Date published: 21/11/24
Author: Sajini Sridaran, Paralegal
What is TOLATA?
The law surrounding property disputes between unmarried couples has long been governed by the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
TOLATA regulates how property disputes between unmarried couples are handled in England and Wales. The Act applies where individuals disagree about who owns a property or in what shares or what should happen to a property after a relationship breakdown.
TOLATA is most frequently applied in cases where unmarried couples separate and dispute their respective interests in a property. As these couples do not benefit from the same legal protections as married couples, TOLATA provides a mechanism for the court to determine each party’s interest. It can also be applied in cases of property disputes between friends, family members, or business partners who co-own land or property. In either scenario, the court has the power to declare who owns a property and in what shares and to also order the sale of a property.
Express Declarations of Trust & Subsequent Agreements
The recent decision in Re Cynberg has brought new attention to how the court might approach property disputes.
The existing case law on property disputes before Re Cynberg essentially stated that where there had been an express Declaration of Trust identifying who owned a property and in what shares, it should be treated as binding unless:
- a subsequent agreement had replaced it;
- it was necessary to rectify it because of a mistake;
- it was necessary to rescind it because it had been improperly entered into e.g. as a result of fraud or improper pressure on a party;
- the principle of proprietary estoppel applied.
The application of the above meant that, practically speaking, if an express Declaration of Trust existed, it was usually found to be determinative in the event of a later dispute between parties whose relationship had broken down.
Importantly, for a subsequent agreement to be treated as binding by the court, it was thought it had to be in signed writing and comply with various formalities. In other words, an informal agreement would not be sufficient to supercede an earlier express Declaration of Trust.
However, the recent case of Re Cynberg has shone light on what might constitute a subsequent agreement so that an informal agreement may, in the right circumstances, be sufficient to supercede an express Declaration of Trust.
What happened in Re Cynberg?
In 2001, a couple purchased a property. The transfer document (Form TR1) included an express Declaration of Trust pursuant to which the parties held the property equally as joint tenants. Both parties contributed to household expenses and mortgage repayments.
In 2009, the parties separated, and the husband indicated he no longer wished to retain an interest. There was no written agreement between the parties which superceded the Declaration of Trust contained in the TR1 i.e. there was an informal agreement only. From then on, the wife paid for all expenditure relating to the property, including using an inheritance to renovate the property.
In 2018, the parties formally divorced. Again, there was no written agreement between the parties which superseded the Declaration of Trust contained in the TR1.
Following this, the former husband was declared bankrupt. His trustees in bankruptcy claimed that he still owned 50% of the property and that it should be sold to settle the husband’s debts.
The wife (in part) claimed a common intention constructive trust had arisen, arguing she solely owned the beneficial interest. A common intention trust can be described as a trust which arises automatically where the parties have a shared intention regarding the ownership of a property, even if no written agreement exists i.e. it is an informal agreement.
The case comprised a first instance decision and an appeal. At first instance, the court, amongst other things, found that a constructive trust had arisen and superceded the express Declaration of Trust in the TR1. This, in effect, expanded the definition of subsequent agreements to include informal agreements that were not recorded in signed writing which complied with various formalities. When the trustees in bankruptcy appealed the decision, their appeal failed, and the wife was found to own the property solely.
Conclusions
- Re Cynberg has clarified that in some circumstances informal agreements which have given rise to constructive trusts may override an express Declaration of Trust.
- However, the best way for unmarried couples to avoid a future dispute about property ownership is to seek legal advice from the outset and properly record how the property should be held in a written agreement and/or Declaration of Trust.
- If how the property is to be held changes over time, legal advice should again be sought, and the new arrangement should also be recorded in a written agreement and/or Declaration of Trust.
If the issues raised in this blog are relevant to you and you want to speak to one of our cohabitation solicitors in London, please write to info@kmjsolicitors.com or call 0203 709 6895.
