… that was, indeed, the question.

When we usually write about family law it is in the context of relationships between spouses, civil partners, couples living together, parents and children. Regular readers, and those in the know, will be aware that the legal landscape is very different for those who live together outside marriage, and where two people own property together but are not married or in a civil partnership. The law which affects the property rights of cohabiting couples is the same law of property which governs joint owners who are not in a relationship. It is a complex mix of trust and some arcane principles of property law.

Just such a case caught our attention recently, not least because it has a Cambridge focus, featuring a property just down the road from here, in Cherry Hinton. It is called Agarwala v Agarwala and you can read the judgment here.

This case was slightly unusual in that the property was owned by a brother in law and sister in law (respectively Sunil and Jaci), who had bought it as an investment in 2007 (not as is usually the case with reported decisions a couple or former couple). The house was bought in Jaci’s sole name with a mortgage in her name. It was to be run as a B&B business, and the two of them agreed that Sunil would run the B&B business, but due to his credit rating he needed Jaci’s help with purchasing the property.

The dispute centred around their diametrically opposed positions as to who was beneficially entitled to the property. By way of quick explanation, property has both a legal title (what is “on paper”) and a beneficial (or equitable) title, which can differ. It is possible for the legal shares in a property and the beneficial ones to differ. There have been several cases in which the highest courts have looked at how to deal with disputes like this, where shares in the beneficial title are not agreed. In essence, where there is nothing in writing to make the division of the beneficial title clear, the court’s job is to look at what the parties’ intentions actually were through analysing the evidence. They can also retrospectively impute intentions to the parties as to the shares in the beneficial title.

In this case, Sunil and Jaci had had discussions about who would be beneficially entitled to the property, but did not set that down on paper. So the court had to decide who it believed, with both of them claiming they were entitled to the whole of the beneficial title. This was not a case where the court would divide it between them as both claimed they were entitled to all of it.

As the legal title was in Jaci’s name, Sunil had to establish his case by way of the doctrines of constructive trust and estoppel. These are rather complex legal principles that are all about relying on a promise made by someone else and suffering some disadvantage as a result.

Jaci argued the property was meant as her pension and Sunil made the arrangements for its purchase and agreed to run the business, with the benefit to him being that he would be able to farm out over bookings from his existing B&B business to this new B&B at no extra cost. Sunil argued Jaci just helped him out with the purchase and the benefit to her was that he paid her a monthly salary of £800 to do the accounts of business as well as covering all the costs of the property.

In Cambridge County Court the trial judge decided that, despite a certain amount of underhand behaviour (including forging documents) Sunil was entitled to the beneficial title in the property, and that Jaci held the legal title as a simple (‘bare’) trustee for him, receiving a monthly payment from him for her role as owner but not actually being entitled to the property. The judge said that it was improbable that such an “unscrupulous and self-interested character” as Sunil would altruistically provide his sister in law with a property and business at no charge – so his bad character actually helped him win his case!

Jaci appealed to the Court of Appeal but was unsuccessful in overturning the trial judge’s decision as it was well reasoned and not clearly wrong in law or on the facts. It is always difficult to appeal judgments made by a judge who hears evidence and gives specific reasons for deciding as he/she did.

Whilst this case is quite specific on its own facts, it is a useful reminder of the principles of property law relating to all those buying property with someone to whom they are not married or civilly partnered, and a warning about the importance of setting down your intentions with regards to how you own your property in writing when you buy property, to avoid expensive disputes later down the line.

If we can advise you on property issues with family members, or any other aspect of family law, please get in touch with us on 01223 443333 to make an appointment.

 

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