When two or more parties purchase a property jointly and there is no express declaration of trust (usually contained in the TR1 form), the usual presumption is that equity follows the law and they hold the property was joint beneficial owners in equal shares.
This presumption however can be displaced by showing that the parties had a different common intention at the time of purchase or at a later point in time. This is usually evidenced by the conduct of the parties.
These are principles laid down in the infamous cases of Stack v Dowden (2007) and Jones v Kernott (2011).
Initially it was thought that the common intention trust only applied where a property was purchased as a home; in commercial investment cases the applicable principle was resulting trusts based on tracing financial contributions.
In Lasker v Lasker (2008) the court held that Stack and Dowden principles were not applicable
“where the primary purpose of the property purchase had been as an investment, even if there was a personal relationship between the parties.”
But in the more recent case of Marr v Collie (2017) the Privy Council concluded that “Laskar is not authority to say that the principle in Stack v. Dowden (i.e. that beneficial ownership follows legal ownership unless the contrary is proven) only applies in the domestic context.”
Context and intention are crucial factors.
We recently had the decision in Oberman v Collins (2021) which has revisited these issues
Ms Oberman and Mr Collins were in a long term relationship between 1995 and 2015. They had two children and set up a company (Bluegen) in which they were joint directors and shareholders.
Throughout their relationship, they purchased 41 properties held in their respective sole names, joint names and the name of the company. The portfolio was worth about £8 million.
The relationship broke down in 2015. 28 of the properties were agreed to be divided but 12 properties in Mr Collin’s sole name were subject to dispute.
Ms Oberman issued proceedings in 2018 seeking a declaration that she had a 50% beneficial interest in all of the properties (specifically the 12 owned in Mr Collin’s name) based on a common intention constructive trust.
The case was heard and handed down in late 2020 in the High Court.
Ms Oberman’s evidence was preferred to that of Mr Collins and the judge made findings that:
“at all times between 2008 and 2015 the Properties were treated as part of a single portfolio in common ownership irrespective of whether they were registered in the name of Bluegen, the sole name of Mr Collins or Ms Oberman or in their joint names. I also find that they were transferred into the name of Bluegen or into sole or joint names based upon the need to finance or refinance the properties and the requirements of each lender (as Mr Collins had originally accepted in his witness statement).”
Having found it was the common intention of the parties that the portfolio of properties were acquired for both jointly and equally, the court also went on to find that “Ms Oberman relied on that common intention to her detriment by (a) her financial commitment, (b) working in the business and (c) by assuming financial liabilities in relation to the Portfolio and giving control over it to Mr Collins.”
The judge also accepted argument on behalf of Ms Oberman that whilst “it may be more difficult to establish such a trust in the commercial context…there are likely to be hybrid cases (for example family run businesses) where the rules of equity are equally applicable.”
He saw no reason why the common intention constructive trust could not apply to a portfolio of properties (rather than having to establish this for each individual property) “even one fluctuating over time provided that the trust satisfies the requirements for the essential validity of a private trust.”
“Moreover, even if it is not possible to give effect to a common intention constructive trust of a portfolio of properties, the Court can give effect to a common intention constructive trust of each individual Property by drawing the inference that the parties intended to acquire it in equal shares from their express agreement in relation to the portfolio more generally and their subsequent conduct in relation to the use of the rents and profits and proceeds of sale.”
Judgement was awarded in Ms Oberman’s favour.
Obviously it is always preferable to set out intention and agreement in writing at the start of any personal relationship or business venture to avoid issues like this arising.
Where that is not possible then a forensic exercise will need to be conducted to piece together the intention of the parties.
It is clear now that this can take place in transactions with more of a commercial nature that previously thought.
What assisted Ms Oberman was that she relied on various key evidence:
- Spreadsheets and covering e-mails referring to the properties as a single portfolio (irrespective of ownership)
- E-mails and text messages with assurances of joint ownership and equal shares