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Tuesday, 17 April 2012

Joint ownership implications in family breakdown

It is not often that Family Law has to cross paths with conveyancing solicitors but in wake of the somewhat famous case of Kernott v Jones, attention has once again been directed at conveyancing solicitors acting for purchasers buying property together. It has long been the duty of the solicitor who is acting for clients buying land jointly to explain to them that they can chose to hold it as beneficial joint tenants or as tenants in common. The solicitor should explain what those two options mean, and should make clear to the clients the advantages of setting out their choice in a Declaration of Trust so that there can be no dispute about their decision. They will then be saved costly litigation should a dispute arise in the future. This is vital advice, and it goes beyond the simple point that beneficial joint tenancy means that there is a right of survivorship (the survivor of the two when one dies, will take the whole property); joint purchasers also need to know that when a beneficial joint tenancy is severed, it is at that point unavoidably held in equal shares even if the purchase was funded unequally. Because of the lack of any jurisdiction to redistribute property on the breakdown of cohabitation, this advice and the taking of an informed decision may be even more crucial for unmarried clients than for married clients.

There have been many incidents in the UK when this advice has not been given, no Declaration of Trust has been executed and much of the value of the property has later been wasted in litigation under the law of implied trusts. Over the years, Judges have had to point out on many occasions the disastrous consequences that can occur when people fail to deal explicitly with the beneficial interest in the property.

In an earlier case Stack v Dowden (2007), it was observed by the Court that although the Land Registry form TR1 required registration of a purchase and makes provision for the parties to declare whether they are to hold the property for themselves as beneficial joint tenants or as tenants in common or on some other trust, the parties are free to make that declaration. They may not have been advised to do so despite the solicitor’s duty or they may choose to ignore that advice. The problem with the Form TR1 is that the tick box exercise is not compulsory and failure to tick one of the boxes means that the Land Registry will simply enter a restriction in Form A upon the title by default. That restriction has often been misinterpreted and taken as an indication of tenants in common.

It is imperative to avoid unnecessary litigation to make sure that joint purchasers particularly unmarried parties, purchasing property together are correctly advised regarding the implications of how they hold the property.

Many family solicitors will be directing their separated cohabitant clients to make claims for negligence against the conveyancers who dealt with the purchase where parties’ intentions as to ownership have not been properly recorded.
(Blog written by Olive McCarthy, Head of Private Client)

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