The current law on the establishment and regulation of a co-ownership interest in land is unsatisfactory.” Discuss

5 May 2016

Co-ownership forms one of the most complex areas in land law. It requires constant updating over time as social structures and patterns of living evolve in society.

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This essay will discuss the many difficulties that regularly arise in this delicate area of the law for which there is no simple, all-encompassing solution. Specifically it will cover the common intention constructive trust and its development as well as the impact of the reform introduced by the Trust of Land and Appointment of Trustees Act 1996 (TLATA).

Cohabitation of property has generally always been regulated by statute. Much of the 20th century co-ownership was created under ‘trusts for sale’ regulated in the LPA 19251 that had been initially designed for older times. The trust for sale was therefore not a particularly effective method for co-ownership as society developed with an increase in women’s legal status and rights, particularly regarding familial and matrimonial arrangements. Difficulties arose if these relationships broke down, as the trustees were under a duty to sell and had only a power to postpone that duty.

Due to the doctrine of conversion, beneficiaries had no interest in the land and no right to occupy it. If one partner demanded the property to be sold, the other half would have difficulty in refuting, especially as the power to postpone required consent from both parties.2 Despite the courts developing the doctrine of continuing purpose that worked to prevent this,3 it was obvious that a full on reform was required to update the statute in this area.

The Law Commission detailed the problems in a 1989 report4 which lead the way for the TLATA. TLATA has proven effective in addressing most of the statutory issues regarding establishment and regulation of a co-ownership in land that preceded it. S.1(1) sets out the new ‘trust of land’, which gives beneficiaries an equitable interest in the land rather than notionally in money, with a power rather than a duty to sell and with proprietary rights for all purposes. This includes giving beneficiaries the right to occupy.

The doctrine of conversion and its related issues were also made redundant.6 In creating one type of trust, it also removed the confusion that arose out of having both the trust for sale and the SLA settlement trust pre-TLATA. S.13(6) codifies what was previously known as equitable accounting in common law, defining the method by which compensation payments are dealt from any occupying beneficiary to any occupationally-excluded beneficiary. However, the effect of this codification is unclear and questioned as to its relevance in Stack v Dowden.7

For the trustees to sell, they now must formally join in a conveyance involving an application to court. 8 While this can itself become complicated where there are contrasting intentions and personal interests regarding the house and relationship, issues become even more complex when the trust in question is an implied trust in sole-name cases with no expressly communicated intention as to how the beneficial interest is to be shared.

Without such a declaration of trust, it is unclear as to how the property is to be divided in law should the parties wish to separate. The current law in this area is unsatisfactory largely due to the difficulty involved with balancing equity and justice in such relationships and is an area that TLATA has seemingly left to the judiciary.

Of interest in highlighting the difficulty courts have had is the lengthy historical change it has seen in common law in the past few decades. To deal with a scenario in which there is no declaration of trust, the law on implied trusts needed developing in the search for the most equitable scenario. Specifically, the problem arose where a couple purchased a house as tenants in common with different financial contributions, but one party later underwent work either financially or through labour which added to the price of the property.

Naturally, they would expect to acquire a greater share than their initial contribution. The resulting trust assumed to be set up at the time of purchase therefore seems inequitable in considering only the initial financial contribution. The constructive trust was used and redefined to account for such a scenario.

Despite the initial confusion between the two types of trust in case law,9
the importance of the difference now established is paramount. Lord Diplock’s verdict in Gissing10 laid down the requirement for an agreement between the parties, express or inferred from conduct, plus some detrimental act in reliance upon it to constitute a constructive trust.

Lord Denning subsequently used this ‘constructive trust for a new model’ in a series of 3 cases11 in which he found general domestic duties around the home as being sufficient in establishing a constructive trust and a share of the beneficial interest, despite no financial contribution to the purchase of the property.

The boundary was later raised in Burns12 through implementation of a stricter application of Gissing, revisiting the requirement for some element of ownership-sharing agreement, express or implied, also termed ‘common intention’. The court did not agree with Denning in Pettit that domestic duties were sufficient,13 and instead said that lacking this common intention, the court could only go as low as accepting elements of financial contribution that specifically allowed for the purchaser to pay mortgage instalments as sufficient to create a constructive trust.

The courts attempted to redefine the Gissing precedent further in Rosset.14 LJ bridge controversially added to his verdict that inference of a constructive trust would require a ‘direct contribution’ to the purchase price or mortgage instalments,15 raising the barrier by eliminating contributions that merely freed up the purchaser to pay mortgage instalments previously accepted in Gissing and Burns.

This came to be the law, despite the obvious inequity in the courts’ refusal to take anything less than direct contributions. Some commentators thought this went so far as to be more of a resulting than a constructive trust16 and the law has since been redefined in Stack

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