All those involved in conveyancing and in private client work will be well aware of the problems that can be caused when informal arrangements are made by clients as to the ownership or occupation of property. ‘No we don’t need a legal document drawing up – we’re family’ goes the cry – until it all goes wrong. Two recent cases before the Court of Appeal emphasise once more the huge personal and financial problems that can be caused when families disagree and how proper legal documentation at the start can help prevent such problems arising – or at least make them easier to resolve.
Sandhu v Sandhu [2016] EWCA Civ 1050
This was yet another example of families disagreeing about the correct apportionment of beneficial interests in a property. It involved a dispute between a father and two sons. The house in question had been bought in the sole name of one son with father contributing to the purchase price. Many years later father and the other son claimed that father had a beneficial interest in the property due to his contribution. This was eventually taken to the Court of Appeal.
There was nothing in writing to show what the parties had intended when the property was purchased. In such a situation, following the decision of the Supreme Court in Jones v Kernott [2011] UKSC 53 where there is no evidence as to what particular shares were intended, the court has to consider all the evidence as to the whole course of dealing between the son and his father in relation to the property to arrive at a fair result. The County Court judge had held that, on the facts, the father should have a 70% share in the property. On appeal, the Court of Appeal found this figure ‘eminently reasonable’ and dismissed the appeal – but at what cost in money and emotional stress to the family involved? How much better had it all been reduced to writing at the outset?
Zas Ventures Ltd v Forkner [2016] EWCA Civ 1062
This case was somewhat different. The former family home, a small terraced property in East London, had been left by will by Mother to her son and one of her two daughters. The son and daughter had left home some time before and had their own homes; the other daughter still lived with mother at her death. At a family meeting it was orally agreed that the other daughter (the defendant in this case) should be allowed to live rent free in the property for “for as long as she wanted without paying any rent provided that she kept the property insured and in good repair and paid all the outgoings in connection with it such as Council Tax etc.” Nothing was put in writing.
Years later, with Miss Forkner still in occupation, the house was sold at a price that reflected her occupation rights. As there was no written agreement, the buyer insisted on the brother making a statutory declaration setting out what had been agreed, which included the above statement.
Unfortunately, as a few more years passed, it was clear that Miss Forkner was not complying with the terms of her occupation. The property had fallen into serious disrepair which needed immediate remedy. After some negotiation, the buyer brought possession proceedings against her claiming that her right to occupy was conditional on her repairing and could now be terminated because of the breach.
Miss Forkner admitted that she had not repaired but claimed that her right to occupy was not conditional on this so that failure to comply only entitled the buyers to damages. She also claimed that her brother and sister during their ownership had waived the right to enforce these obligations.
The Court of Appeal held that her occupation was conditional – the use of the phrase ‘provided that’ in the brother’s statutory declaration was indicative of this. And this was the only evidence of the precise terms of the agreement. Further, although her brother and sister had indeed waived their rights, serious further deterioration to the property had arisen since the sale. The right to enforce this had not been waived by the buyers. This was sufficient to entitle them to terminate the right to occupy and thus claim possession.
Once again, had there been a proper written agreement setting out the rights of the parties, much stress and expense could have been avoided.
Conclusion
The message is clear; lawyers do have a responsibility here; we must try and persuade families not to rely on informal arrangements. Despite what they might think, families do fall out. Arrangements do not always work out. Things do go wrong. Spending money on proper legal documentation can make things a whole lot clearer right from the start and maybe prevent problems in the future. Proper legal advice is not expensive – it can be priceless.
