Chapter 1: The happy couple
Harry and Ginny are an unmarried couple.
In the early stages of the relationship, Ginny moved into Harry’s accommodation, being a small studio flat under some stairs. The flat was registered in Harry’s sole name after it was gifted to him by his parents several years before meeting Ginny.
It soon became clear that the studio flat was far too small, so they began their search for a bigger home. They ended up purchasing a four-bedroom house, Hogwarts, for a price of £450,000.
To fund the deposit for Hogwarts, Harry used £200,000 from the sale of his flat. The remaining £250,000 of the purchase price was financed with a capital repayment mortgage in Ginny and Harry’s joint names. Ginny did not make any financial contribution towards the deposit or the costs of purchase.
At the point of purchase, Ginny and Harry ticked a box in the conveyancing paperwork (specifically, the Transfer Form) stating that they were to hold Hogwarts as ‘joint tenants’.
Ginny and Harry discussed Harry’s large financial contribution towards the deposit and it was agreed during that conversation that, in the event that Hogwarts was ever sold, Harry would receive the first £200,000 of the sale proceeds with any balance being divided equally between them. Harry felt comfortable proceeding with the purchase on this basis.
Upon moving into Hogwarts, all of the monthly mortgage repayments and utility bills were paid equally between Ginny and Harry via their joint bank account.
Chapter 2: Expelliarmus Ginny
After a few years, Harry becomes bored with Ginny and ends the relationship.
Harry is keen to sell Hogwarts so that he can purchase a property with his new lover, Ron. Hogwarts has been valued at £600,000. With £200,000 left to pay on the mortgage, there is net equity of £400,000.
Ginny is willing to agree a sale, but wants to split the proceeds 50/50. She has made reference to them each walking away with £200,000. Harry feels that Ginny has not taken into account his £200,000 contribution to the deposit and believes that he should be reimbursed this sum before the proceeds are split. Harry’s view, therefore, is that he should get £300,000 from the sale proceeds and Ginny should get £100,000.
What is Harry’s legal position?
Chapter 3: The law
Ticking the joint tenants box on the Transfer Form at the point of purchase might not look like much however, the effect of this is significant: ticking this box constitutes an ‘express declaration of trust’.
Express declarations of trust have been described by the court as “conclusive” evidence of the beneficial shares in a property. This means that it does not matter how the purchase was funded; the declaration of a joint tenancy will prevail.
As a joint tenancy can only ever mean equal shares, the starting position is that Ginny and Harry are bound by the express declaration contained in the Transfer Form and are each entitled to 50% of the net sale proceeds.
Express declarations of trust can only be ‘set aside’ in very limited circumstances, such as where there is undue influence, mistake or fraud. The evidential threshold that must be met to set aside a declaration of trust in this way is a high one. It would be worthwhile for Harry to request a copy of the conveyancing file relating to the purchase of Hogwarts, as the file might support an argument that the declaration of a joint tenancy should be set aside on grounds of mistake. On the face of it, the joint tenancy is inconsistent with Harry and Ginny’s verbal agreement about ring-fencing Harry’s deposit, so it’s possible that a mistake was made.
‘Mistake’ for this purpose has a specific legal meaning (as opposed to simply regretting the decision to enter into a joint tenancy). More information about setting aside express declarations of trust can be found in our earlier article: Setting aside express declarations of trust.
Another legal avenue to explore is the principle known as ‘proprietary estoppel’. If assurances or promises have been made, proprietary estoppel can prevent someone from backtracking on that promise in certain circumstances. It might therefore be possible to argue that Ginny is prevented (or ‘estopped’) from going back on her promise that Harry would receive the first £200,000 from any sale. More information on proprietary estoppel can be found in another of our earlier articles: Proprietary Estoppel.
If this scenario resonates with you or you require further information or advice regarding your property dispute, please email Laura Tanguay or call on 01473 299188.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2022.