At long last the Supreme Court has issued its eagerly awaited judgement on the above case. Or so the press release goes! In truth it was not that eagerly awaited in my view but it is interesting for a number of reasons.
Doubtless my colleagues in the Family Department are getting all excited and will blog in much greater detail and much better than I can.
However I am going to waffle on about what it means for conveyancers and the public in very simple terms because conveyancers are simple souls.
‘Tis is the latest in a string of cases dealing with shares that people own in houses. Sadly it will not be the last.
The lead case is Stack v Dowden 2007 which decided that the Courts could look at the intention of the parties at the time of purchase and imply an implied trust. What that means is that if X puts in 25% of the equity and Y 75% the Court may imply a 25/75 split of the proceeds of sale. However if X paid all of the mortgage the Courts may well imply something different.
Therefore conveyancers have a duty to advice and take instructions on how people wish to own the property and if they want to own in equal or unequal shares plus take into account other relevant factors like who pays what and what the purpose of the purchase is eg is it the family home.
We do this as a matter of course and we advise people to have declarations of trust which sets out what they have agreed. If people are not married or have children from an earlier relationship or sometimes for tax purposes it is essential to have advice on this and a declaration of trust and a will.
Sadly most people do not do so and so in time if they are not married the case can end up before the Courts and the Courts can decide what the parties intended. Obviously X intended something different from Y otherwise the Court would not be involved so someone is going to be disappointed. So do it right when you buy.
What Jones v Kernott does is take this a step further and it is something we mention already. If the intention of the parties changed since purchase then the Courts can imply a further implied split of proceeds.
Simply put in this case the property was purchased in 1981 in joint names by an unmarried couple as a family home. Ms Jones paid all of the equity. They had no declaration of trust. They paid outgoings jointly. Later they took a further loan and extended the property.
In 1993 the separated and Ms Jones stayed with the children in the property. Mr Kernott had little or no further involvement with the property and family. In 1995 the property was marketed but not sold but an endowment was cashed so Mr Kernott could buy his own home. In 2006 he decided to claim a share in the property and Miss Jones applied for a declaration under Sc 14 of the Trust of Land and Appointment of Trustees Act 1996 that she owned it all.
The case then moved to the Courts and after appeals the Supreme Court has decided that where the intention of the parties has changed since the date of purchase the Court can infer what those intentions are and imply a trust.
Mr Kernott was awarded 10% share of the equity based upon the situation in 1995 as at that time the Court inferred that at the time the parties intended that the property was no longer the family home.
It is stated that each case will be judged on its facts so there will be more cases like this and more trauma for families. Get a declaration of trust AND if circumstances change you can by agreement amend the declaration. It will save a lot of time and money in the future.
Personally I find it difficult that the Courts can imply what the parties intended at a certain time. However until there are cohabitation laws this is what we have to work with. The most important point is to think about what you want both now and in the future should one person die and to amend an agreement if circumstances change.
In my case we have a declaration of trust as I have a step daughter that way she will inherit her mothers share in due course. My wife had most of the equity. When she left work we amended the declaration so my share increased and hers went down until we got to 50/50 as I paid the mortgage.
In theory in this case there could have been a declaration of trust that Ms Jones got the first £6,000 (being the equity) plus 75% of any increase in equity and Mr Kernott 25% of any increase they would both have covenanted to pay the mortgage and outgoings equally.
When they did the extension they may have adjusted this perhaps if for example Mr Kernott was (as was the case) doing some of the work then a straight 75%/25% split may have sufficed.
When they split and certainly when Mr kernott purchased his home an amendment crystallising the parties situation would have been sensible so a 90/10 split with Ms Jones covenanting to pay all the outgoings and a statement that the property was intended to be a home for her and the children until the oldest was 21 for example would have been a possibility.
Declarations of trust can be complex you need advice on them – take it.
