Joint Ownership and Avoiding Costly Mistakes

The case of Leonard Kernott v Patricia Jones (2010) EWCA Civ 578 is another timely reminder that those purchasing property jointly should give consideration as to how the property should be held prior to completing any purchase. An express declaration as to how they hold the beneficial interests in the property should be made to prevent any uncertainty.

In this case, K appealed against earlier decisions regarding a declaration as to the share of the beneficial interest in a property he co-owned with J. J and K had bought the property in 1985 with a deposit provided by J and a mortgage, the repayments of which were shared. The property was in joint names. In 1993, K moved out and J remained in the house with their two children and made all the mortgage repayments during that time. K subsequently purchased another property. Approximately 12 years after their separation K sought the payment of his half share. J issued proceedings under the Trusts of Land and Appointment of Trustees Act 1996 and sought a declaration that she owned the entire beneficial interest in the property. A declaration was made that the beneficial interest was split 90 per cent to 10 per cent in favour of J and that decision was upheld on appeal.

The Court of Appeal held:

• The conveyance into joint names created joint beneficial interests. The parties agreed that when they separated they had equal interests. There had to be something to displace those interests and the passage of time was insufficient to do so, even though K had acquired alternative accommodation and J had paid all the outgoings since K had left. K was entitled to a 50 per cent interest in the property and the decision that the interest was split 90 per cent to 10 per cent in favour of J was wrong.
• There was nothing to displace the presumption of equality. There was a total lack of evidence about the parties' intentions. If K and J had truly intended that K's beneficial interest should reduce post-separation, they should have acted accordingly and adjusted their beneficial interests.
• The burden of proof was on the party seeking to show a common intention that the beneficial interests should be different to the legal interests.

This case followed the landmark decision in Stack v Dowden (2007) UK HL 17 in which an unmarried couple lived for many years in property purchased jointly. No express declaration was made as to how the beneficial interests in the property were held. The House of Lords held that they were entitled to joint and equal shares in the property unless a clear contrary intention was shown otherwise. The case established the following principles for determining the beneficial interests:

• a conveyance into joint names will result in a legal and beneficial joint tenancy, unless the contrary is shown;
• the burden of proof is on the owner seeking to show that they intended to hold their beneficial interests as tenants in common;
• the court must ascertain the parties' shared intentions in the context of the whole course of their conduct relating to the property. Some of the factors to be considered include:
• any advice or discussions at the time of the transfer, that would indicate their intentions at that time;
• the reasons why they purchased the house jointly;
• the purpose for which the house was acquired;
• the nature of the parties' relationship;
• whether the couple had children for whom they both had responsibility to provide a home;
• how the purchase was financed, both initially and subsequently;
• how the parties arranged their finances, for example, whether their accounts were held separately, together or a combination of both; and
• how the couple discharged their outgoings on the house and other household expenses.

These cases show that it is imperative to consider how the beneficial interests should be held when purchasing property jointly, especially where the buyers are unmarried. The burden on the party seeking to rebut the presumption of joint beneficial interests is a heavy one and the court will not substitute what it considers to be a "fair" solution in the absence of any evidence as to the parties common intention. Any decision by the parties should be documented by way of a declaration of trust to avoid any uncertainty.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.