Learning Outcomes
This article explains implied trusts in purchase money situations, focusing on the presumption of resulting trust, its operation, and its relationship with co-ownership of the family home in SQE1 FLK2. It details the circumstances in which a purchase money resulting trust arises, the kinds of direct contributions that qualify as purchase money (deposit, contemporaneous cash funding, assumption of mortgage liability, and Right to Buy discounts), and the strict timing requirement that contributions must be made at or before acquisition. It analyzes how courts quantify beneficial shares arithmetically by reference to acquisition contributions, distinguishing this from broader, fairness-based constructive trust reasoning. It reviews the evidential burdens on the claimant and legal owner, the admissibility and limits of contemporaneous and post-transfer statements, and the way documentary funding arrangements are used to prove or rebut the presumption. It discusses how the presumption can be displaced through proof of gift, loan, or discharge of debt, and how the presumption of advancement operates as a counter-presumption in defined relationships. It also situates resulting trusts within the wider exam framework, highlighting common SQE1 problem patterns where legal title does not match financial contribution and requiring careful distinction between resulting trusts, constructive trusts, and illegality-based defences.
SQE1 Syllabus
For SQE1, you are required to understand the principles fundamental to implied trusts, particularly resulting trusts arising from contributions to the purchase price of property. This knowledge is essential for analysing property ownership disputes and advising on beneficial interests where legal title might be misleading. You need to be able to apply these rules in practical scenarios, with a focus on the following syllabus points:
- The nature and creation of implied trusts, specifically resulting trusts.
- The operation of the presumption of resulting trust in purchase money situations.
- How beneficial interests are quantified under a resulting trust.
- The requirements for rebutting the presumption of resulting trust.
- The presumption of advancement and its application (and limitations).
- Distinguishing resulting trusts from constructive trusts in the context of shared homes.
- Formalities: resulting and constructive trusts are exempt from LPA 1925 s53(1)(b)–(c) by s53(2); voluntary transfers of land and s60(3) LPA 1925.
- Evidential rules: admissibility of contemporaneous evidence and the limited role of subsequent acts/declarations.
- Illegality: the court’s discretionary approach to claims where the transfer or arrangement involved an unlawful purpose.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
-
Under what circumstances does the presumption of a resulting trust typically arise in relation to property purchases?
- When property is transferred as an outright gift.
- When one person contributes to the purchase price of property, but legal title is held by another.
- When a trustee breaches their fiduciary duty.
- When property is held under an express declaration of trust.
-
How is the beneficial interest under a purchase money resulting trust usually quantified?
- Equally between all parties involved.
- Based on the court's assessment of fairness.
- In proportion to the contribution made to the purchase price.
- According to the terms of the mortgage agreement.
-
Which of the following relationships traditionally gave rise to the presumption of advancement, countering the presumption of resulting trust?
- Transfers between siblings.
- Transfers from a wife to her husband.
- Transfers from a father to his child.
- Transfers between business partners.
-
True or false: Evidence of intention declared after the property transfer is generally admissible to support the transferor's claim of a resulting trust.
Introduction
When property is purchased, the legal title might be registered in the name of one person, even if another person contributed financially to the purchase. Equity may intervene in such situations to ensure fairness by implying a trust, reflecting the financial reality rather than just the legal formality. One important type of implied trust is the resulting trust, particularly the presumption that arises in purchase money situations. This article explores this presumption, its effects, and how it can be rebutted.
A helpful distinction:
- Resulting trusts look to direct financial contributions to acquisition at the time of purchase and apportion beneficial interests arithmetically.
- Constructive trusts look to common intention and detrimental reliance and often govern disputes between cohabiting partners about their family home where ownership is contested beyond strict purchase funding.
The Presumption of Resulting Trust
Where a person (A) provides some or all of the purchase money for property, but the legal title is transferred into the name of another person (B), equity presumes that A did not intend to make a gift of their contribution to B. Instead, it presumes that A intended to retain a beneficial interest in the property. This is known as the presumption of resulting trust.
