A ruling at the Court of Appeal (Civil Division) has underlined the vital importance of taking legal advice before embarking on joint property purchases.
Two close friends purchased a flat in central London in 1997 without first executing a written declaration of trust setting out the proportions of the property each of them owned.
The parties’ financial contributions to the purchase price were unequal and the flat was registered in the sole name of one of them. There was also ‘a certain amount of informality’ in the way the parties met the outgoings of the flat.
Lady Justice Arden said the parties ‘did what many single people do’ when they bought the flat with the help of a mortgage and with each of them making cash contributions to the purchase price.
However, the absence of legal advice before they purchased the property came back to haunt the parties when their ‘great friendship’ ended in 2008 and a dispute arose over the respective proportions of the flat each of them was entitled to.
Despite the inequality of their financial contributions, a County Court judge ruled that the parties were each entitled to half of the property after finding that they had, prior to the purchase, reached an ‘express agreement’ to that effect.
However, that decision has now been overturned by three judges at the Court of Appeal, who ruled that the party who put substantially more money into the purchase is entitled to 75% of the property and his former friend 25%.
Lady Justice Arden, sitting with Lords Justice Tomlinson and Davis, said that result was a fair reflection of the respective contributions made by the parties both to the purchase price and to the flat’s outgoings, including the mortgage.