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Trust of Land (ToLATA) - Resulting and Constructive Trusts
Resulting and Constructive Trusts are the two main legal concepts which are relevant for a court to decide whether someone has a share in a property when the legal title is registered in the sole name of someone else. For the aid of understanding this complex area, we give an explanation below, where party “A” has the sole legal title to the property and party “B” believes they have a right to a share in the property.
A ‘resulting trust' arises when “B” has made a direct financial contribution to the purchase of the property registered solely in “A”'s name. It is important to have evidence of this payment and to show that this contribution to the purchase was not intended to be a gift or a loan. A resulting trust means that “A” holds either all or part of the property on trust for or for the benefit of “B”. If a resulting trust is determined to exist, the court will usually calculate the precise share in the property based on the amount of the direct capital contribution, proportionate to the purchase price. However, they may also then look at wider factors, including any constructive trust which may also exist, in order to ascertain the true share each party may have in the property.
A ‘constructive trust’ is a more complex area of law and happens when there is an agreement, arrangement , understanding or promise between the two parties. This can happen in one of two ways, when there is an express agreement and when there is not. Either way, the Court will look at all the evidence in determining the share of each party:
An express agreement, when set out in a formal document and signed by “A”, obviously gives a much better piece of evidence to show the intentions of each party. However, much of the time the intentions are only spoken in conversations and this comes down to one party’s word against the other. When this is the case it is also necessary for B (the person claiming a share in the property) to have acted to their detriment (disadvantage) or altered their position because of the agreement, arrangement, understanding or promise.
Where there is no such express agreement, the Court may look at the conduct of A and B in relation to the property, which is called ‘imputing a common intention'. If B contributed directly to the payment of mortgage instalments, or to payments for a substantial improvement to the property, the Court may infer that this must have been because there was a common intention to share the property. After all, it is very unusual to pay another person’s mortgage for no financial gain at all. However, it must be contributions of a substantial nature, merely contributing to household expenses is not enough, as there may be many other reasons why people pay those.