How much trust should be relied on in cohabitation arrangements?

This post discusses the concept of equitable trusts in the context of a relationship breakdown of unmarried couples. I consider which approach courts should take when a couple changes their mind about how to divide their assets.

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Equitable trusts. Often the source of much frustration for law students and often misunderstood by the public due to their complex nature. However, they are an invaluable tool when dealing with a relationship breakdown and attempting to divide property when intentions have changed.

Let’s put this situation into context. An unmarried couple decides to buy a property together (there are currently 3.3 million unmarried cohabitants in the UK in this very position). The couple live in the property for let’s say 10 years. They then, unfortunately, break up.  The couple may have entered into clear agreement as to how to divide the property before completion (cohabitation agreements are highly recommended here). But often they will not have and there will have to be a determination by the courts into how the couple intended to divide the beneficial interest (monetary value) of the property. There are also situations, where a couple may have agreed something at the beginning of the relationship, but then over the years have changed their intention on what to do with the property.  How do the courts proceed then?

The conflict is whether the courts should approach these situations in a purely formalistic way, looking only at what the parties have written down, disregarding any actions which might show a different intention subsequently. Or should the courts be more holistic, looking at the whole span of the relationship and working out both parties’ true intentions when it comes to who gets what at the end of the 10 years? I explore which approach is more preferable in this post.  

The seminal cases of Stack v Dowden [2007] 2 AC 432, Jones v Kernott [2012] 1 AC 776 and Oxley v Hiscock [2004] 3 WLR 715 have provided a robust framework for the courts to infer parties’ intentions in a holistic manner:

Constructive Trust

Express Declaration of Trust

An express declaration is seen to confirm the extent of each party’s beneficial interest of the property and also sets out any express terms that the co-owners want to include e.g. Person A gets full amount of deposit back, Person B keeps all the furniture. It is on the whole considered conclusive evidence.

However, as the HM Land Registry acknowledges in their guidance of joint ownership: “Recording the joint owners’ intentions in panel 10 of the transfer or in a separate form JO … may help to avoid such disputes later on. However, this is only a starting point, as the joint owners’ intentions may change over time”

  1. Liability

The starting position for jointly owned property will be 50/50. However, if this is disputed, the claimant must prove a common intention to divide the beneficial entitlement in a different way, coupled with detrimental reliance on this intention. This intent can either be express (based on discussions between the parties) or inferred (based on direct contributions or their entire course of conduct in relation to the property in question e.g. paying the mortgage or DIY improvements to the home). 

2. Quantification

The court assesses the parties’ respective beneficial interests based on what the parties have agreed or what the court considers fair when looking at the whole course of dealing between the parties in relation to the property.

So which approach prevails and in what circumstances? In his article, “To Write or Not to Write?” [2013] Conv. 1, Dr Martin Dixon writes:

“That quintessential expression of equity’s conscience—the constructive trust in the family home—must yield to the formalism of the law.”  

But I must disagree.

Comment

I would argue that on the whole, an express declaration of trust made by its beneficiaries, should have primacy over “common intention” constructive trusts that might otherwise have arisen between them. If couples have had the wherewithal to think about a possible break up, and decide amicably how they would like to proceed on this basis – then this should be honoured.

However, life is rarely this simple. Where there is clear evidence of changing intentions either through words or conduct, then this should be recognised by the courts – after all, timing is everything. What if one party had quit their job throughout the course of the relationship in order to start a new business and therefore did not contribute to the property for 1-2 years? Should they still get half? What if both parties paid the mortgage each month, but one gave up their weekends to complete DIY work which added an extra 25% to the value of the property? Is half fair their? Ideally, this is an arrangement to be worked out by the couple themselves, but when feelings are involved it can be difficult to make rational decisions. In these situations, the role of the courts is to accurately honour what the parties intentions actually are, not just what they said they wanted to do 10 years ago. Things change, feelings change and overall circumstances change – equitable trusts are a convenient and necessary tool to reflect this.

Of course, some critics suggest that the injection of a holistic, equitable approach is ‘dislocating a fundamental tenet of property law that holds that express party intentions…cannot be dislodged on the basis of subsequent informal dealings or conduct’ (Chris Bevan, ‘The search for common intention: the status of an executed, express declaration of trust post-Stack and Jones’). This was also the approach taken in the case of Pankhania v Chandegra [2012] EWCA Civ 1438.

This conflict between the two approaches is a clear demonstration of a deeper clash “between the oxymoronic tectonic plates of property law: of common law versus equity; of formality versus informality and of certainty versus fairness” (Bevan, above). Formalism requires adherence to prescribed rules and a dismantling of legal issues in a thoroughly logical and mathematical way – exactly how most property lawyers would like to approach it. However, when dealing with domestic affairs, rising emotions and changing intentions, formalism can rarely be achieved. The purpose of a constructive trust is to deal with facts and find the accurate truth as it stands today, not to rely on expressions made years ago. This will often produce fictional results.

