When purchasing a property as a couple, whether that be unmarried or married, you are required to tick a box on the Transfer Deed indicating how you wish to own the property. This is known as the ‘Declaration of Trust’ box. Many couples opt to hold their property as joint tenants. This means they each hold an equal share in the property.
Previously decided cases have held that the declaration of trust box is final unless there has been a fraud or a mistake or it is varied by a later written agreement.
When relationships breakdown, parties often verbally agree arrangements about their property. For example, one party might agree to leave, but the other may not be able to take the joint mortgage into their sole name. Therefore, it is often agreed that they will be released from the mortgage later. However, if a property then increases in value, this party may try to claim an interest in the property, despite (sometimes) leaving many years ago or not contributing to any outgoings.
Informal agreements like this don’t always happen on relationship breakdown. They can also happen where one party agrees to spend more money on improving the property or paying a larger share of the bills. The parties may have agreed informally that the party spending more has increased their share in the property.
These situations are common examples of conduct changing what was originally opted for in the Transfer Deed. The agreements in these examples often happen informally, and at the time, amicably between parties.
Given the risk of disputes happening later down the line, it is always better to ensure any agreement you wish to rely upon is in writing, rather than orally and, ideally by signing a new Declaration of Trust stating your revised shares. However, you may be in a situation where a formal agreement was not drawn up, or perhaps it was but it never fully materialised – in any of these circumstances, our Family Law specialists are on hand to listen and assist.
Recent developments
The recent case of Nilsson & Anor v Cynberg has been a significant development in the legal framework for this area. The case involved a married couple who, upon splitting, agreed for the wife to continue living in their family home providing she paid for the mortgage and outgoings in her sole capacity. However, when the husband went bankrupt years later, his trustee in Bankruptcy tried to recover his interest in the family home. Although their agreement was not in writing, nor was the husband’s name removed from the property, the court found that their discussions had given rise to an agreement which varied the earlier Declaration of Trust. The court said there was a clear subsequent agreement between the parties that the wife was to retain the entire interest in the home, and she had relied upon this by remaining there and paying all the outgoings.
The common intention constructive trust being sufficient to fulfil the court’s requirements of a ‘subsequent agreement’ is certainly a new and interesting development for this area. The verbal agreement combined with the wife’s conduct was able to override the couple’s previous written declaration of trust as joint tenants. It is a new case which introduces the potential to rely on a more informal agreement where it can be shown that a party acted to their detriment in keeping to it. This shows a far more flexible approach than the courts have taken for many years.
Each individual case is different and subjective to the circumstances; however, the case shows the law being clarified and expanded to consider agreements which might make a Declaration of Trust unfair to one owner. It suggests that subsequent agreements which aim to vary an express declaration of trust are not limited solely to formal written agreements. It opens the potential for parties’ discussions and conduct to ultimately determine their beneficial interest in a property.
How can we help?
If you require assistance regarding any part of this article, or if you have a dispute regarding your property which you wish to discuss, please contact us on 01392 207020.
