When it comes to property ownership, it’s not uncommon for more than one person to have a vested interest. Couples, friends, family and business partners are all buying property together, but what happens when these relationships break down?
In these situations, disputes can arise easily and need to be resolved quickly. Central to this is knowing what you and the other owners are legally entitled to, so each party can walk away happy.
Of course, this is easier said than done, which is why we’re going to share everything you need to know about property ownership disputes, including how they arise, the impact of ownership type and what you can do to resolve them.
When Do Disputes Arise?
Disputes often occur when one owner wants to sell the property and the other doesn’t. Even if both agree to sell, a dispute may come about because they cannot agree on the proportion of equity each should receive.
In many cases, how the property came to be owned also plays a role in the dispute. For example, many disputes come from property that has been inherited by multiple people who can’t agree on what to do with it.
While these are common examples, they don’t all have the same solution. One of the largest factors in deciding how to resolve your dispute is how the property is owned.
Types of Property Ownership
When it comes to ownership disputes, it’s easy to assume that each party actually owns some or all of the property. However, this is not the case.
The law recognises that while you may not have provided the deposit or be on any of the paperwork, that does not mean you haven’t contributed to the costs of owning the property.
For example, you may have spent the last ten years paying half of the mortgage and bills or you could have funded renovations on the property.
In situations like this, it’s possible that a court will decide you’ve contributed enough to acquire a financial interest in the property. This is known as beneficial ownership.
Alongside financial contributions, the court will also consider whether there is evidence of detrimental reliance, meaning one party relied on the understanding that they have a beneficial interest.
Establishing yourself as a beneficial owner can be a complex process, so if you think you may qualify, speak to a solicitor.
When it comes to buying a property with someone else, there are two types of ownership. The first is owning it together as joint tenants.
Under a joint tenancy, every buyer owns the entire property, meaning they have equal rights to the whole. What’s most notable about joint tenants is that if one dies, the property automatically passes to the other co-owner.
When it comes to joint tenants, disputes can arise when it comes to selling the property, as the presumption for residential property is that the property is owned in equal shares (though this doesn’t apply to commercial and investment properties).
That means, even if you’ve contributed more to the purchase or running costs of the property, you may still struggle to be granted more than 50% of its value.
Again, if your dispute involves a property owned as joint tenants, you should seek legal advice on what steps you can take.
Tenants in Common
The alternative to owning property as joint tenants is owning it as tenants in common. As tenants in common, you’ll each own a specific share in the property. So, if you pay more towards the house, you can own a larger share.
Also unlike joint tenancies, the shares owned as tenants in common do not automatically pass to the other co-owner on your death and instead can be included in your estate to be dealt with under the terms of your will.
For this reason, when relationships breakdown, many homeowners choose to move their ownership type from joint tenants to tenants in common.
Resolving Property Ownership Disputes
If you’re going through a property ownership dispute, it’s likely that you’ll want to avoid the risk of another one when you buy again in the future. So, before we look at how to resolve a dispute, here’s a quick word on avoiding them in the first place.
If you’re buying a property as tenants in common and you’re not married or in a civil partnership, one of the best things you can do is prepare a Declaration of Trust.
This co-ownership agreement will clearly define what shares each owner has in the property and how they intend to split future costs, such as mortgage payments.
A Declaration is useful because if a dispute does arise in the future, the court already has a clear starting point for how the property should be divided. This means both sides can save time and money trying to define the terms on which the property was bought.
Alternative Dispute Resolution
When relationships breakdown, communication often does too, which makes coming to an agreement with the other owner difficult. In these cases, both parties can quickly begin preparing for a court battle, but this is not always needed.
When you can’t reach a resolution, you should always try recommending an alternative dispute resolution (ADR), such as mediation. Not only is ADR often cheaper than litigation, but it’s also typically faster, meaning you can move on from your dispute quicker.
If you’re not sure whether ADR will work for you, speak to a solicitor to find out what they recommend. You’d be surprised at how often broken communication can be repaired with the help of a third party.
Applying to Court
If you’re unable to reach a resolution through speaking with the other owner(s) or with ADR, your final step is to ask the court to step in, through the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
In most cases, you’ll need to ask the court to make an order for one of three reasons:
- To order the sale of the property
- To determine who is entitled to occupy the property
- To decide the nature and extent of ownership for each owner.
However, the court has wide-ranging powers and can make a variety of rulings depending on what orders are applied for.
Like any litigation, you’ll need to plan your TOLATA claim carefully and collect evidence to support it. However, the court will take into account a range of factors, including:
- The intentions of the owners at the time of purchase
- The purpose for which the property was owned
- The value of the property on the open rental market
- Respective beneficial interests in the property
- The rights and needs of any children living in the property
If the court does rule in your favour to, for example, sell the property, you may yet have another step to take. The court may provide you with an order of sale, but if your co-owner refuses to sign the transfer of deed to the new buyer, you may need to apply to the court again.
How to Resolve Property Ownership Disputes
When it comes to resolving property ownership disputes, the goal should always be to avoid court action, whether by coming to an agreement yourselves or with the help of alternative dispute resolution.
However, not every dispute can be solved this way, so if you think you might have to go to court, it’s important to seek professional legal advice as soon as possible so you can build a strong case.
If you’re currently going through a property ownership dispute, get in touch with Glaisyers to learn how we can help you reach a resolution.