To conclude, the courts have at their disposal two routes of determining the beneficial interest of non-married couples. However, in situations of a clear change in intentions and conduct, the court should use the more flexible option of a constructive trust. This ensures accurate establishment of the parties’ intentions as it stands now. My response to Dixon’s claim is, at times:

“the fictional struggle for formalism must yield to the factual, soothing balm of equity’s conscience. “

After all, when dealing with relationships, a little trust can go a long way…

The move from confiscation to forfeiture: how should we punish rogue landlords?

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This article discusses the penalties for rogue landlords who rent out unfit and illegally constructed properties to tenants. It discusses the growing pressure for properties to be confiscated from landlords and their names and convictions to be publicly accessible.

There is growing pressure for more punishment of rogue landlords who are renting out unfit properties to tenants. It is argued confiscation orders are not effective enough. The term ‘rogue landlord’ has been defined by government as describing ‘a landlord who knowingly flouts their obligations by renting out unsafe and substandard accommodation to tenants, many of whom may be vulnerable.’ 

Confiscation orders are orders made against a convicted defendant ordering them to pay an amount of money, which reflects the benefit gained from their crime (Proceeds of Crime Act 2002, s6). Unlike a forfeiture order, a confiscation order is not focussed on the asset (property) and does not deprive the defendant or anyone else of title to any property.

Last month, a confiscation order worth nearly £740,000 was given against landlord, Mohammed Mehdi Ali, who rented out properties in Willesden in breach of planning enforcement notices. This is thought to be the largest order ever given for breaching planning permissions with Councillor Shama Tatler, Brent Council’s lead member for regeneration, property and planning stating that “the accommodation provided was some of the worst residential accommodation that officers have ever come across.” Mohammed Mehdi Ali was told he would face a prison term of five years and nine months if he did not pay the order, in full within three months.

Just the day before, Slough Borough Council secured a confiscation order worth £109,000 against a landlord who built unlawful extensions to a family home and housed up to 14 people in the rooms. Jagtar Phagura, 64, created five bedrooms in extensions built without planning permission at the property in Mirador Crescent, Upton Lea. The house had been purchased as a three-bedroom home covering two floors.

By flouting standard planning permission procedures, these landlords create unsafe environments for numerous tenants, who tend to be from an immigrant background and/or on low-incomes, making them particularly vulnerable. For these landlords, their aim is to rent out their properties to as many people than can physically fit, in the aim of making as much profit as possible. This engages article 1, protocol 1 of European Convention of Human Rights, of course, which states:

Every natural or legal person is entitled to the peaceful enjoyment of [their] possessions. No one shall be deprived of [their] possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The question is, is it in the public interest to completely confiscate these unfit properties from rogue landlords? Surely the answer is, of course!

Comment

Despite the name, confiscation orders do not remove the property from rogue landlords’s possession and therefore they are able to continue profiting from their asset. This seems counter-intuitive. The issue was raised in a Select Committee debate in April 2018 where it was argued, confiscation orders were not enough of a deterrent, normally fining nominal fees which landlords simply in as part of their business model,. They then continue to earn a profit from their asset. It was argued that “local authorities should have the power to confiscate properties from those landlords committing the most egregious offences and whose business model relies on the exploitation of vulnerable tenants”, yet this has still not come into effect.

However, in response to these complaints, the Government did set up a national ‘Rogue Landlord and Agent Checker’ which was aimed at asking Local Councils to provideinformation about private landlords and letting agents who have been prosecuted or fined. Despite being heralded as ‘a key tool to target the country’s worst landlords’, it has been dubbed ineffective, with the Guardian reporting it was near empty 6 months after it’s creation, with numerous Freedom of Information Request denied as it ‘was not in the public interest to disclose this information at this time’.

So to confirm, bad landlords who make profit from exploiting vulnerable tenants are, yes asked to pay a fine, but in return, allowed to keep their property to continue using as they see fit and allowed to keep their anonymity when convicted of their crimes. How is this possibly benefitting the public?

There is hope on this issue, however. The Mayor of London has created a London based Rogue Landlord and Agent Checker’ with contributions from all London Councils as to convicted landlords and all information is publicly accessible. The aims of Checker are to:

  • empower private tenants to check their landlord or agent before they sign a rental agreement;
  • facilitate better information sharing between enforcement authorities, improving enforcement action against bad landlords and agents who operate across London; and
  • provide a quick and easy way for tenants to make a complaint to a London borough.

Early signs of this checker are seen to be positive with over 100 landlords/ agents named on the register. However, I suggest more awareness is needed over this tool, as many renters in London should be encouraged to report bad letting experiences and also review the website before signing tenancies.

To conclude, such high orders given in cases such a Ali and Phagura are drawing awareness to the need for true confiscation of properties in serious rogue landlord situations. Pressure is now growing for the government to remove the asset and stop this issue it’s core, rather than using weaker preventative measures of fines. In these situations, I argue rogue landlord’s have forfeited their right to exclusive enjoyment of the property and thus their property ought to be forfeited too.