There are 2 distinct and concurrent levels of ownership when it comes to land. First, there is legal ownership. In essence, this refers to who is registered as the legal owner of the land. This is relatively easy to establish, given that details of the legal owner, in the case of registered land, can be obtained from Land Registry’s online portal. In addition to the legal ownership, there is also the beneficial or equitable interest. This refers to who has the right to enjoy the land, or the underlying interest in it.
When purchasing a property in joint names, the parties should be asked whether they wish to hold the property as joint tenants, or tenants in common in equity. With regard to the former, both parties in this instance are deemed to be jointly entitled to the whole property. In other words, there is no divisible share attributable to either party whilst they both own the legal title and they are unable to leave a share of the property in their will. Rather, on the death of one party, legal and beneficial ownership will pass to the surviving joint tenant, save for a few restricted circumstances, which are beyond the scope of this blog.
Alternatively, co-owners can elect to hold the property as tenants in common. Through this means of beneficial ownership, each party has a set share in the equitable interest of the property, albeit it is not realisable as a separate asset until a sale. If the co-owners own as tenants in common, they can elect to take equal or unequal shares in the property.
In the case of co-owners owning a property as tenants in common in equity, where there is an express Deed of Trust, this will be taken to be conclusive of the parties respective interests in the property, save for a few restricted circumstances, such as fraud, mistake, undue influence, sham or proprietary estoppel.
However, problems can arise when the parties do not explicitly define their respective shares in the land, or otherwise reach an express agreement as to how they wish to hold the beneficial interest. Indeed, in the absence of an express Deed of Trust, it can be difficult to establish and quantify the parties’ respective interests in a piece of land, particularly when there is an absence of documentary evidence. In such circumstances, the starting point is that the equitable interest will reflect the legal interest, unless there is clear evidence to the contrary. Therefore, if only 1 individual is listed on the legal title, they will also be taken to be the sole beneficial owner. In the case of 2 co-owners, they are each taken to have an equal share in equity.
Should a party seek to rebut the aforementioned presumptions, they will have the onus of proving their case on the balance of probabilities. In cases where only 1 party is named as the legal owner, the party without a legal interest will first have to overcome the hurdle of showing they have a beneficial interest by proving there was a common intention for them to have an interest (which could be inferred from their conduct) and that they acted on it to their detriment. In joint name cases, the first hurdle is not normally an issue, but again, the party who claims more than an equal interest will have to convince the court that the parties had a different common intention. The court will then look at a whole range of factors in the parties’ dealings in relation to the property to assess quantification of shares.
It is advisable that co-owners, if they are seeking to purchase a property and hold this in unequal shares, have a Deed of Trust drawn up at the time of the purchase, in order to confirm the agreement reached with regard to beneficial ownership. Reference to this Deed of Trust should also be noted in the transfer deed, or the TR1. Indeed, this would certainly reduce the risk of a dispute, should the relationship between the parties break down irretrievably. In turn, this will save both parties the time and expense of litigation further down the line.
Each case is very fact-specific and with that in mind, parties should litigate as a last resort, due to the standard costs rule that the loser will be ordered to pay the winner’s legal costs. For this reason, every effort should be made to negotiate sensibly and settle at an early stage.
If you have a beneficial ownership dispute and require advice, please do get in touch with Hanne & Co and we will be happy to assist.