TOLATA Claim Solicitors in Essex

Disputes in relation to the Trust of Land and Appointment of Trustees Act (“TOLATA”)

Please contact our Litigation Department on our mobile friendly number 033 33 22 1000 or 0800 987 8156 to arrange a meeting and speak to a Solicitor regarding your TOLATA claim. Alternatively, send us an email at info@kewlaw.co.uk for more information. 

On the breakdown of a relationship (or some other triggering event) disputes will often arise in relation to property jointly owned under a trust.

Joint ownership

Legal ownership (as registered at HM Land Registry) may differ from the underlying beneficial interests.

Joint proprietors always hold the registered estate on trust and can do so either for themselves or for third parties. Likewise a sole registered proprietor may hold the estate on trust for himself and third parties (or exclusively for the latter). Where there is joint legal ownership this raises a strong rebuttable presumption of joint beneficial ownership.

Parties who jointly hold land on trust for themselves can do so either as:-

Joint tenants:

Where property is owned as joint tenants on the death of one of the owners their beneficial interest will automatically pass to the other owner under the right of survivorship.

Tenants in common:

Where property is owned as tenants in common on the death of one of the owners their share would vest in the beneficiaries under their Will. A tenancy in common requires any purchase price to be paid to at least two trustees in order to overreach the beneficial interest.

Types of trusts of land

How Is a Trust Of Land Created?

Expressly:-

Parties may declare in writing their intentions that the property be held on trust for specified beneficiaries together with details of the nature and extent of their beneficial interests. Such express trusts are often contained in the initial conveyancing documents at the time they acquire the property.

By way of resulting trust:-

A resulting trust arises when party B has made a direct financial contribution to the purchase of the property registered solely in party A’s name which was not intended to be a gift or loan. Depending on the circumstances party A will hold either part or all of the property under a resulting trust for party B. The extent of party B’s interest is likely to be determined in proportion of the direct capital contribution against the total purchase price. A resulting trust may exist in conjunction with a constructive trust which may affect the extent of Party B’s interest.

By way of constructive trust:-

A constructive trust may be implied where a property is not registered in the names of all purported beneficiaries and Party A has by way of a promise, agreement, arrangement or understanding induced party B to act to their detriment or significantly alter their position in reliance on the agreement that if they do so they will acquire a beneficial interest in the land i.e. it must be unconscionable for the legal owner to deny the existence of the beneficial interest.

It will likely be necessary to look at express discussions and to a narrower extent the conduct of the parties to establish a common intention. An intention cannot be inferred from the parties’ expectations arising from their relationship. A common intention does not require the extent of the share to be agreed, this can be declared by the Court on the basis of the available evidence.

Whilst the conduct sufficient to infer a common intention must be substantial, such as contribution to the purchase price, the level of conduct needed to demonstrate detriment is lower and may be shown by contributions to home improvements, household expenses and/or payment of mortgage instalments.

In unusual circumstances the rebuttable presumption in respect of jointly owned property may be displaced where a resulting or constructive trust in differing shares can be established on the evidence.

Examples of trusts of land

In the event of disposal of trust property the equity must be passed to those beneficially entitled. When land subject to a trust is sold the trust attaches to the net proceeds of sale. Below are a number of examples of trusts of land:-

A cohabiting couple acquire a property with the intention that it shall be occupied by them as their family home. Party A contributes towards 50% of the deposit but only Party B is registered as a proprietor because the mortgage is advanced in their sole name or so as to not otherwise prejudice Party A’s financial position. The parties do not enter into a Deed of Trust or otherwise record their beneficial entitlements. Party B as the legal owner will hold the land as trustee for both parties as beneficiaries under an implied trust. In such circumstances a dispute may arise as to the existence and/or extent of each party’s respective share.

Two sisters purchase a property for investment purposes in their joint names. Party A provided 100% of the deposit in the sum of £100,000. The parties execute a Deed of Trust recording that the first £100,000 of the net proceeds of sale be paid to party A and the balance to party A and party B in equal shares. They are both the trustees and beneficiaries of the trust holding the land as tenants in common in accordance with their respective shares. If both sisters have the right to receive income generated by the trust dispute may arise if one sister seeks to occupy the property to the exclusion of the other.

