How to Establish a Beneficial Interest in a Property by way of a Constructive Trust 

This article will briefly explore the factors which an individual who is in an unmarried relationship can rely on when applying to the court for an order under the Trusts of Land and Appointment of Trustees Act 1996 (‘TLATA’), with a focus on the law of Constructive Trusts. This scenario often arises when a couple have lived in a property for a number of years, but just one of the parties is a legal owner (their name is on the registered title). As a consequence, the party who does not have their name on the registered title can often find themselves having to prove to the court that they are entitled to a proportion of the beneficial ownership of the property.  

A legal owner of a property is one whose name can be found on the title deeds and therefore holds the legal title. A beneficial owner is one who may or may not be a legal owner but is entitled to some benefit from the property. The starting point in these cases is that equity follows the law. This means that if one party is the sole legal owner, they will also be the sole beneficial owner unless the contrary can be shown.

In the event there is a dispute between a cohabiting couple as to the beneficial ownership of the property, the first thing to consider is whether the couple have entered into an express declaration of trust. This normally takes place when the property is purchased and can therefore be found on the purchase deeds. If there was an express declaration of trust, the declaration as to the proportion each party has of the beneficial interest in the property can be found here. However, an express declaration of trust can also be entered into as part of a cohabitation agreement, meaning that property deeds may not evidence the trust. Constructive trusts will be discussed below. However, it is important to note that any express declaration of trust cannot be trumped by way of a constructive trust.  
 

Proprietary estoppel, however, can be the exception to the rule that an express declaration of trust has the final say as to the split of entitlement to beneficial ownership. Proprietary estoppel arises when a court rules it to be unconscionable to uphold existing legal property rights. This can therefore include an express declaration of trust. To establish proprietary estoppel, the court must be satisfied that the following conditions have been met:

A constructive trust cannot override the existence of an express declaration of trust unless the initial declaration of trust is set aside. However, if there is no express declaration, constructive trusts can be the avenue for an unmarried cohabitee to establish a beneficial interest in a property. In establishing a constructive trust, you must ascertain the parties’ ‘actual shared intentions’. This can be established by express notice or by implication. In respect of the latter, the court will consider the parties’ whole course of dealings in coming to a decision on their shared intentions.

In the case of unmarried couples where only one party is the legal owner, the presumption is that the initial shared common intention was that the legal owner would be the sole beneficial owner. In order to evidence a changed common intention, the party claiming a beneficial interest will need to show that they have relied on that changed common intention to their detriment.

Accordingly, there are two primary ways of establishing a change in common intention:

1. Express Common Intention
2. Conduct

In respect of express common intention, the party claiming the beneficial interest must evidence discussions where the parties have agreed to alter the share of the beneficial interest from the starting position. Once this has been shown, they must prove that they acted to their detriment in reliance on the fact that they would obtain a beneficial interest. This will give rise to a constructive trust.

In respect of conduct, they will need to show that there has been a change in common intention by the way the parties have conducted themselves through their course of dealing. This is much more difficult to prove in most cases, but can include the following:

If you are seeking advice on a similar issue of your own, contact one of our specialist property lawyers. Our Dispute Resolution team can advise you as to your prospects of success, as well as providing best advice on how to proceed, and legal support in putting a Constructive Trust in place. Contact our team by calling 020 7228 0017 or emailing info@hanne.co.uk.