Protecting your property interests

It is not uncommon for property to be bought in the name of one person and for another person to have contributed financially towards the purchase of the property, even though it is legally held in only one name. The person making a financial contribution does not have a legal interest in the property, but may have what is known as a ‘beneficial interest’ in the property, entitling them to a share of the sale proceeds. In the case of a dispute between the person in whose name the property is held and the person alleging the beneficial interest, the onus is on the latter to show that they have an interest in the property.

A recent dispute

This situation was illustrated in a recent dispute concerning a property in Kent. 219 Bexley Road was purchased in November 2012 in the sole name of Que Ha Tran who at the time was in a relationship with Ian Rand. Both owned their own properties but Mr Rand alleged that in April 2012 they agreed to buy a house in which they would both live, contributing to its purchase equally. The property was bought in Que Ha Tran’s name alone. The purchase price was £260,000 with a mortgage of £195,000 and a deposit of £65,000. A joint bank account was opened for expenditure relating to the property into which they each paid £1000 per month. Mr Rand paid in excess of £60,000 in total towards the deposit and subsequent property renovation costs.

When the relationship came to an end Mr Rand applied to the Property Chamber for recognition of his beneficial interest in the property. Que Ha Tran alleged that the sums paid by her former partner were by way of loans to her and that he had no beneficial interest in the property.

At the tribunal hearing Mr Rand was successful as it was determined that there was an express agreement between the couple that they were to be joint owners of the property and that Mr Rand’s substantial financial contribution, and the time spent by him on arranging and supervising renovation work, entitled him to a half share.

How to reduce the risk of disputes and protect your interests

It is unclear why the Kent property in this case was bought in Que Ha Tran’s name alone but in any situation where property is being purchased jointly but unequal contributions are being made towards the purchase price, the risk of disputes can be considerably reduced if, at the time of purchase, the parties enter into a declaration of trust. The declaration should set out in writing, and in detail, the parties’ respective interests in the property. It could also set out what is to happen if further money is expended on the property, perhaps for improvements, as in this case. The declaration of trust could also provide for who is responsible for payment of outgoings and what is to happen if one of the joint owners wishes to sell.

Anyone purchasing a property in this situation (whether they are an unmarried couple, a parent and adult child, siblings or friends), should ensure that their respective interests are protected by this straightforward method, rather than run the risk of incurring the stress and expense of a dispute.