Trust of Land and Appointment of Trustees Act 1996
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TOLATA cohabitation disputes regarding property
When a married couple separates, the financial claims that they have against one another are wide-reaching. A specific statute (the Matrimonial Causes Act 1973) encompasses those claims and the factors that the court must take into account when considering a financial settlement.
By contrast, the claims that former cohabitees have against one another are limited. There is no specific statute dedicated to dealing with claims that arise following the breakdown of cohabiting relationships. Former cohabitees are generally restricted to claims for child maintenance (if there are any relevant children) and claims in respect of any jointly owned or jointly occupied property.
The civil court can deal with disputes between couples who either own a property together or have lived together in a property that is held in one person’s name. Such claims are dealt with under Section 14 of the Trust of Land and Appointment of Trustees Act 1996 (TOLATA).
This gives the court the power to:
- In the case of a jointly owned property, determine the co-owners’ respective shares in the property. For example, a property may be held by two individuals on a 50/50 basis, but one party may say that they have made a higher financial contribution to the property and therefore their interest should be higher than 50%.
- In the case of a property held in one party’s name, determine whether another party has acquired a beneficial interest. For example, a party may argue that they have no legal interest in a property but have acquired a beneficial interest because they have made significant financial contributions to the purchase price or a renovation.
- Determining whether a property should be sold.
If there is a dispute between joint owners as to their respective shares in a property, the starting point will be for the couple to review the transfer document that was signed at the time of purchase. If Section 10 of the transfer document is completed and confirms how the couple intended to hold the property, this will be treated by the court as an express declaration of trust and ‘conclusive evidence’ in respect of the ownership position. In such circumstances, arguments about financial contributions are irrelevant. The court can only set aside an express declaration of trust if there is evidence of fraud, undue influence, duress or mistake.
In joint ownership cases that don’t feature an express declaration of trust — or in cases where the property is held in one person’s name only — the role of the court is to determine whether an ‘implied trust’ has arisen in favour of the individual who is seeking to assert an interest (or a higher interest) in the property. In such circumstances, the court will examine the parties’ respective financial contributions to a property and their intentions at the time of purchase and throughout the relationship. This is an extremely complex area of law.
As above, the court also has the power to consider whether a property should be sold. An order for sale can arise after the court has dealt with a dispute as to the shares in a property. Equally, the court can make an order for sale when there is no dispute about the shares in a property but where one party is obstructing a sale or is refusing to buy the other out of their interest.
TOLATA cases that involve a dispute about property interests are notoriously difficult. The statute was not designed to cater for cohabiting couples. TOLATA claims are dealt with in the civil court (as opposed to the family court), which means that there are significant cost consequences for running an unsuccessful claim. The available case law is limited and highly fact-specific, which makes it difficult to assess the strength of a claim prior to issuing proceedings.
If you have a potential TOLATA claim, it’s strongly advised that you seek specialist legal advice.
Cohabitation agreement FAQs
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What is a cohabitation agreement?
A cohabitation agreement records a cohabiting couple's intentions and how they wish for any property to be divided in the event of separation.
However, the agreement can also record more basic issues such as how any property where they are living will be run, including who will be responsible for which outgoings.
A cohabitation agreement can cover a variety of different issues, from how a property will be held to how the parties’ finances will be operated during their cohabitation.
The most common areas that can be covered include:
- how rent, mortgage or household bills are paid
- financial matters, such as what happens to joint bank accounts or pensions
- respective beneficial interests in property (whether owned jointly or solely)
- financial arrangements for children.
Cohabitation agreements can be entered into by any cohabiting couple. The most common scenario is when a couple begin cohabiting and are purchasing a property.
While a cohabitation agreement is a legally binding document, The Law Commission has expressed reservations about enforcement. Cohabitation agreements are governed by ordinary rules of contract and can therefore be challenged on any of the following ordinary contractual principles:
- fraud
- duress
- undue influence
- misrepresentation
- mistake
- illegality on other grounds.
The key, however, is to remember that if a cohabitation agreement is entered into free of any of the above principles — and if both parties have obtained independent legal advice — the Court is more likely to uphold it.
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Should I get a cohabitation agreement?
A cohabitation agreement can make family life easier, giving all parties the flexibility and freedom to organise their financial affairs as they wish.
A well-drafted agreement sets out and evidences beneficial interests in co-owned property and ultimately protects that interest (for example, if one party’s family has gifted money towards the deposit).
Cohabitation agreements can facilitate quick resolutions to financial matters in cases where there is an acrimonious separation, providing clarity on what each party is entitled to and in what proportion. This can also avoid the potential costs of litigation upon separation, as many of the technical issues relating to the separation and the mechanics of valuing and dividing property will have already been agreed.
The fundamental issue regarding cohabitation agreements is the uncertainty about whether the terms of the agreement will be upheld and enforced by a court. Although these types of agreements aren’t completely legally binding, the courts may well decide to attribute significant weight to them.
Some people are cautious of broaching the topic of entering into a cohabitation agreement with their partner as the suggestion may be interpreted as a lack of commitment to the relationship. Without careful consideration and management, this can carry the risk of relationship breakdown.
Cost is also a factor to consider when deciding whether to proceed with a cohabitation agreement, particularly if the parties’ circumstances and the terms proposed are complex. It is, however, much better to enter into a cohabitation agreement than not.
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When should I make a cohabitation agreement?
There can be many reasons and situations in which making a cohabitation agreement could be advisable, such as before buying a property or moving in with a partner.
Cohabitation agreements provide clarity and security by ensuring that both parties are aware of where they stand should the relationship ultimately break down.
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I don’t own the property that I live in. Do I need a cohabitation agreement?
If a property is owned by one party, it’s possible that the other may be able to make a claim under the law of trusts.
A resulting trust can occur when:
- One party contributes towards the purchase price of a property in the other’s name.
- One party transfers property to another but receives nothing in return.
A constructive trust can occur where:
- There has been an agreement to share ownership of the property — either directly, by way of an express agreement, or indirectly, by making financial contributions (such as to the mortgage or purchase price).
- One party is reliant upon this agreement.
In such scenarios a cohabitation agreement should be entered into to ensure that the party who is financially contributing to the property but does not legally own it is protected in the event that the parties separate.
