Legal ownership and beneficial ownership, do you need to be named as the legal owner of a property to be entitled to a share in it? Here, Holly Greensmith looks at Joint Purchase vs Sole Purchase and what factors contribute towards whether or not your partner has beneficial interest in your property.
The ownership of land in England and Wales is dealt with in two ways: the legal ownership and the economic benefit, which is also commonly referred to as the beneficial ownership. Legal ownership is simply that, you own the property in law. For example, where you are the purchaser of the property or mortgage holder. However, beneficial ownership can also accumulate alongside legal ownership and the legal owner or owners will not necessarily be the same as the beneficial owner or owners.
The legal owner is said to hold the beneficial interest in the property on trust for the beneficial owner. A beneficial interest in property is an equitable interest, which gives the owner the right to acquire formal legal title. The beneficial owner of the land will therefore have a right to the income from the property or a share in it, and a right to the proceeds of sale of the property or part of the proceeds.
Whilst this can all seem quite complicated what this means in practice is that, contrary to popular belief, you do not need to be named as the legal owner of the property to be entitled to a share in it.
How to establish a beneficial interest
Equity follows the law and beneficial interests reflect the legal interests in the property.
Joint purchase
If you jointly purchase a property to live in with your partner, whether married or unmarried, and both parties are responsible for repaying the mortgage, the presumption is that the parties intended a joint tenancy both in law and in equity. Joint tenants have rights in law to equal shares of the property and have the benefit of the rule of survivorship if one party passes away – that being that the property passes entirely to the surviving party.
However, this presumption can be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resources (Jones v Kernott [2011] UKSC 53).
A property may also be purchased jointly but with parties being tenants in common (TIC”), rather than joint tenants. TIC can own the property in unequal shares.
Sole purchase
If your partner purchases a property in their sole name, and you merely cohabitate, then you may still accumulate a beneficial interest via the following equitable principles;
- Resulting trust, although rare in a domestic context, it may apply where former cohabitees were also business partners (Jones v Kernott [2011] UKSC 53).
- Constructive trust (this is the most common in a domestic context)
- Proprietary estoppel.
Where to start?
So, the starting point is who owns the property, whose name is it registered in? if registered in two names, are they registered as joint tenants or TIC. If the parties are joint tenants, an application may be submitted to Court to sever the tenancy.
The next step is then the assessment of the beneficial interest, who has paid what? What other contributions have been made? Who has been paying the bills and the mortgage? Who has paid for any renovations or extensions/ additions. The entire factual matrix needs to be assessed.
The other thing to consider is the presence of any promises. Sometimes a property will be held legally by one party with the other party living in the property but with underlying promises to the extent the property belongs to the other party. We see this quite often, sometimes throw away comments to the extent of a party owning a property can in fact be binding in law, if that comment has been relied upon. There would need to be evidence of the promise and reliance upon the same but it is possible to establish an interest via this route.
Test for quantifying beneficial interests by constructive trust
Once a starting point has been established in relation to the parties’ respective beneficial interests the attention shifts to establishing the actual shared intentions of the parties (whether expressed or inferred by conduct). Such intentions must be supported by some detriment by the claimant to justify intervention by equity. For example, paying for significant renovations to a property could evidence that you held the belief that you would benefit from the same, either by living there or from the increased sale price the renovations would attract.
The standard of proof is the balance of probabilities. The burden of proof rests on the party who seeks to show that beneficial ownership is different from legal ownership.
Things that may assist in overcoming this burden are things such as evidence of payment, receipts, bank statements showing payments for renovations, contributions to household bills and other such financial contributions.
When quantifying beneficial interests, the court will assess each parties’ share as that which it considers fair, having regard to the whole course of dealing between them in relation to the property. Accordingly, outcomes are fact-specific and vary widely from case to case.
It is therefore evident that a simple approach of 100% to the legal owner is not applicable in most cases and the facts of each case will be scrutinised to ascertain what a fair and just proportion (if any) would be.
This area of law can be complex, if you think you may have an interest or entitlement in a property then we would be more than happy to discuss this with you at [email protected]
