A Brief Overview
When individuals, (whether with members of their family, friends, partners or business partners) own land or property together, disagreements can arise leading to legal disputes.
Those disputes can result from the use of the land or property including the occupation; the ownership (interest) of the land or property; or whether it should be sold.
In the event of sale there can be disputes over the conditions of sale, the division of the proceeds of sale and whether there should be adjustments to the sale proceeds due to unequal financial contributions .
What does the Act do?
This Act provides the court with the following powers:
- To make an order relating to the exercise by a Trustee of their functions;
- To exclude or restrict the Beneficiaries’ entitlement to occupy the land or property;
- To declare the nature of a person’s interest in land or property;
- The court can order a sale of land (or part of it) or property;
- The court can order the land or property to be mortgaged, exchanged or partitioned CPR 40.16-40.17;
- The court can make compensatory (financial) awards
s .13(6) and S 14(2);
- The court cannot transfer property but in certain circumstances can give one party the first opportunity to bid on a land/ property which is the subject of an order for sale s. 14(2).
What is a Trust of Land?
A Trust of Land is when land or property is owned by 2 or more people. Trustees hold the legal title and the beneficial interest is the right to enjoy occupation of the land or property or receive an income from it, this is shared amongst the Beneficiaries.
A Trust essentially outlines how that land or property is held. Who owns the land or property; in what shares; what are the rights of the owners and what are their responsibilities and obligations. This can be set out expressly in an Express Trust or be Implied by the way the land or property was acquired, this is known as an Implied Trust.
Who can apply?
An owner or person with an interest in the property may apply.
What are the considerations?
Under Section 13
Section 13 relates to who can occupy the land or property. One or more of the Beneficiaries rights to occupy can be excluded or restricted. Conditions may be imposed on the Beneficiaries who are in occupation, such as discharging the mortgage or other expenses relating to the land or property. Conditions can be imposed on Beneficiaries to compensate the Beneficiary who has been excluded or whose occupation is restricted. When determining issues of the court will have regard to:
- The intention of the person/s who created the Trust;
- The purpose for which the land or property is held;
- The circumstances and wishes of each of the beneficiaries who are entitled to occupy the land or property
Under Sections 14 and 15
Section 14 relates to the exercise of the Trustees of their functions and the Court’s declaratory powers as to the nature and extent of a person’s interest in the land or property. The court can order the sale and regulate how the property is to be sold. On sale it can make adjustments to the proceeds to reflect financial contributions.
Section 15 outlines the relevant matters that the court takes into account:
- The intention of the parties;
- The purpose for which the land or property is held;
- The welfare of any minor who occupies or might reasonably be expected to occupy the land or property as his home;
- Any creditor’s interest in respect of any beneficiary.
- Section 15 inevitably considers two types of claims:-
In applying the considerations under section 15 the court inevitably considers two types of claim:
Resulting Trusts (where the non-owner makes a financial contribution to the purchase of the land or property); or
Constructive Trusts, where parties have formed a ‘Common Intention’ that the non-owner will benefit from shared ownership and that the non-owner has acted to his detriment as a consequence.
Further the court can assess property rights of a party through Proprietary Estoppel, where one party relied on the promises of shared ownership from the owners and acted to their detriment on the basis of that promise.
Procedure
It is important to know and understand the procedure. There are very strict rules on the timing of proceedings, the information that must be disclosed and considerations to alternative ways of resolving the dispute. The costs consequences can be very serious for breaches of Court Directions or the CPR. It is noteworthy that the court has the power to order costs on an indemnity basis plus interest as well as an additional amount CPR 44. 3 (1) (2).
It is also important to bear in mind the Pre-Action Conduct and Protocols (https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct) noting paragraph 6 requires the claimant to set out concise details of the claim giving the defendant a reasonable time (14 days in most straight forward cases) to respond and para 8 requires the consideration of negotiation or other form of ADR.
Overview
It is important to note that these applications often run alongside applications for financial relief for minor children under Schedule 1 of the Children Act 1989.
Further there are other potential remedies for an engaged couple, where is it possible to claim a share or an enhanced share of land or property under the Matrimonial Proceedings and Property Act 1970 Section 37
The number of TLATA claims is increasing, the area of law can be complicated and there are many ‘trip hazards’ that can cause serious consequences to the outcome in any case. When purchasing land or property or making a financial contribution it is important to protect yourself from litigation. A Declaration of Trust or Ownership Agreement will offer protection and updating any such Trusts or agreements in the event of a change of circumstances.
In the event of a claim it is important to establish a clear litigation structure in order to achieve the best outcome.
Tina Harrington, Counsel on behalf of Sheryl Perry Solicitors.