Core principles of trust law - Trusts of the family home

Learning Outcomes

After reading this article, you will understand the key legal principles for trusts of the family home, including how ownership is determined, when equity will recognize a beneficial interest for non-legal owners (such as cohabitants), and the main practical consequences. You will be able to apply relevant tests, identify constructive trusts and proprietary estoppel claims, and advise on disputes about property rights in the home, as required for SQE2 assessment scenarios.

SQE2 Syllabus

For SQE2, you are required to understand the law and practice relating to trusts of the family home, especially in the context of co-ownership and disputes on separation. Focus areas for revision include:

• Identifying and distinguishing legal and equitable ownership in the family home.
• The creation and recognition of express, resulting, and constructive trusts in domestic property contexts.
• Principles governing the establishment of beneficial interests for cohabitees or non-legal owners.
• Application of the law on constructive trusts, including direct and indirect contributions, and relevant evidential requirements.
• Use of proprietary estoppel and quantifying beneficial shares.
• Advising clients in cohabitation disputes or relationship breakdown, including claims for occupation and sale.

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.

1. In a case where only one partner is the legal owner of the family home, what must the non-legal owner show to claim a beneficial interest?
2. What is the usual effect of indirect (non-financial) contributions to household expenses in determining beneficial ownership?
3. Briefly, what are the key requirements for a proprietary estoppel claim in a family home context?
4. How does the law differ between married couples and unmarried cohabitants in resolving disputes over beneficial ownership?

Introduction

In the context of the family home, determining who owns what can raise complex questions of trust law. It is common for one partner or spouse to be the sole legal owner of the property, even though another may have contributed financially or otherwise. For the SQE2 exam and legal practice, you must know when and how a trust—whether express, resulting, or constructive—might arise, and how the courts decide if a non-legal owner can claim a share.

Key Term: beneficial interest
The right or share a person has in the economic value of property, even if they are not the legal owner.

Legal and Equitable Ownership

Legal ownership of land is determined by registration—only those named on the title or deed are legal owners. However, equity may recognize someone else as having a beneficial interest.

Key Term: legal ownership
The formal title to land recorded in deeds or at the Land Registry.

Key Term: equitable ownership
The share or right in the property's value recognized in equity, often under a trust.

Recognizing Trusts in the Family Home

When property is bought in both parties’ names, there is usually a presumption of joint beneficial ownership, subject to evidence of a different agreement or intention. SQE2 focuses on situations where the property is in the sole name of one partner, and the other claims a beneficial share. These claims generally depend on either:

• An express declaration or agreement (rare without documentation).
• A resulting trust (based on direct contributions to purchase price).
• A constructive trust (based on express or inferred common intention and detrimental reliance).

Express Agreements

Where there is a written or oral agreement, evidence must be clear as to the parties' intention about who should benefit and to what extent.

Resulting Trusts

A resulting trust may arise if a non-owner made a direct financial contribution to the acquisition of the property, such as paying part of the purchase price or deposit. Here, their beneficial share generally reflects their contribution.

Constructive Trusts in the Family Home

Where there is no express agreement and the resulting trust analysis does not apply, the courts turn to constructive trust principles. The leading approach for cohabitants is:

1. Was there a common intention that both should have a beneficial interest? This may be expressly stated or inferred from conduct.
2. Did the non-owner act to their detriment in reliance on that common intention (e.g., financial contributions, substantial renovations, career sacrifices, etc.)?
3. Once common intention and detrimental reliance are proved, the court quantifies the share—starting with what was intended, but, if unclear, the court may infer or impute a fair share.

Key Term: constructive trust
A trust imposed by equity when it would be unconscionable for legal owners to deny another person's beneficial interest due to their contributions.

Indirect Contributions and Evolving Principles

The courts may infer a common intention from patterns of shared finance, such as paying household bills, but typically only if these are linked to mortgage repayments or acquisition (rather than general living expenses). Non-financial contributions alone (such as childcare or homemaking) do not generally suffice unless accompanied by explicit understandings or dealings.

Worked Example 1.1

Cara and Jordan, an unmarried couple, buy a house in Cara’s sole name. Jordan pays for an extension and regularly contributes to the mortgage by transferring money to Cara's account. After their separation, Jordan seeks a share. What likely arguments support Jordan’s claim?

Answer:
Jordan can argue a constructive trust case. Regular contributions to the mortgage and funding the extension can evidence both a common intention and detrimental reliance. The court is likely to find that Jordan has a beneficial interest, with the size of the share determined by the extent of their contributions and evidence of intention.

Proprietary Estoppel in the Family Home

Proprietary estoppel is an alternative route for non-owners to claim an interest where there is a promise or assurance, reliance, and detriment.

Key Term: proprietary estoppel
An equitable remedy preventing a legal owner from denying rights in property where another relied on an assurance to their detriment.

Key Term: detriment
A disadvantage or loss suffered from acting on another’s assurance.

Worked Example 1.2

Sam tells Alex that the house will "one day be yours" if Alex helps pay for home improvements and looks after Sam in old age. Alex invests time and money as agreed. Years later, Sam tries to sell the house. Can Alex claim an interest?

Answer:
Yes. If the court finds clear assurance, Alex’s reliance, and resulting detriment, proprietary estoppel will apply. The court may order a proprietary share, a right to stay in the property, or compensation reflecting Alex’s loss.

Quantifying and Enforcing the Interest

Where a beneficial interest is established, the court must decide its size. If there is no express agreement, the court makes findings based on financial and other substantial contributions, the facts, and what is fair. The court’s decision can grant a share of net sale proceeds or sometimes a right to occupy.

Worked Example 1.3

Ant and Jamie cohabit for ten years. The house is legally in Ant's name, but both pay towards the mortgage and major works. After splitting, Jamie asserts a 50% share. Ant claims Jamie's contributions were mere rent. What will the court consider?

Answer:
The court will examine evidence of a common intention, the pattern of contributions, and conduct. If the payments and actions show a joint enterprise towards home ownership rather than rent, the court may award Jamie a substantial share.

Married Couples, Civil Partners, and Cohabitants

The rules for married couples and civil partners are partly governed by family law statutes, which may authorize courts to reallocate property on divorce or dissolution regardless of strict trust law principles. Unmarried cohabitants must rely on trust law as explained above.

Key Term: cohabitant
A person living with another in an intimate relationship, but not as a spouse or civil partner.

Summary

Key Points:

• Trusts of the family home deal with the split between legal and beneficial ownership.
• Express, resulting, or constructive trusts may give non-legal owners a beneficial share.
• Proving a constructive trust or proprietary estoppel requires evidence of intention, contributions, or assurances, and detriment.
• Married and unmarried couples may have different rights and remedies in property disputes.

Key Point Checklist

This article has covered the following key knowledge points:

• The law distinguishes between legal and beneficial ownership of the family home.
• Where there is no formal written agreement, express, resulting, or constructive trusts determine non-legal owners’ rights.
• Demonstrating a beneficial interest commonly relies on evidence of intention and detrimental contributions.
• Proprietary estoppel may provide a remedy where promises or assurances have been relied upon to one's detriment.
• Married couples may seek relief under family law statutes, while cohabitants must prove a trust or estoppel claim.

Key Terms and Concepts

• beneficial interest
• legal ownership
• equitable ownership
• constructive trust
• proprietary estoppel
• detriment
• cohabitant