Partners breaking up and fighting over their rights under a resulting trust. Trusts explained by SAM Conveyancing
Are you buying a house with your partner?
Make sure you set your intentions in writing. You don't want to end up fighting over your property.

Deeds are drafted within 1 working day. Costs start from £240 INC VAT. Drafted by our panel solicitor.
Need a Deed of Trust?
 
 

Resulting Trust

07/03/2018
(Last Updated: 27/04/2023)
6,413
11 min read
Key Takeaways
  • If you're buying a house with someone and you don't pay them back for their share, you might end up in a resulting trust, which will entitle them to any gains from the property.
  • Any contributions to the utility bills or mortgage repayment create a different type of trust.
  • You can prove the trust by showing that you've contributed financially to the purchase or disprove it with specific documentation.
  • This type of trust can be avoided if both parties set their intentions in writing from the start.

What is the meaning of resulting trust?

This type of trust arises when the property ‘results’ back to the original settlor; in other words, the beneficial ownership in a property is reflected in how the property was originally purchased. The case of Pettit c Pettit 1970 shows the now well-known presumption of ownership, that a person who contributed towards a share, or all, of the purchase price of a property would be entitled to the corresponding proportion of the beneficial interest in the property, by way of an implied trust.

What is crucial to understand is that regardless of whether you wanted to buy the property in trust with someone else and share the beneficial ownership with them, by your actions of jointly funding the purchase of the property with someone else and without any other document confirming the contrary (like a gift letter or a deed of trust) you may well have purchased the property under this trust.

This means that although you may be the sole legal owner of the property, the beneficial interest in the property (which includes any gains made when the property is sold) could be shared with the person who helped buy the property with you.

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.

What is an example of resulting trust?

Dave is the sole legal owner of a property he purchased in 1980 for £200,000. Dave's partner, Jane, invested £20,000 into the purchase price, Dave invested £20,000 and Dave got a mortgage for the remaining £160,000. In 1990 when Dave comes to sell the property, Dave and Jane aren't together but Jane is expecting to get paid money from the sale. During the whole period of time, Dave paid all of the mortgage repayments and Jane didn’t pay anything else towards the property.

Dave tells Jane that she is due nothing when he sells the property.

Conclusion: Dave is incorrect. As Dave and Jane didn't draft an agreement confirming the £20,000 paid by Jane was a gift or that it wasn't to be repaid to her, then there is an automatic presumption that the money paid by Jane was being held on Trust by Dave and was to be repaid to Jane in the future, thus giving rise to a resulting trust.

Now Dave is selling, Jane will be due a share of the beneficial interest in the property. The trust means Jane is due back her £20k and potentially a further share of the gain in the property. If Dave didn't accept this then Jane will need the help of a specialist trust solicitor to help enforce her legal right to the beneficial interest in the property.

Dave will also need to instruct a solicitor as he could argue that as he paid all of the mortgage repayments, that there is also a Constructive Trust which could affect the beneficial ownership split between Dave and Jane. Click here to read more about different types of Constructive Trusts.

Dave and Jane's disagreement on who owns the beneficial interest on the sale of the property could have been avoided if they both agreed at the outset what their intentions were within a legal agreement. At the end Dave thought the money was a gift, however without a gift letter he is unable to prove this.

Are you facing a property dispute?

Book a FREE 15-minute meeting* with a specialist property dispute solicitor/consultant. They'll listen to your issue and suggest ways forward, including the costs, with No Obligation to use our services after the free meeting.

  • What are you due on sale?
  • How to sell where one person doesn't
  • Mediation and Settlement Agreements
  • Applications to court, including Declaratory Orders, Regulatory Orders, Occupational Rent

How do you prove a resulting trust?

To prove it, you’ll need to be able to demonstrate that you contributed towards the original purchase price of the property. Let’s look at what constitutes the purchase price of the property.

A key principle to understand if there is a trust is that it is presumed, outside of certain relationships, that any money paid to a third party is never a gift and is always due to be paid back. This means if someone pays money to buy a property and receives no consideration in return then it is presumed that they have intended to retain an equitable interest in the property being purchased (ie they are going to get something back from the sale of the property in the future). The person buying the property will therefore hold the property on trust for them.

In Dyer v Dyer the judge stated: “the trust of a legal estate...whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive, results to the man (person) who advances the purchase money"

Is there a resulting trust?
Is there a resulting trust?
In all of the following cases there is no presumption that the money paid is a gift and it is presumed the money is to be repaid and the property held on trust for them:
  • Mother giving money to their child
  • Grandparents, uncles, aunties or siblings giving money
  • Wife giving money to her husband
  • Co-habiting couples or mistresses giving money to their partners
  • Friend giving money to their friend
There are exclusions (subject to circumstances) to a presumption of trust where it is presumed the money paid is a gift instead which include:

  • Father giving money to their child (not any other relative such as a grandparents, uncle, auntie or siblings)
  • A person acting 'in loco parentis' (from the latin 'in the place of a parent') giving money to a child (this could, for example, be a foster parent or official carer giving money to a child)
  • Husband giving money to his wife

In all cases your solicitor should confirm with you if any money from a third party being used towards the purchase price is a gift or a loan during the conveyancing; to satisfy both their obligations towards you and the mortgage lender.

How do you rebut the presumption of resulting trust?

This trust is only presumed and as such can be rebutted in the event that evidence can be provided to prove that the intentions of the parties were to gift the money. Examples include:

  • Evidence the money was a gift, such as a gifted deposit letter
  • Evidence the money was a loan, such as a loan agreement or a promissory note
Once again, this evidence would normally be obtained by your solicitor during the purchase of the property when they complete their due diligence of source of funds and to satisfy their obligations towards your mortgage lender. If you are getting a mortgage and are receiving money from a third party, then your mortgage lender will require you to confirm if the money used to buy the property is a gift or a loan.

Why do mortgage lenders need to know if the money is a gift or a loan?

The simple answer is that mortgage lenders do not want any party to have a beneficial interest in the property, unless they're bound by their mortgage terms. This is why your solicitor will need evidence to prove whether the money you are receiving is:
  • A gift, which means the payer has no legal rights to get the money repaid. You should note that some mortgage lenders only allow gifts from parents. This means if your gift is from a friend or other family member, you may need to find a mortgage lender that allows for this and does not treat the apparent gift as a loan.
  • A loan, with a loan agreement drafted. Once again, you may struggle with this route as many mortgage lenders do not allow for a loan and those that do will normally require the loan to be registered as a second charge behind their own first charge (i.e. in the event of repossession, any proceeds from a subsequent sale will be firstly used to repay the lender).

As you can see from the above, without setting out your intentions for the property in an Express Trust, your intentions may not follow your original plan - something that can cause a challenge if the relationship between you and a joint owner changes (such as a breakdown in a relationship).

Fixed Fee | Rated Excellent on Trustpilot
Frequently Asked Questions
PRESUMPTION
DIFFERENCE
Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

People also searched for

SAM Conveyancing's tips for how to prove source of funds

How to prove source of funds

13/11/2019
287,639
What is a deed of trust on a property explained by SAM Conveyancing

What is a deed of trust on a property?

27/09/2021
46,496
Beneficial Ownership vs Legal Ownership

Beneficial Ownership vs Legal Ownership

28/07/2022
33,944