A Guide To A Trust Of Land Claim – Beneficial Interest In A Property
A trust of land claim, is also known as a ToLATA claim (under the Trusts of Land and Appointment of Trustees Act 1996).
The typical application is for the declaration of a trust and/or the parties’ beneficial shares, an account and/or an order for sale. This can arise where the property is either legally owned solely by one party or jointly by more than one party.
However, s.14(2) also enables the court to exercise any of the powers of the trustees. By s.13 these include regulating occupation and determining an occupation rent. Thus the court may postpone sale and allow one owner to remain in occupation, although that person will almost always be required to pay the mortgage and other outgoings and keep the property insured and in good repair.
Where a sole owner wants to deal with a claim by an occupier of his land to a beneficial interest, he has 2 options for making a claim:
- a declaration of sole beneficial ownership; or
- a possession claim under Part 55 (essentially a squatters action).
The first thing to establish is who owns the legal title. This is normally reflected on the land registry office records.
If more than one person holds the legal title, then you will have to determine in what shares and how the property is held between the parties.
You can co-own a property in two ways: as a joint tenants or tenants in common. Joint tenancy is the norm if you want to own in equal shares (regardless of initial contribution).
If the property is owned as joint tenants, then something called ‘survivorship’ applies. This means that your share will automatically pass to the surviving co-owner(s).
If you are tenants in common, when you die your share will pass to whomever you have bequeathed it to in your will (if you have one).
It is important to note that you can change from one type of ownership to another, depending on your circumstances at any one time.
You can change the legal ownership from joint tenants to tenants in common by ‘severing’ the joint tenancy.
To change from tenants in common to joint tenants is slightly more complicated and you will need the agreement of all co-owners.
The law will always assume (unless otherwise stated) that shares are owned in equal proportions where there is more than one person on the legal title.
Most of the time that’s fine as that reflects what people agree and want. But not always. If you want division differently then you need to state this in a Declaration of Trust. A Declaration of Trust is a useful tool as it can set out who put what in, and who gets what out at the end, and they don’t have to correlate. It will reflect what parties agree and intend at the time and will be vital when things go wrong.
The starting point will always be the assumption that beneficial title follows legal title.
Establishing Beneficial Interest
A person with beneficial interest enjoys the benefits of ownership (even if they have no legal title). Beneficial interest may not always be reflected in the legal title at the land registry but that would be starting point.
If there is an express declaration of trust (usually reflected on purchase in the transfer document, the TR1) that is usually conclusive evidence of beneficial interest unless the declaration can be set aside due to:
- Fraud or mistake
- A variation
- Proprietary Estoppel
Most cases around beneficial interest will be where the legal title is in the sole name of one co-owner or where there is no express declaration of trust.
Courts will look at whether you are entitled to a beneficial interest based on a resulting or constructive trust.
In trying to establish the beneficial interest (and the extent of any interest) the following evidence will be required:
- Purpose for which the property was purchased
- Who paid the purchase price and costs of purchase
- Who is named in the mortgage and is meeting the mortgage payments
- Any written declaration of trust or declaration of the beneficial shares
- Any subsequent declaration of trust or variation of the beneficial interests
- Whether either party acted to their detriment in any way not directly contributing to the purchase e.g. by giving up a home or career? Why did they do so and was this connected with a promise that they would have a share
- What was said about the beneficial ownership (especially immediately before the purchase)?
- Each party’s understanding as to the beneficial ownership at the time it was bought
It will be necessary to obtain any conveyancing files, bank statements, invoices/receipts, and evidence from witnesses in support
Buying a property is a big investment – of time, money and in some cases emotion. You need to protect that investment (now and in the future) and setting down the ground rules with your co-owners will minimise and hopefully avoid disagreements, conflict and litigation. It should also preserve the relationship/partnership if everybody knows where they stand from the start.
A joint account should be set up from which all joint expenses for the property can be paid, and so that you keep your own personal expenses separate. You can then also trace which party has made what contribution.
You will need to get the right advice from the right professionals before embarking on the purchase of a property with someone. You should get independent mortgage and legal advice from your respective co-owners so that you are aware of all the consequences of co-ownership and can take appropriate steps to safeguard your interest.
Prevention is always better than cure because litigation is risky and unpredictable. But in the event you do need to bring a ToLATA claim then you need to have the right evidence and professional advice before embarking on litigation.