What are your rights when you co-own a property or co-habit?

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Co-ownership of property is becoming more common in today’s society. With the soaring costs of moving up the property ladder, let alone being able to get on it in the first place, it comes as no surprise that more people are buying property together, either for couples to purchase a property before getting married, or for one to buy a property with their parents or a family member.

While there is always an intention for things to move smoothly at the time, what happens when things go wrong? Where do you stand?

In land law in England and Wales, there are two types of ownership: legal and beneficial. A legal owner is one who is the proprietor on the title deeds. A beneficial owner is one who holds a share of the equity in the property, usually by making financial contributions to its purchase and/or paying the mortgage.

When parties co-own a property, they do so on trust for each other. You cannot physically separate a property so instead each party holds the other’s share on trust for them. Therefore, a trust and beneficiary relationship is created, and the powers and responsibilities under that trust are governed by the Trust of Land and Appointment of Trustees Act 1996, commonly referred to as TOLATA. (Note: this only applies to non-married co-owners; this article does not cover married couples or civil partners.)

How each party holds the trust will depend on the facts. It will depend on whether they are all registered as the legal proprietors of the property and what beneficial interest is held. For example, if they are registered as joint tenants, the law follows that the beneficial ownership is 50/50 along with the concept of survivorship (when one joint tenant dies, their share will be transferred to the other automatically and irrespective of their Will, if they have one). Conversely, tenants in common in equal or unequal shares will follow an equitable accounting process as to how much each party has contributed in order to calculate their beneficial share, unless it is expressly stated in a declaration of trust. There are other factors to consider too such as the instance where one party is not registered on the title deeds but has made financial contributions to the property.  

In the event of a dispute, the first step is to consider what the legal and beneficial ownership status is, however this is not always a simple task. Who is the legal owner(s) and on what basis. How much of the beneficial interest does each party have? If one person moves out, do they continue to pay the mortgage, if appliable? They may be entitled to occupational rent too.

The next step is then to consider how matters move forwards as the relationship has broken down so that ultimately, the parties can draw a line and move on with their lives. One of the parties could buy the other out, or in the event of a dispute on that subject, apply to the Court under TOLATA for a declaration as to beneficial ownership and/or an order for sale. Settlement discussions and mediation are also other options too, with mediation recently becoming compulsory under the Civil Procedure Rules.

Your property is likely to be the most valuable asset you own. Unsurprisingly, people will fight tooth and nail for it so it always advisable to seek legal advice on your position before embarking on litigation.   A suggestion for those who do co-own, or are thinking of co-owning, property though is to have your intentions recorded at the time of purchase (or retrospectively) by way of a declaration of trust. This will help mitigate a dispute later down the line because it will set the stall as to who owns what legally and beneficially. Of course, if circumstances change since then, it will certainly assist the Court in establishing what the intentions of the parties were at the time of the deed was entered into.

If you wish to discuss the contents of this article or have any queries regarding the above, please do not hesitate to contact our Commercial Litigation team who will be more than happy to assist you.

Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.

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