Legal Case on Property of Cohabitees - Essay Example

?Introduction This paper examines a case about two cohabitees, Brad and Angelina who have acquired a property and there are some complications with the involvement of Angelina as a part owner of the property. The paper will examine the case in two parts and each part will involve a critical analysis of cases and facts relating to the issues at hand Part A Issue: In this section, we advise Angelina on her rights to the Aniston Villa. In doing this, the following pointers of law are relevant: 1. Her rights arising from the ?40,000 contribution she made towards the deposit that gave rise to the mortgage 2. Her legal right as a party whose name did not appear on the registered title. 3. Rights accruing to her as a result of the contributions she made to the running costs of Aniston Villa 4. The position of the ?40,000 'compensation' paid by Brad. 5. Possibility of Celeb Bank removing Angelina from the premises. Rules “A mortgage is a security for a loan”1. This involves a transfer of a legal or equitable interest in the borrower's land to the mortgage with a provision that the mortgagee's interest shall end upon the repayment of the loan plus interests and costs2. This means that a mortgage is some kind of a loan that is given to enable a borrower to get interest in a land. The mortgagee (one taking the mortgage) gets interest to a given land or property whilst it is paid for by the mortgagor from the owner of the land3. In the case of Abbey National Building Society V Cann4 G lived with his mother D in a property. D contributed to the purchase price of a property that they moved into which G, the son, held for himself and his mother. They moved to a smaller house costing ?4,000 more than the previous house they both bought. The mother was only aware of the necessity to move but she was not aware of the fact that her son had taken another mortgage of ?25,000 with the defendants. Due to the son's failure to repay the mortgage, Abbey National Bank sought to repossess the house. D, the mother, was now living with her partner in the same house and she argued that she had an equitable proprietary right under the Land Registration Act 1925 (Now Land Registration Act, 2002). She therefore moved from the new premises and entered the old house that the bank was repossessing 35 minutes before the bank took over. The bank argued that D had no rights in the property. In deciding the case, the court examined whether the property could have been purchased without the mortgage or not. Also, the occupation of the premises under Section 70 (1) g of the Land Registration Act 1925 had to be permanent and not temporal in nature. It was therefore held that D had no rights to the property. In Ingram V CIR5 the question of determining the equitable right was based on whether the contribution made by a person claiming equitable rights to the property was vital in the acquisition of the mortgage or not. If it was, then the person has proprietary rights. If not, then there was no such right. Also, in National Province Bank Ltd V Ainsworth6 a distinction was made between proprietary interest and personal interest. In this case, the House of Lords held that before a right or interest can be admitted to the category of property right, it must be definable, identifiable by a third party and have some degree of permanence or stability. If there are some rights that do not fall in this category, it is classified as personal interest and is not a proprietary right and cannot lead to any claim under property law or trust law. Also, in the case of Lloyd Bank and Rosset7 it was held that the failure to contributing to the cost of running a house is not sufficient to create a proprietary right in a given property. Pettitt V Pettitt8 also demonstrated that a man who contributed by making improvements to a house bought and owned by his wife was not substantial enough to create a proprietary interest. Where there was some contributions that was made by a cohabitee to the property, it becomes a resulting trust9. On the other hand, if the cohabitee made some significant contributions to the price of servicing the mortgage, it leads to equitable trusts10. In this situation, “the court looks at the value contributed not the amount of cash paid”11. In the case of Bernard V Joseph12 it was held that the court would have to use representative shares in contributions to the property or trust in question. Application In this case involving Brad and Angelina, Angelina made a payment of ?40,000 to the acquisition of Aniston Villa. This means that the Angelina made a direct contribution to the initial deposit that was made towards securing the mortgage. The ?40,000 was crucial in the acquisition of the mortgage. And without the mortgage that came into force, Aniston Villa would not be acquired. Due to that, the contribution of Angelina can be see as a resulting trust which leads to proprietary rights in the Villa for Angelina. Although Angelina made an express request not to get her name on the registered title, it does not mean that she has no rights. There is an implied or constructive trust which gives Angelina the right to become a proprietary owner of Aniston Villa. Due to this, Angelina has some kind of proprietary rights which she can invoke to limit the ownership and control of the product. Angelina's contribution of ?40,000 was direct, definite and clear to any third party. Due to this, she has a right to Aniston Villa and has the right to get involved in the sale, usage or the rent of Ansiton Villa. The direct contribution that Angelina made to the product could count towards proprietary rights. If the contributions either cause Aniston Villa to be improved or led to the servicing of the mortgage in any form, then that would give right to proprietary rights and equitable interests in the product. This is