It is becoming increasingly difficult for people to get on the property ladder. With mortgage companies now asking for deposits of around 20%, it is no surprise that young married couples are increasingly being helped by family members to fund the purchase of their first property. In some circumstances, parents are even purchasing properties outright for their child to move into with their new spouse. Unfortunately, if the relationship does not last then claims on the matrimonial home by both parties may prove to be complicated.
The general rule when dealing with finances on divorce is that regardless of which party owns the family home on paper, the reality is that it will be considered a matrimonial asset which both parties have a claim to. But what happens if the property is partly or even wholly owned by one of the couples’ parents? Who should the property then go to if the parties decide to separate?
Although this may cause more hurdles when dealing with financial relief proceedings during a divorce, all is not lost for the married couple that resided in the family home. In this situation a beneficial interest is established and a trust of land will arise. This may be either a resulting or constructive trust.
A resulting trust will arise if a direct financial contribution has been made towards the purchase of the property by one or both of the parties. If this occurs, they will be considered to have a share in that property.
If a direct financial contribution was not given but it is clear that the intention of the married couple and the parents was for them to share the property or use the property as their own and the parties have relied on this agreement to their detriment, they will have a claim on the property under what is known as a constructive trust. Relying on the agreement to their detriment includes making contributions towards the home or conducting work on the property.
In deciding whether a trust has arisen the Courts will look at:
- The intention of the person(s) that created the Trust i.e. the husband, the wife and the purchaser of the property;
- The purpose for which the land is held; and
- The circumstances and wishes of those who are entitled to occupy the land.
If claiming that a trust does exist and that they have rights in the property, the parties should be aware that conditions may be placed on them to pay any outgoings or expenses in relation to the property.
If a trust is found to exist then an application can be made to the Court to deal with what should happen to the property when the divorcing couple are arranging their finances. A Court Order could be made to prevent the sale of the property, order the sale of the property or even relieving the person who originally bought the property, known as the trustee, from any duty to consult the divorcing couple with regards to what they do with the property.
Until a Court order is made, the owner of the property would be restricted from preventing any beneficiary of the trust from occupying the property, for example, by changing the locks or selling the house.
When deciding the type of order to make, the Court will have regard to the intentions of the parties, the purpose for which the property subject to the trust is held, the welfare of any minor children who occupy the property and the interests of any secured creditor or any beneficiary.
In the event of a marriage breakdown, it is important to seek specialist legal advice from a solicitor who will be able to explain and deal with particularly complex issues, ensuring that all possible claims with regards to the matrimonial home are explored.