What is a declaration of trust?
A declaration of trust is a document that records how a property is owned and the terms on which a beneficial interest is held.
Stack v Dowden – The General Rule
The general rule, as highlighted in the case of Stack v Dowden, is that an express declaration of trust is conclusive unless varied by subsequent agreement.
This means that where two people purchase a property in joint names and tick box 11 of the TR1 form, they agree that they will hold the property on trust for each other and this cannot be amended unless agreed otherwise.
It is noted, however, that this agreement may be altered by way of proprietary estoppel. For more information on what it means to bring a proprietary estoppel claim please see Is a Promise Legally Enforceable? (tozers.co.uk).
The recent case of Nilson and Another v Cynberg [2024]
In the recent case of Nilson and Another v Cynberg, the judge had to consider whether a ‘subsequent agreement’ must be a formal agreement under the Law of Property (Miscellaneous Provisions) Act 1989 or whether an informal agreement was sufficient.
Nilson and Another v Cynberg: The Facts
In this case, the claimant and her husband purchased a property as joint tenants. They later separated and agreed that the claimant could remain in the property with their children so long as she left it to them in her will. On this basis, the claimant continued to live in the property and took sole responsibility for paying the mortgage, utilities, and other minor works.
Some years later no action had been taken to legally transfer the title of the property into the claimant’s sole name upon instructing a solicitor to deal with her divorce, her husband confirmed through his solicitors that he was willing to transfer the property to her sole name as agreed at the time the relationship broke down. Again, no action was taken to transfer the legal title at the time.
The divorce was not finalised until 2018 despite their separation being much earlier in 2009. Shortly after the divorce, the claimant’s husband was declared bankrupt his trustees in bankruptcy sought a beneficial interest in the property as a result of the property’s legal title remaining in joint names.
To provide an outcome for the case the court had to consider whether the discussions at the time of their separation gave rise to a ‘common intention constructive trust’ and if so, whether this was sufficient to amount to a ‘subsequent agreement’.
Nilson and Another v Cynberg: The Outcome
The claimant’s position was that the discussions upon their separation in 2009 gave rise to a common intention constructive trust because there was a clear agreement that the parties both intended for her to keep the property. The claimant claimed for the whole of the beneficial interest in the property on this basis.
In their defence, the trustees in bankruptcy claimed that a common intention constructive trust was not sufficient for a ‘subsequent agreement’ and so the husband’s beneficial interest vested in them.
Upon appeal, it was held that a declaration of trust is conclusive unless there is rectification, recission or a subsequent agreement. It held that a common intention constructive trust was sufficient as a ‘subsequent agreement’ so long as it was made after the declaration of trust was executed.
How can we help?
If you require advice in relation to a declaration of trust and/or the existence of a common intention constructive trust, please call us to discuss how we might assist.