A grandparent gifts a property to a minor grandchild in their Will. Following their death the property is registered in the names of the minor grandchild’s parents who hold it as trustees for the child. Upon sale the parents would not be entitled to retain any of the net proceeds of sale as the property beneficially belongs to the child. The trust would then attach to the proceeds of sale.

Powers and duties of trustees

Trustees are under a duty to exercise such reasonable skill and care as in necessary in all the circumstances when dealing with trust property. For the purpose of exercising their functions trustees generally have all the powers of an absolute owner in relation to the land subject to the trust however, inter alia, so far as practicable they must consult the beneficiaries of full age entitled to an interest in possession in the land and so far as consistent with the general interest of the trust give effect to the wishes of those beneficiaries or of the majority (according to the value of their combined interests) in the event of dispute. Trustees are constrained by the rules of equity which require that they must advance the interests of all beneficiaries without preference.

If all the beneficiaries consent and are of full age and absolutely entitled in undivided shares to land subject to the trust, the trustees may partition the land or any part of it between the beneficiaries and provide for any equalization payment. Alternatively the trustees may sell the property and account to the beneficiaries in apportionment with their respective shares.

Occupation of trust property

If trust property is available and suitable a beneficiary who is entitled to an interest in possession is entitled by reason of their interest to occupy the land at any time if at that time the purposes of the trust include making the land available for his occupation or the land is held by the trustees so as to be so available.

Where two or more beneficiaries are entitled to occupy the trustees may exclude or restrict the entitlement of any one or more of them so long as such exclusion or restriction is not unreasonable. An occupying beneficiary may have conditions imposed upon him by the trustees such as to pay any outgoings or expenses in respect of the land or compensation (or occupation rent) to a beneficiary whose entitlement to occupy has been excluded or restricted. Importantly this power may not be exercised by trustees so as to prevent any person who is in occupation of land from continuing to occupy the land unless they consent or the Court has given approval.

Making a TOLATA Claim Application:

If a dispute arises in relation to land held under a trust any person who is a trustee or has an interest in the subject property may make an Application to the Court for resolution of the issue/s. The Court has extensive powers to make Order in relation to a dispute concerning a trust of land (or trust of proceeds of sale of land) including but not limited to:-

• Relieving a trustee of their obligation to obtain consent or consult;
• Entitling one or more beneficiaries to occupy the property subject to any conditions as the Court deems fit;
• Declaring whether a party has a beneficial interest in the property and if so the nature thereof;
• Declaring the extent of a beneficiary’s interest in the land (the Court cannot alter the beneficial interests that may exist in the land);
• For the partition of the property;
• For the sale of the property (with or without an and distribution of the net proceeds of sale;
• For the sale of the property to be postponed;

Determination of the Outcome of a TOLATA Claim by the court:

• The intentions of the person or persons (if any) who created the trust;
• The purposes for which the property subject to the trust is held i.e. to provide a shared home or to secure a financial interest or make financial provision;
• The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home;
• The interests of any secured creditor of any beneficiary.
• In a case concerning the exercise of powers relating to exclusion or restriction of a beneficiary’s entitlement to occupy the Court will also consider the circumstances and wishes of each of the beneficiaries (of full age) entitled to an interest in possession or (in the event of dispute) of the majority (according to the value of their combined interests).

TOLATA confers a wider discretion on the Court than that enjoyed by trustees as it is not constrained by the rules of equity.

Expert advice

Contact Kew Law for expert advice on trust of land dispute (TOLATA) claims on 0800 987 8156 or info@kewlaw.co.uk in relation to any property ownership dispute including:-

• Seeking to resolve matters by agreement;
• Severing a joint tenancy;
• Protecting an unregistered beneficial interest;
• Ensuring pre-action compliance
• The existence and extent of an implied trust;
• Obtaining and analysing trust documents and other evidence and assessing the merits of a dispute and possible remedies;
• Preparing and bringing or defending a TOLATA claim (under either the CPR Part 7 or Part 8 procedure) including but not limited to preparing and dealing with the Claim Form, Particulars of Claim, Defence, Counterclaim, Reply to Defence, disclosure, witness evidence, obtaining of expert evidence and interim Applications as necessary;
• Enforcement in the event of one party failing to comply with the Order made by the Court;
• The issue of costs and recovery thereof.

This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the contents, or for any consequences of relying on it, is assumed or accepted by Kew Law LLP.