Our Contentious Probate team recently undertook a case regarding the nature of a Declaration of Trust when a property is owned by two or more people as “tenants in common”. Julian Burrows who ran the case at the Business and Property Court in Bristol secured a successful outcome for our client.
In our case, the Deceased made his final will on 24th January 2002 dividing the bulk of his estate equally among his 4 children and our client, his longstanding partner.
A month later, our client decided that she wanted to purchase her property from the council exercising her “right to buy”. However, our client did not have the means to purchase the property at its discounted price of £36,500. This sum of which the Deceased gifted her £24,500 and lent her £12,000 to facilitate the purchase, which took place on 2nd June 2002. The Deceased considered that in light of his gift, he was no longer treating his children and his partner equally. He therefore executed a codicil on 28th June 2002 in which he removed the claimant as a beneficiary.
Had matters ended there, no dispute would have arisen.
However, shortly afterwards, on 11th July 2002, a different branch of the same firm of solicitors produced a Declaration of Trust, which the Deceased and our client executed that day having been advised to do so. A Declaration of Trust is a legally binding document that defines how property is owned; it clarifies ownership shares, particularly for tenants in common and secures interests for non-legal owners. The document executed by the parties provided that the property would be owned by the Deceased as to 54.9% (being his contribution divided by the purchase price) and by our client as to the balance of 45.1%; she would also have a right to reside for as long as she wished. Both clients were elderly and it appears that it was not properly understood particularly by the Deceased against the background of his 28th June 2002 codicil.
The Deceased died nearly 20 years later on 15th January 2022.
It was only when the Deceased died that our client realised that as a result of the document she was asked to sign by her previous solicitors 20 years earlier, she only owned 45.1%, meaning she did not have full ownership of her home.
This was clearly not the intention of the parties.
Upon our investigations, the Deceased’s codicil made perfect sense: it was his attempt to restore equality by removing the testamentary gift from our client on the basis that she had just received a lifetime gift of a similar amount.
Once one took into account the existence of the codicil, the subsequent Declaration of Trust did not reflect the parties’ true intentions for not only did it strip our client of any interest in the property beyond that represented by her discount, it also gave the Deceased the beneficial share represented by the £12,000 loan even though the loan was at that point requiring repayment and was ultimately repaid.
To put it simply: before these events, our client was entitled to a 1/5 share of the Deceased’s residuary estate; after these events, she was cut out of the will, had only a lifetime right to reside, remained obliged to repay £12,000 and only received 45.1% of her house.
Our client and the Deceased were simply unaware that by executing the Declaration of Trust, they were not restating what had already been the case up until then, but instead fundamentally altering it so as to bring about a state of affairs that neither intended. This seemed to us to be a classic case where the parties were simply signing what was put in front of them by lawyers, without realising the consequences of doing so. Ultimately leaving them with a state of affairs that were not wanted or intended.
As a result, we successfully brought a claim in Court to say that the transaction needed to be set aside for mistake. As the key events happened a long time ago in 2002 our client was not able to sue her solicitors. However, through our investigations, we were able to track down the staff responsible for the drafting of the documents and they both provided us with witness statements and came to Court to give evidence.
The matter ran to Hearing in Court and our client was successful. One of the Deceased’s children actively defended the claim and as a result the Deceased’s estate was required to pay our client’s costs.
There are many lessons to be learnt here – Gemma Smith, Head of our Wills, Trusts & Probate department shares a vital piece of advice to consider;
“When you’re sharing ownership in property, clarity is everything. A solicitor-drafted Declaration of Trust makes sure everyone’s interests are protected, today and in the future”
It is important that if a property is jointly owned that a Declaration of Trust exists that accurately sets out the exact contributions from each co-owner and that any Declaration of Trust is completely understood and aligns with what may be set out in each co-owner’s last will. If only one party is on title to the Property, but it is understood that the Property is owned by more than one person, it is important that a Declaration of Trust is prepared to set out each parties’ beneficial interest in the property.
It is also vital that each party obtains independent legal advice in doing so, so as to ensure that their rights are properly protected and that mistakes such as the above scenario can be avoided if at all possible.
If you require advice on a new Declaration of Trust or would like our team to check an existing Declaration of Trust to ensure that it reflects the parties’ intentions, please do not hesitate to get in touch. You can call us on 01752 292 292 or email clientservices@wolferstans.com to speak to a friendly member of our team.
This article was written by Julian Burrows, Partner, Solicitor, and Head of Contentious Probate at Wolferstans Solicitors.