TOLATA Claims Solicitors

What Is a TOLATA Claim?

TOLATA stands for the Trusts of Land and Appointment of Trustees Act 1996 — the primary legislation governing disputes about the ownership and occupation of property held on trust. TOLATA claims typically arise when two or more people have contributed to the purchase or improvement of a property but are unable to agree on their respective shares, whether to sell it, or how the proceeds should be divided.

These disputes most commonly occur between:

• Unmarried couples — where the couple separates and disputes arise about who owns what share of the family home
• Family members — for example, a parent who contributed to a child's property purchase
• Business partners or friends — who purchased investment property together
• Cohabitants — where one party is not on the legal title but claims a beneficial interest
• Deceased estates — where disputes arise between beneficiaries or family members about property held in the estate

Types of Beneficial Interest Claims

Express Trusts

An express trust arises where the parties have explicitly agreed — in writing — how beneficial ownership is to be shared. The most common document evidencing an express trust is a Declaration of Trust (also known as a Deed of Trust), which formally records the respective beneficial shares. Where a Declaration of Trust exists and has been signed by all parties, it is generally conclusive as to beneficial ownership under section 53(1)(b) of the Law of Property Act 1925.

However, disputes can still arise even where a Declaration of Trust exists — for example, where one party claims it was signed under undue influence, or where subsequent contributions have been made that are said to vary the original trust.

Resulting Trusts

A resulting trust arises automatically where one person contributes to the purchase price of a property held in another's name, without any gift being intended. The contributing party is presumed to hold a beneficial interest proportionate to their financial contribution. For example, if A contributes 40% of the purchase price and B contributes 60%, a resulting trust may arise giving A a 40% beneficial interest even if the property is registered in B's name alone.

The resulting trust doctrine is more commonly applied to commercial property and investment property than to family homes, where the law of constructive trusts tends to apply instead.

Constructive Trusts

A constructive trust arises where, in the absence of an express agreement, it would be unconscionable for the legal owner to deny the other party's beneficial interest. To establish a constructive trust, the claimant must demonstrate:

1. A common intention that both parties would share beneficial ownership — this can be shown by express discussions or inferred from conduct
2. Detrimental reliance on that common intention — the claimant acted to their detriment in reliance on the common intention (for example, by making financial contributions, improving the property, or giving up a career)

The leading cases are Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, which established that in joint name cases the starting point is equal ownership, but this presumption can be rebutted by evidence of a different common intention. In sole name cases, the claimant must establish both common intention and detrimental reliance.

Proprietary Estoppel

Proprietary estoppel is a separate equitable doctrine that operates alongside constructive trusts. A claimant may establish proprietary estoppel where:

1. The legal owner made a representation or assurance that the claimant had or would acquire a right over the property
2. The claimant relied on that assurance
3. The claimant suffered detriment as a result
4. It would be unconscionable to allow the owner to go back on the assurance

Proprietary estoppel claims often arise in family or farming contexts — for example, where a child was promised the family farm in return for working on it for years, and the promised inheritance is then withheld. The remedy may be the fee simple, a lease, a licence, or a monetary award — the court has wide discretion to give the "minimum equity to do justice".

TOLATA Remedies — What the Court Can Order

Factors the Court Considers on a Section 14 Application

When deciding whether to make an order for sale under section 14 of TOLATA 1996, the court must have regard to the matters specified in section 15, including:

• The intentions of the person(s) who created the trust
• The purposes for which the trust property is held (e.g. as a family home for children, or as an investment)
• The welfare of any minor who occupies or might reasonably be expected to occupy the property as their home
• The interests of any secured creditor (e.g. a mortgagee seeking possession)

In practice, where the original purpose of the trust (providing a family home for children) has been fulfilled (the children have grown up), the court will typically order a sale. Where minor children remain in occupation, the court may refuse or postpone a sale.

Quantifying Beneficial Shares

Once the existence of a beneficial interest is established, the court must quantify it. In joint name cases, the starting point is equal shares (Stack v Dowden). In sole name cases, once the claimant has established an interest, the court looks at the whole course of dealing between the parties to determine the size of the share.

Relevant factors in quantifying the share include:

• Direct financial contributions to the purchase price or mortgage
• Indirect financial contributions (paying bills to enable the other to pay the mortgage)
• Contributions to improvement (renovation, extension work)
• Any express discussions about shares
• How the parties arranged their finances generally
• The nature of the relationship (marriage, cohabitation, friendship, business)

Equitable Accounting Between Co-Owners

Even where beneficial shares are agreed, the net proceeds of sale must often be adjusted to reflect financial dealings between the parties. Equitable accounting adjustments commonly include:

• Occupation rent — a co-owner who has been in exclusive occupation (to the exclusion of the other) may be required to pay an occupation rent equal to half the market rental value of the property for the period of exclusive occupation (Stack v Dowden; Byford v Butler)
• Mortgage contributions — if one party has paid more than their share of the mortgage, they are entitled to a credit for the overpayment
• Improvement contributions — expenditure on improvements that increased the property's value may entitle the paying party to a credit
• Repairs and maintenance — routine maintenance is generally not credited; structural repairs or significant improvements usually are

Practical Steps Before Issuing TOLATA Proceedings

Before commencing court proceedings, our solicitors will advise you to:

1. Gather all financial evidence — bank statements, mortgage statements, receipts for building work, any written communications about ownership or contributions
2. Obtain a property valuation — to understand the stake involved and whether litigation is proportionate
3. Consider mediation — TOLATA disputes are well-suited to mediation, which is significantly cheaper and faster than court proceedings
4. Issue a Letter Before Action — setting out your claim and inviting the other party to engage in settlement discussions, as required by the Pre-Action Protocol for Property Disputes
5. Register a restriction at HM Land Registry — to prevent the property being sold or mortgaged without your consent while the dispute is ongoing

TOLATA and Bankruptcy / Insolvency

Where a co-owner becomes bankrupt, the trustee in bankruptcy acquires the bankrupt's beneficial interest in any property and can apply for an order for sale under both TOLATA 1996 and the Insolvency Act 1986. After one year from the vesting of the bankrupt's estate in the trustee, the court will generally order a sale unless the circumstances of the case are exceptional — the interests of the bankrupt's creditors are then given great weight. Our solicitors advise non-bankrupt co-owners facing section 335A applications.

Frequently Asked Questions