All I want for Christmas is you – and a share in your property!
Gifts in property transactions, and the potential for dispute
16 December 2022
Whether it’s the £1.2 million necklace that David Beckham gave Victoria in 2005, a batch of home-made mince pies, or £500 towards building that conservatory your sister has always wanted, gifts can bring people together.
But what happens if the giver later regrets their generosity and wants the item or money returned? Are they legally entitled to get it back?
The short answer is “no”. Provided that the giver intended to transfer ownership to the recipient at the time the gift was made (and, if the gift was land, provided that the relevant legal formalities were carried out), that is normally the end of the story.
The longer answer is “maybe, depending on the circumstances”. A typical example where a gift can be undone is where the giver was improperly influenced into making the gift. Such influence is known as “undue influence”.
Undue influence could be obvious (for example, threats or abuse). However, it could be more subtle. The court will presume that undue influence has arisen where the recipient of the gift looks after the giver’s financial affairs and the size or nature of the gift calls for an explanation.
For example, if a grandmother transfers her house to her granddaughter (who manages her grandmother’s financial affairs), and the grandmother gives nothing to her other grandchildren, the court is likely to presume undue influence. To overcome this assumption, the granddaughter would need to satisfy the court that the grandmother did have free will when making the gift. For example, if the granddaughter can prove that she had a strong emotional bond with her grandmother when the gift was made, and that the grandmother was estranged from her other grandchildren at that time, the granddaughter may be able to overcome the presumption of undue influence.
Undue influence is discussed further in our previous articles, such as “I am a joint owner of a property and there is an express declaration of trust. Is it legally binding?”
Even where there is no question of undue influence, disputes can arise about what the giver’s intentions actually were. A gift is effective when the donor intends to make it a gift and the recipient takes the thing given and keeps it, knowing that he has done so. Where there is a dispute as to intention in the making of a gift, it is the intention of the donor which will be crucial, rather than that of both parties. If the donor claims that a gift was not intended, what is the status of the item or payment? Context is everything. Someone who hands a gift-wrapped bracelet to their loved one on Christmas Day will struggle to convince the court at a later date that the bracelet was not a gift.
By contrast, if someone contributes £10,000 towards their brother’s kitchen installation, and they did not expressly tell the brother at the time that it was intended as a gift, this could easily lead to a dispute about whether it was a gift. Potentially, the giver could argue that the £10,000 was intended as a loan. Alternatively, the giver could argue that there was a common intention between the siblings that the giver was making an investment and would obtain a share in the property. As explained in previous articles, such as “Cohabitation disputes – trouble in the Shire!” , where such a common intention is made out, this could give rise to a “common intention constructive trust”. If a common intention constructive trust has arisen, the giver may be able to recover their investment when the property is sold (potentially, with an uplift, if the property has since gone up in value).
Most gifts will never be challenged. It is unlikely that anyone would bring a court claim over a batch of mince pies or even the latest iPhone.
However, where an item is of high value, there could be a real risk of litigation. There may be a gap of many years between the gift being given and court proceedings being issued. It may be very difficult to recall or prove what happened, especially if the gift-giver or recipient has passed away.
If you expect to give or receive a substantial gift this Christmas, and you are worried that its validity may be challenged in future, it is worth obtaining independent legal advice. Potentially, it would be useful to enter into a Deed of Gift to put the matter beyond all doubt.
If you require any further information on property disputes of this nature, please contact Stephanie Butler on 01223 326694.
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 December 2022.