The reason these disputes arise is because it is possible to acquire rights to a property even if you are not named on the deeds as a legal owner. This is because there is a distinction between legal ownership and beneficial ownership. While the legal owners have the power to sell the property, it is the beneficial owners who get to keep the sale proceeds. This is because the legal owners hold the property on trust for the beneficiaries (who might not be the same people). The most straightforward way to establish that a property is subject to a trust in this way is by creating an express declaration of trust. The terms of the trust declare how the beneficial interest in the property is to be held, i.e. to whom the equity belongs and in what shares. To satisfy the formality requirements of a trust, the declaration of trust must be in writing and signed by the parties. (The declaration may be a stand-alone document or it may form part of the conveyance itself.)
Express declarations of trust are binding on the parties and are usually conclusive evidence of how the sale proceeds should be divided. They will not usually be affected by subsequent changes of circumstances, for example, if one party starts to pay more towards the property than had initially been envisaged. Because declarations of trust only have to be in writing and signed by the parties to be legally effective, they do not necessarily have to be prepared by lawyers (although this is usually advisable). As such, they can be prepared by the parties themselves, which creates scope for allegations of fraud about whether the document was actually signed by the parties to it.
Birketts recently advised a client in similar circumstances. There was a valid express trust declaring that the property was held solely for our client’s benefit. We sought a declaration from the court that the property belonged exclusively to our client in accordance with this deed. Our client’s ex-partner sought to defend the claim in reliance upon a number of subsequent 'declarations', which purported to give him an equal share in the property. Had those declarations been genuine, they would have superseded the earlier declaration and the most recent of the declarations would have been binding. We successfully argued that the other, more recent, 'declarations' were fraudulent on the basis that our client's signature on the deeds had not, in fact, been written by our client.
These cases are very fact specific and require expert evidence to be given by a person specialising in forensic handwriting analysis. The handwriting expert is typically appointed by the parties on a joint basis and will analyse agreed examples of the person’s signature along with the disputed signature(s) before reporting on whether the disputed signature is genuine.
To help minimise the potential for dispute, we advise that declarations of trust are prepared by solicitors. This is not only because a solicitor is able to produce a more comprehensive agreement, but also because the solicitor can then witness the parties' signatures on the document. The solicitor can then be called to give evidence, confirming that the document was indeed signed by the parties, in the event that one of the signatures is later called into question.
The content of this article is for general information only. If you require any further information in relation to property disputes please contact Laura Tanguay on +44 (0)1473 299188 or [email protected]. Alternatively, please contact a member of Birketts’ Property Litigation Team. Law covered as at July 2017.