If you own a property in joint names, that means shares are also equal, right? WELL…

You may think that if you purchase a property in joint names, you each own 50% share in the property but recent case law re-iterates that that is not necessarily the case.

It may well be your intention at the outset of the matter that you each own a 50% share in the property but if such an agreement is not clearly recorded in a Declaration of Trust,  such intentions can change over time, even if the title deeds and mortgage remain in joint names.

For example, one owner may have left the property leaving the other to pay the mortgage.  The party who has remained in the property and paid the mortgage for a number of years may feel aggrieved at doing so and seek to vary the shares.  However, because the property is held in joint names, the presumption would be that each owner is entitled to a 50% share and it would be for the party alleging otherwise to prove his/her case.

In order to decide the issue, the Court would try and ascertain how the “common intention” with regard to shares has changed by considering conduct of both parties (e.g one party has left whilst other has paid the mortgage).  If it is clear that the parties had a different intention at the outset or had changed their original intention with regard to shares but it is not possible to ascertain what their actual intention was, each party is entitled to what a Court determines is a fair share.  Fair share is decided by considering the parties “whole course of dealing in relation to the property”.

As you will already appreciate, this can be both a difficult and costly exercise.  A recent case in the press has confirmed that it is possible for shares in a jointly owned property to be varied.  In this particular case, the parties commenced their relationship in 1983 and separated in 2005.  They had 2 children, born in 1993 and 2000.  The parties purchased a property in joint names in 1996, jointly contributing towards the deposit and securing a mortgage in joint names.   During the course of the relationship, “A” (self employed business man) purchased 3 other properties in his sole name and in May 2005, the parties remortgaged the family home as A was in financial difficulty.  Approximately £66,000 of the remortgage funds were used to pay of A’s debts.  The parties separated in June 2005, A contributed towards the mortgage until April 2008 and then left “B” (his ex partner) to pay the mortgage.

The starting point in this case is that each has a 50% interest in the property in circumstances where the property remained in joint names and the parties did not enter into a Declaration of Trust, either at the outset or subsequently to confirm how they wished to hold their shares in the property.  The onus therefore fell on B to prove otherwise.

Had the parties entered into a Declaration of Trust, either when they purchased the property or at the time of separation, that would have been conclusive with regard to their respective shares in the property, irrespective of who paid what.  The risk to B was that she had paid the mortgage for a number of years and because the property was held in joint names, there was no certainty that the shares would be varied to reflect this.  The risk to A was that he owned a property in joint names and therefore could have quite rightly assumed that he was entitled to a 50% share of the property but as outlined above, the Court can alter/vary shares in a jointly owned property in the absence of a Declaration of Trust taking into account the factors outlined above.

The outcome of the case above was that B was entitled to 85% share in the property, A was entitled to 15% share – in a case where the property was owned in joint names!

The morale of the story – to avoid expensive litigation and uncertainty with regard to the outcome, enter into a Declaration of Trust.  A Declaration of Trust is a document confirming your respective shares in a property,  whether the property is owned in joint names or the sole name of one party. If you have an interest in a property, be sure to have a  Declaration confirming the exact amount of your interest.   This will provide both owners with peace of mind.

Here at Chadwick Lawrence we have a highly experienced Family Team who can assist you with the preparation of a Declaration of Trust, or discuss any other questions you may have with regard to family matters.  Our award winning Conveyancing Team who can also assist you in purchasing, selling or transferring properties.  Contact us on 0800 015 0340.