because the contributions that she made are significant and they went towards the acquisition of the property. Without such an effort, it is likely that the property would not have been acquired. It is therefore important for her to get some degree of recognition and compensation for what she sunk into the acquisition process. It is therefore apparent that the 'goodwill' gesture of returning the ?40,000 would not be sufficient to compensate Angelina. She needs to be given her fair share of the property and her value of her contribution to the acquisition of Aniston Villa must be holistically assessed before her compensation can be given to her. This means that the court will have to evaluate the real value of Angelina's contributions and deduct it from the current worth of Aniston Villa which now stands at ?510,000 and give her a due amount. This would include the ?40,000 she has gave which became a deposit for the mortgage and any qualifying contribution she made either to the improvement or towards the servicing of the mortgage. Angelina has rights in the funds from the Aniston Villa. And this means that she needs to get a better share of the ?510,000 worth of the villa based on her contributions towards its acquisition and control. In the event of Brad acquiring a second mortgage, Angelina can exercise her right to proprietary ownership as an equitable trustee when Celeb Bank requires her to leave the premises. This is because her presence and continuous occupancy of Aniston Villa creates an estoppel for the ejection attempts of the bank under the Land Registration Act of 1925 section 70 (1) g and Land Registration Act 2002 Schedule 3. This law provides protection for persons who are in occupancy of a given property and this include people who hold an interest in a given property or are in actual occupation of the property itself. Thus, the contribution made by Angelina provides a strong grounding for her to lay legal claims to the property. However, if she decides to move out of Aniston Villa and Celeb Bank takes over the premises, then she would not be able to claim it since the mortgage was arranged between Brad who acted as the legal owner and holder of the title with the right to convey the property without Angelina's involvement. It is therefore important for her to remain in occupancy to protect her rights and interest in the property. Conclusion Angelina made an essential contribution of ?40,000 which gave rise to the mortgage which was a significant part in the acquisition of Aniston Villa. This gives Angelina rights to proprietary ownership and rights to equitable trust in the property. Also, if the contributions made by Angelina to the running costs of the property qualifies, she would have further rights to Aniston Villa. Although Angelina requested not to be named on the titled register, her equitable rights to the property is inherent and cannot be denied her. The only situation where it could be denied is where Brad gets a new mortgage with his rights to the registered title. This means that the return of the ?40,000 from Brad to Angelina is not sufficient and she needs to be given a fair share of Aniston Villa which is now worth ?510,000. This can be done by applying to the court who will have to examine the value of the contribution made by Angelina to the acquisition of Aniston Villa. Part B Issue This section of the paper will examine the legal and ethical implications of protecting the equitable interests of couples who live together. This include those that are not married but live together and spend money on a given property. The unit will discuss the components of equitable trusts and how they come up and link it up with the case at hand, involving Brad and Angelina. Rules According to Section 53(1) of the Law of Property Act 1925, no interest in land can be acquired or disposed off except by writing, signed by the person creating or conveying the property. The declaration of the trusts must be in writing. However, Section 2(1) of the same law states that conveyance on the grounds of equity is possible and this is through the situation whereby a party accepts money for a mortgage or conveyance. In law, a trust involves a person who instructs a second person to use a property or resource for the benefit of a third party13. In other words, a trust involves three parties. One is the person seeking to create a given legal entity for the benefit of another. However, due to circumstances and other factors, the individual instructs a second person to do it for the benefit of the third party. In English Law, the Courts of Equity recognised the second person as the legal owner of the trust, but the third person was the beneficial owner14. There is the equitable view of 'constructive trusts'. “A constructive trust is a remedial device used by the court to prevent a person from unconscionably or inequitably retaining control over property. The Constructive Trust will be imposed where a court finds that circumstances warrant the imposition of proprietary relief”15. In AG for Hong Kong V Reid16 a constructive trust was said to be formed when one breaches a duty owed to another and uses the benefits to buy a property. Also, in Muschinks V Dodd17 a couple lived in a house owned by the man. They agreed to make improvements to the property by building a pottery shed for the woman to work in. The woman paid part of the cost of the improvement. After that event, the two separated and the matter became a legal battle. The court held that the man held the property as a constructive trust for the woman and himself on proportion of what they had both invested. A trust arose on the date of the judgement and it was used as the yardstick for the decision of the court. This means that when a cohabiting partner invests money into a given property, that property becomes a constructive trust and it must be examined as