Although the Matrimonial Causes Act 1973 allows the Court to use
a fairly broad brush approach to ascertain a “fair” division of any
matrimonial assets, the scope of the Trust of Land and Appointment
of Trustees Act 1996, which applies to cohabitants is much
narrower, and the rules that apply often do not take into account
the needs of the family or the children.
Ownership of property
People who own or a
planning to own property together need to be aware that if there is
no clear legal document setting out the terms/shares of ownership
and the parties are unable to reach agreement, then the issue is
likely to fall into the ambit of trust law. The result may
not be the one that was intended at the time of the purchase.
Trusts
If the property is owned in joint names, there is going to be a
presumption that each owner is entitled to 50% of the money
released on a sale. But what if that does not reflect the
reality, or the home is – for whatever reason – registered in the
name of one of the partners only? In that case, it may be
necessary to look at the whole course of conduct between the
partners during the time of ownership – and sometimes before – to
decide whether and on what terms the property is held “on
trust”.
There are two different types of trust that may arise after
parties have cohabited.
In basic terms, a resulting trust arises when a party has made a
direct financial contribution toward the property and a
constructive trust arises when the following criteria are
met:
• The parties reached an agreement, arrangement or
understanding that the property is to be shared between them –
i.e., there is a common intention that the property is to be
shared
• This agreement can be as a result of express discussions or
the Court can find that such an agreement was implied by the
parties conduct
• The party who is not the legal owner has acted to their
detriment in reliance on this agreement
If the parties are not able to reach agreement about ownership
of the property then an application is made to the Court under s14
Trust of Land and Appointment of Trustees Act 1996 which requires
the Court to look beyond the legal title in order to determine the
shares in which the parties own the property.
How we can help
Declaration of Trust
A declaration of trust is a legal document signed during the
period of ownership which clearly sets out the shares in which
parties own a property. By executing a declaration of trust,
parties clearly set out their intentions on how the property is to
be held and this reduces the possibility of a dispute in the event
of separation.
Cohabitation agreements
It is still extremely rare for cohabitants to enter into a
cohabitation agreement at the point when they begin to live
together and often there is little discussion about the practical
implications of any split in the future.
However, where possible it is advisable to enter into a
cohabitation agreement which amongst other things clearly sets out
each party’s interest in the property and also sets out the
practicalities of how any separation will be managed.
Cohabitation agreements can also deal with the parties’
intentions relating to financial arrangements on separation
including child maintenance issues. If a clear agreement is reached
at the outset, time and money can be saved in the event of a
separation.
Separation agreements
If no cohabitation agreement is drawn up at the outset, then
parties have the option of entering into an agreement on
separation. This agreement can cover the same issues set out in the
paragraph above.
Parties and their legal advisors negotiate and agree the
provisions of the settlement and the terms are then formalised in
the separation agreement.
If the parties wish, this document can then be lodged with the
Court and an order will be made mirroring the terms of the
agreement.
Applications to Court
If parties are unable to reach agreement, then the next step
will be to ask the Court to settle the dispute. The Family Law team
at Hodge Jones & Allen has a wealth of experience of conducting
such litigation in an efficient and effective manner.