Key Term: Resulting trust
An implied trust which arises by operation of law in certain circumstances, typically where property is transferred to someone who pays nothing for it and is then implied to hold the property for the benefit of another person. The beneficial interest is said to 'result' (return) to the person who provided the property or purchase money.
The effect of this presumption is that B (the legal owner) is deemed to hold the property (or a share of it) on trust for A (the contributor).
Key Term: Presumption of resulting trust
The rebuttable presumption that arises when property is purchased in the name of another, or transferred voluntarily without consideration, suggesting the recipient holds the property on trust for the provider of the funds or the transferor.
Two common settings:
- Voluntary transfers: where X conveys property to Y for no consideration (with special statutory nuances for land).
- Purchase money cases: where X funds all or part of the price but title is put into Y’s name.
Quantifying the Beneficial Interest
If A provides the entire purchase price but the property is put in B's name, the presumption is that B holds the entire property on resulting trust for A. If A contributes only a portion of the purchase price, the presumption is that B holds the property on trust for both A and B, with their beneficial interests being proportionate to their respective contributions to the purchase price.
In practice, quantification under a resulting trust:
- Focuses on contributions to acquisition costs at the time of purchase (e.g., cash deposit and purchase funding in place then).
- Usually excludes later payments for repairs, improvements, and general outgoings.
- Treats mortgage funding cautiously: assumption of mortgage liability and contemporaneous funding can be counted as purchase money, whereas unconnected, later instalments are often relevant to constructive trusts rather than resulting trusts.
When computing shares, courts typically use the ratio of each party’s contribution to the total price paid at acquisition (deposit + purchase funding), without importing fairness-based adjustments that belong to constructive trust analysis.
Worked Example 1.1
Chloe contributes £50,000 towards the £200,000 purchase price of a house. The legal title is registered in the sole name of her friend, David, who provided the remaining £150,000. There is no written agreement about ownership. What is the presumed position regarding the beneficial ownership?
Answer:
Equity presumes a resulting trust. David holds the legal title on trust for himself and Chloe. Chloe's beneficial interest is presumed to be proportionate to her contribution, which is 25% (£50,000 / £200,000). David holds the remaining 75% beneficial interest.
Worked Example 1.2
Amir pays a £40,000 deposit towards a £300,000 purchase. The balance is funded by a mortgage in Beatrice’s sole name. Legal title is registered in Beatrice’s name only. Amir and Beatrice had agreed at exchange that Amir would provide the deposit and Beatrice would take responsibility for the mortgage at completion. Later, Amir makes no mortgage payments; Beatrice pays them all.
Answer:
The deposit is a direct contribution to acquisition. A resulting trust presumption arises in favour of Amir for £40,000/£300,000 = 13.33%. Later mortgage servicing by Beatrice does not change the arithmetic under a resulting trust; her subsequent payments are relevant to constructive trust adjustment only if common intention and detrimental reliance are proved. Absent such proof, the presumed shares remain proportionate to acquisition contributions.
Worked Example 1.3
Nadia is a secure tenant entitled to a statutory Right to Buy discount of £90,000. Her partner, Theo, provides the £210,000 cash needed to complete the £300,000 purchase, and title is registered in Theo’s name only. Nadia did not contribute cash but the discount was only available because of her tenancy.
Answer:
In many cases the discount is treated as a contribution to the purchase price attributable to the sitting tenant. A purchase money resulting trust presumption can arise giving Nadia a 30% share (£90,000/£300,000) and Theo a 70% share (£210,000/£300,000), subject to rebuttal by evidence of gift or a contrary arrangement.
Contributions Must Relate to Purchase Price
For the presumption to arise, the contribution must be towards the actual purchase price of the property at the time of acquisition. Payments towards general household expenses, repairs, or subsequent mortgage instalments (unless part of the initial arrangement to fund acquisition) generally do not give rise to a resulting trust, although they might be relevant to establishing a constructive trust (a different type of implied trust often used in family home disputes).
A practical approach to mortgage funding:
- Contributions count where they form part of the contemporaneous acquisition financing (e.g., being jointly liable on the mortgage or paying an agreed lump sum at or around completion).
- Routine servicing of the mortgage after purchase, without more, is usually relevant to constructive trust or proprietary estoppel rather than a purchase money resulting trust.
