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Constructive Trust - How to prove an implied or express agreement

18/04/2018

A constructive trust arises where the intention of the parties is to share the beneficial interest of property/land (also known as equitable interest, meaning the share of any gain or loss on sale/transfer) between each other. This does not always mean that the parties are the legal owners of the property registered at the Land Registry - read our article here on the difference between legal and beneficial owners. The issue is being able to prove that it was the mutual intention to share the beneficial interest in the property.

A claim of a constructive trust normally occurs after a falling out between parties and can often lead to a lengthy and costly legal battle where each individual tries to prove the full extent of their beneficial interest. This is most commonly seen with cohabiting partners where one party owns the legal title but the other party agreed to pay for the mortgage repayments. If the relationship falls apart, then the party who was paying the mortgage repayments may look to make a claim to a share of the beneficial interest in the property through a constructive trust because they paid the mortgage repayments. On the other hand the legal owner may claim that there was no common intention to share the beneficial interest and the money paid was similar to rent. Without anything agreed in writing at the outset, or the hope of an implied intention to share, this couple face a legal battle regarding how and indeed whether they should share the beneficial interest in the property.

Constructive Trust Vs Resulting Trust

A constructive trust differs from a resulting trust because a resulting trust is formed by the contribution towards the purchase price of the property, or directly towards renovations/repairs or towards the mortgage repayments (as agreed prior to purchase). This differs from a constructive trust because these are payments made towards the property paid after the purchase date with the intention for the parties to own the property jointly such as mortgage repayments (agreed after purchase) and payment for household bills.

How do you prove a Constructive Trust?

There are two ways to identify if a court may imply that you have a constructive trust over property or land and these are:

Express Agreement for which a party relied upon and acted to their detriment or altered their position (such as paying money for a property related expense); or
Implied Agreement - through common intention and conduct.

The challenge is that proving either an Express or an Implied Agreement is very difficult. In this article we'll set out:

What property payments could give rise to a constructive trust?
How to prove an Express or Implied agreement
How a bare trust / deed of trust could save any disputes
Legal cases where constructive trust cases have been won and lost

The best advice is to set out in writing your intentions for the beneficial ownership of a property, especially if you are not a legal owner and preferably before the property is bought. If it is your agreed understanding that by paying money towards mortgage repayments and household bills you are building up equity in/beneficial ownership of the property, then draft a legal agreement confirming this. We draft deeds of trust to set out the intentions between joint beneficial owners and this can include a confirmation of how your beneficial interest is calculated based on the payments you are making towards the property. For more information please email help@samconveyancing.co.uk or call 0333 344 3234 (local call charges apply).

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What property payments could give rise to an express or implied agreement?

Mortgage repayments - through an implied agreement
Extensive improvements to the property - paid works or the use of the party's time/resource (to their detriment) - through an express agreement.
Substantial financial contributions towards household bills/expenses - through an express agreement

How can you prove an Express Agreement?

An express agreement can be verbal or in writing and it evidences the parties' intentions to share the beneficial interest in a property.

Verbal Agreement - the challenge with verbal agreements is proving the conversation took place on a specific date and time. That said however, a witness statement setting out what was discussed between the parties does support a claim to a constructive trust.

Written Agreement - this is preferred although quite often not obtained prior to making payments towards the property.

Along with the either or both of the above, you'll need to prove that based on the express agreement you acted in detriment to yourself i.e. you caused yourself a loss on the understanding you were gaining a beneficial interest in property.

How do you prove a detriment?

Here is the list derived from the list above which sets out what evidence you might provide to prove you have acted in detriment to yourself and created a constructive trust:

A detriment must be more than de minimis and any associated cost cannot be caused by your everyday activity.

Mortgage repayments - provide copies of bank statements showing the money being paid to the mortgage lender.
Extensive improvements to the property - paid works or the use of the party's time/resource (to their detriment)- provide copies of bank statements showing the money being paid to the builders along with copies of invoices. For your own time, evidence that you have been put at a detriment by completing the works..
Substantial financial contributions towards household bills/expenses - provide copies of bank statements showing the money being paid towards the household bills and copies of invoices.

To create a constructive trust the payment made towards the property must be substantial and evidenced.

What is an Implied Agreement through conduct and detriment?

An implied agreement can be inferred from the conduct of the parties in relation to making payments towards the property - an inference that through the conduct of the joint owners that they intended to share the beneficial interest in the property. This is different to an Express Agreement where there was some form of written or spoken agreement, whereas an implied agreement relies upon the intention and conduct. This means that regardless of whether the parties agreed or said anything at the time, that the implied intentions of the parties will be considered to confirm if a constructive trust has arisen through their conduct.

The conduct of an implied agreement would arise through the direct contributions towards the purchase price of the property (which could also be a resulting trust) and the payment of the mortgage repayments - although there are some cases where contributions towards other property related costs could be taken into account.

Example of an implied agreement

Jane and John are married. Jane has a part-time job and can only afford to pay £100 into the joint account where the mortgage repayments are made from. There is no Express Agreement between the parties confirming the intentions for the £100. After 10 years Jane breaks-up with John and wants to claim a beneficial interest in the property through a constructive interest. Although Jan made no direct contribution towards the purchase price of the property it could be construed that because she made contributions to a joint account that was used to pay the mortgage repayments that there was an implied agreement between Jane and John to share the payments towards the mortgage repayments and for Jane to share a beneficial interest in the property. Jane would need legal support in order to support this claim.

If you need legal support please contact us on 0333 344 3234 (local call charges apply). We have a panel of solicitors who can help who can, for a pre-agreed fee, review your circumstances and assess whether you have grounds to claim a constructive trust.

Do the courts take into account if you are in an intimate relationship for a long time (and not married)?

There are a number of recent cases such as Stack v Dowden (2007) and Abbott v Abbott (2007) where the courts are more willing to infer that couples in an intimate relationship have a common intention towards the beneficial share of the property when one of them doesn't have legal ownership. This is specifically identified where a couple buy a home with one of them as a sole legal owner. The partner without legal ownership may acquire an interest even though they do not directly contribute towards mortgage repayments (such as payments towards the utility or rate costs).

Jointly own or funding a property? Get a deed of trust

If you share owning a property, either as a legal owner or through jointly funding it, then it is important to set out your intentions right from the outset. If you do not agree the principles at the outset, you are relying on a Resulting Trust or Constructive Trust to confirm your beneficial interest in a property. A deed of trust sets this out from the outset and saves on conflicting understandings at a later stage. Call 0207 112 5388 to speak to a deed of trust specialist.

What types of trust are there

The 3 types of trust that are used to define the beneficial ownership of property are:

Express Trust or a Bare Trust - where joint owners of property set out their intentions and the beneficial interest in the property at the outset (or by mutual agreement during their ownership). This type of trust can either be a declaration of trust or a deed of trust
Resulting Trust - where no Express or Bare Trust has been drafted and the contribution towards the original purchase price of the property is used to work out the beneficial share in the property. This is not applicable if you have set out your beneficial interest within an Express Trust.
Constructive Trust - relates to the consequence of the conduct of the party towards the property such as contributing towards mortgage repayments after purchase and renovation works that add value to the property. This is not applicable if you have set out your intentions within an Express Trust.