Landlord & Tenants: Occupier held entire beneficial interest in property after resulting trust established

Housing - Landlord and Tenants

In the recent case of Tahir v Faizi [2019] EWHC 1627 (QB) the court held that the Claimant was entitled to the entire beneficial interest of a property owned by the Defendant.

Background

Tahir and Faizi had no family connections and had known each other only a short time before Tahir purchased a property in his sole name with a mortgage. Faizi had resided in the property with his family since Tahir purchased the property in 2006. Tahir did not reside in the property.

During his occupation of the property, Faizi had applied for planning permission, changed the garage to an office and paid Tahir’s mortgage directly to the lender for a period of about three years while Tahir was overseas.

At other times during the period from November 2006 to 2015, Faizi made, mostly, regular payments to Tahir in respect of the property. Faizi characterised these as payments of Tahir’s mortgage, in accordance with what he alleged to be their original agreement in 2006. Tahir claimed that these payments were rental payments.

Faizi applied to the County Court for a declaration under Section 14(2)(b) of the Trusts of Land and Appointment of Trustees Act 1996 that he held 100% of the beneficial interest in the property. The County Court initially ordered that the oral agreement between the parties could give rise to a transfer of the beneficial interest in the property to the Tahir. Faizi then appealed to the High Court who upheld the County Court’s decision.

The judge in the High Court found that it could not be a common intention constructive trust and could therefore only be a resulting trust. It went to decide that Fiazi held the entire beneficial interest in the property under a resulting trust and, as such, Tahir was entitled to be indemnified by Faizi for any expenses relating to the property, such as mortgage repayments. The judge also considered that it would be advisable for Tahir to transfer the legal title to the property to Faizi, and to novate the mortgage to him but that this would most likely require lender’s consent.

Conclusion

It can become very difficult when properties are purchased with different agreements and payments towards the property or its maintenance, especially when the agreement is not recorded in writing. If possible it is always best practice to enter into a Declaration of Trust clearly setting out the parties intentions and agreement.

If this has not been completed then the court will need to consider what were the intentions of the parties and the financial contributions that each party mas made. Ideally the parties would be able to agree an amicable solution but if this is not possible the court would need to decide on each parties interest in the property.

Should you need advice upon ownership of a property or require advice upon a potential dispute please contact Andy Rudkin on andy.rudkin@elselaw.co.uk or call him on 01283 526239.

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