The timing requirement is strict: the contribution or obligation to contribute must be supplied at or before title is taken. Reimbursement after completion does not trigger a purchase money resulting trust.
Rebutting the Presumption
The presumption of a resulting trust is rebuttable. It can be displaced by evidence showing that the contributor (A) actually intended to make a gift or a loan to the legal owner (B). The burden of proof lies on the person seeking to rebut the presumption (usually B, the legal owner) to show that a gift or loan was intended. Evidence of intention should ideally be contemporaneous with the transaction.
Common rebuttal scenarios:
- A’s payment was a gift to B.
- A’s payment was a loan to B (creating a debtor/creditor relationship rather than a trust).
- A paid to discharge a debt owed to B.
The quality of evidence matters. Contemporaneous documents (e.g., letters, emails, bank references, completion statements), agreed funding arrangements, and statements at or before the time of purchase are most persuasive. Post-transfer statements by A are generally inadmissible to support A’s claim, but may be used against A.
Worked Example 1.4
Same facts as Worked Example 1.1. However, David produces a letter written by Chloe at the time of the purchase stating, "David, please accept this £50,000 as a gift towards your new home. I don't expect anything back." How does this affect the presumption?
Answer:
This letter provides clear evidence that Chloe intended her £50,000 contribution as a gift, not as the basis for claiming a beneficial interest. This evidence rebuts the presumption of resulting trust. David would hold the entire beneficial interest, and Chloe would have no claim under a resulting trust.
Worked Example 1.5
Holly pays £30,000 towards a purchase in Sam’s name. After completion, Holly emails Sam stating: “I didn’t mean to give you anything. Please treat the £30,000 as ensuring I have a share.” There is no contemporaneous evidence of trust or loan and no pre-completion discussion.
Answer:
The presumption of resulting trust arises because Holly paid part of the purchase price. However, her post-transfer email is generally inadmissible to support her claim. Sam cannot use that email to rebut the presumption, but if Sam had contemporaneous evidence of gift or loan at purchase, that could displace the presumption.
The Presumption of Advancement
Historically, in certain relationships, equity applied a counter-presumption called the presumption of advancement. This presumed that a transfer of property or contribution to purchase price was intended as a gift ('advancement') due to a perceived moral obligation to provide for the recipient.
Key Term: Presumption of advancement
The historical, rebuttable presumption that in certain relationships (e.g., father to child, husband to wife), a transfer of property or contribution to purchase price was intended as a gift, displacing the presumption of resulting trust.
Traditionally, this presumption applied to transfers from:
- Father to child (but not mother to child).
- Husband to wife (but not wife to husband).
- Someone standing in loco parentis (in the place of a parent) to a child.
The presumption of advancement reflects outdated social views and has been heavily criticised. Section 199 of the Equality Act 2010 abolishes the presumption, but this section is not yet in force. Therefore, while its application is viewed restrictively by modern courts, it technically still exists and can be rebutted by evidence of contrary intention, just like the presumption of resulting trust.
In practice today, even where advancement applies, the court looks for evidence of actual intention. For example, if a father pays the purchase price but evidence shows he intended to retain a beneficial interest (or intended a loan), advancement can be rebutted.
Worked Example 1.6
A father pays £120,000 for a flat registered in his adult son’s name. There is no written agreement. Does the presumption of advancement apply and what is the likely outcome?
Answer:
The presumption of advancement applies, suggesting the father intended a gift to his son. However, the presumption is rebuttable. If contemporaneous evidence indicates the father intended to retain a beneficial interest (or intended a loan repayable), a resulting trust or loan analysis can be preferred. Absent such evidence, the son takes absolutely.
Exam Warning
While the presumption of advancement still technically exists, its application is viewed critically by modern courts. SQE1 questions are more likely to focus on determining intention from evidence rather than relying heavily on this presumption. Be aware of its existence and traditional application but focus on evidence of actual intention where provided in a scenario. Furthermore, remember that the common intention constructive trust is often the preferred mechanism for resolving disputes over family homes between cohabiting couples, rather than relying solely on resulting trust presumptions.
