stressful but they can be resolved and in the majority of cases this can be done without Court intervention. You may feel that you cant afford to deal with the issue but you maybe surprised what can be achieved through mediation with the parties or even roundtable discussions.
We can often take the heat out the situation and find a way forward. If you would like an initial consultation do not hesitate to contact us we can take instructions regarding properties located anywhere in England and Wales and can meet via zoom, telephone or in person (Dependant upon current COVID19 restrictions).
Lets us help lift the burden and get you back on track.
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