such in legal proceedings. However, the kind of investment or addition to the property must be proprietary and not just personal interest18. Personal interests might involve just making basic payments for the upkeep of the property. However, qualifying proprietary contributions include giving a mortgage19, or paying to service the debts related to the mortgage or paying for the expansion or improvement of the property. Through the concept of constructive trust, a cohabiting partner could make claims to a given property. The case of Gissing V Gissing20, it was held that where there is no agreement governing arrangements relating to a given property, the court will look at the intention and motive behind the transaction. Also, common intentions are decisive and they really define the frameworks of the implied relationship of the contract. In a case where a party to a given land relationship created on the basis of a constructive estoppel is established, one of the party can decide to cancel a transfer21. Also, a person who comes under the category of constructive trusts can use the property as a legal owner even after the relationship ends in some cases22. In all these cases, the contribution of each party is assessed in terms of the value it added to the property and not about the cash paid. According to the Trusts of Land and Appointment of Trustees Act 1996, a person can apply to court if they haver an interest (Section 14(1)) and the individual must show that he was exercising a function (Section 14 (2)) as a trustee and declare nature or extent of interest. From there, the court will exercise the right to remove a person upon application. Under Section 15 of the Trusts of Land and Appointment of Trustees Act 1996 states that the intentions of persons who created the interest and the purpose for which the property was created is examined. Other issues like interest of creditors, wishes of each beneficiary and circumstances of benefactors are important. Application In this case, Angelina has lived under the same roof with Brad for years. They are in the category of a cohabiting couple due to this, the two of them have a close relationship that can be considered to be one where their assets are more or less the same under law. The purchase of Aniston Villa, which included a deposit presented by Angelina is important and vital. And it means that there is an implied legal situation which gives Angelina some rights over the property at hand. The constructive trust that comes with this means that even though Brad's name is on the registry, Brad is not the only owner of Aniston Villa. This is because without Angelina's deposit, the property would not have been purchased. Due to this, it can be inferred that Brad is holding Aniston Villa in his new in trust for both him and Angelina. Legally, Brad is not the sole owner of Aniston Villa. He shares the ownership with Angelina due to Angelina's significant contributions made towards securing the mortgage and also towards the payment of bills relevant to the villa. The legal rights of Angelina means that she has the right to proprietary estoppel. In other words, when given transaction is being carried out by Brad, Angelina can act to stop it. This means that in the case where Brad seems to be in the process of selling the villa in order to by a new Bentley, Angelina can act to estopp him from doing that. This is because she has a strong legal holding in the property and can exercise it if she wishes to do so. This means that the compensation of ?40,000 that Brad is proposing to give to Angelina is not in any way enough to compensate for her contribution and her legal rights to the property. In other words, with the property worth ?510,000, the return of ?40,000 is unfair and Angelina can act to demand a fairer share or act against certain procedures that are undertaken in relation to the property. Also, Section 70 of the Land Registration Act subsection 1. g. gives Angelina the right to live in the property and prevent people from ejecting her. This means that she can live in Aniston Villa and as long as she is in it, it would not be easy for any mortgagor like Celebrity Bank to eject her. This is because as a constructive trustee, she had the right to remain in the property. And once she can prove her contribution to the property, she can exercise her rights as a constructive trustee. Angelina only needs to stay on the property permanently and no one can demand her to leave in order to repossess it since she has sufficient rights of a constructive trust holder. Conclusion Angelina's contribution to the acquisition of Aniston Villa implies that she has a constructive trust in the property. This trust leads to proprietary estoppel which allows her to prevent actions from being carried out on the premises since it is technically her own as well. Also, she cannot be ejected from the property since she holds a constructive trust in the property. Bibliography Books Dixon, Martin. Modern Land Law (London: Taylor and Francis, 2011) Hepburn, Samantha. Equity and Trusts (London, Routledge, 2001). Hudson, Alistair. Understanding Equity and Trust (London, Routledge, 2012) Moore, Geoff. Real Property Law. (London, Routledge, 2005). Raff, Murray. Private Property and Environmental Responsibility (London: Kluwer Law, 2003) Stroud, April. Making Sense of Land Law (London, Palgrave Macmillan, 2010) Cases Abbey National Building Society V Cann [1990] UKHL 3 Attorney General for Hong Kong V Dodds [1994] 1 AC 324 Bernard V Josephs [1982] 3 AII ER 162 & 163 Gissing V Gissing [1970] UKHL 3 Ingram V CIR [2001] AC 293, 303 Lloyds Bank V Rosset [1990] UKHL Muschinsk V Dodd [1986] 160 CLR National Provincial Bank Ltd V Ainsworth [1965] UKHL 3 Pettitt V Pettitt [1970] AC 777 Statutes Land Registration Act 1925 Land Registration Act 2002 Trusts of Land and Appointment of Trustees Act 1996 Read More