Revision Tip
Focus on the evidence provided in any scenario. Does it indicate a gift, a loan, or an intention to retain an interest? The presumptions are merely starting points where evidence of actual intention is lacking. Direct evidence of intention will always override a presumption.
Further Evidential Points and Special Situations
Admissible evidence is confined to acts and declarations made before or at the time of the transfer (or immediately after if part of the same transaction). Later statements are generally inadmissible to assist the transferor’s claim but may be admissible against them.
Burden of proof:
- The claimant asserting a resulting trust must prove their contribution with clear evidence (e.g., bank transfers, agreed completion statements).
- The legal owner rebutting the presumption bears the burden to show it was a gift or loan.
Formalities:
- Resulting and constructive trusts do not need to be evidenced in writing under LPA 1925 s53(2).
- Voluntary transfers of land: s60(3) LPA 1925 provides that a resulting trust for the grantor is not implied merely because the conveyance is voluntary; modern authorities still recognise resulting trust in appropriate cases where facts justify it beyond a bare presumption.
Illegality:
- Where the arrangement involved an illegal or fraudulent purpose (e.g., hiding assets from creditors or benefits fraud), the court has discretion whether to allow a claim. It weighs public policy factors, the seriousness of wrongdoing, whether allowing the claim would stultify or facilitate the illegality, and the conduct of the parties.
Worked Example 1.7
Grace transfers assets into her son’s name to keep them out of reach of creditors if her business fails. She later seeks to reclaim the assets, saying she never intended a gift.
Answer:
The court assesses whether allowing Grace’s claim is consistent with public policy. If creditors were deceived or the plan was central to the illegality, relief may be refused. If no creditor was harmed and the transfer was not actually part of a fraudulent scheme, the court may in some cases permit recovery. Outcomes are fact sensitive.
Worked Example 1.8
Alex and Blair, an unmarried couple, agree Alex will hold the title alone so Blair can continue a means-tested benefit claim. Both fund the purchase. The relationship ends and Blair seeks a share.
Answer:
The court may decline to enforce Blair’s claim if it would give effect to their dishonest plan. However, the court will consider the seriousness of the fraud, the parties’ respective conduct, and whether denying relief would be disproportionate. Where Blair’s contribution is clear and substantial, some courts have in defined circumstances permitted recovery without endorsing the illegality, but this is not guaranteed.
Distinguishing Resulting from Constructive Trusts in the Family Home
Resulting trusts are arithmetical, tied to contributions at acquisition. Constructive trusts are broader and depend on:
- A common intention to share (proven expressly or inferred from conduct).
- Detrimental reliance by the claimant.
Practical markers:
- Where parties are cohabitees and there is little or no direct purchase funding by the claimant, constructive trust or proprietary estoppel may be the right route.
- Where there is direct purchase funding at acquisition, a resulting trust presumption starts the analysis; later conduct may justify a constructive trust share different from the arithmetic if common intention and detriment are proved.
Key Point Checklist
This article has covered the following key knowledge points:
- Resulting trusts are a type of implied trust arising by operation of law.
- A presumption of resulting trust arises where one person contributes to the purchase price of property, but legal title is held by another.
- The contributor is presumed to retain a beneficial interest proportionate to their contribution.
- Contributions must relate to acquisition funding at or before completion; later outgoings generally do not count towards resulting trust shares.
- The presumption can be rebutted by evidence of intention to make a gift or loan.
- The historical presumption of advancement presumed a gift in certain relationships (e.g., father-child, husband-wife), countering the resulting trust presumption, but its relevance is diminished.
- Section 199 of the Equality Act 2010 (not yet in force) abolishes the presumption of advancement.
- Evidence of actual intention at the time of the transaction is key to determining beneficial ownership; later statements are generally inadmissible to assist the transferor.
- Resulting and constructive trusts are exempt from LPA 1925 s53(1)(b)–(c) under s53(2); voluntary transfers of land engage s60(3).
- Courts may refuse relief where arrangements were part of an unlawful scheme, applying a public policy balancing approach.
Key Terms and Concepts
- Resulting trust
- Presumption of resulting trust
- Presumption of advancement