Yes.
Property law in New South Wales is like a can of worms.
This article aims to give you a clearer picture of what rights that can contain.
Property Ownership
The legal owner of a property is the person who is on the title.
Multiple owners can hold a property in one of two ways. The title shows which one the owners have chosen:
- Joint tenancy: meaning two or more people co-own the property in equal shares and with a right of survivorship (which means if one co-owner dies, the other gets their interest).
- Tenants in common: meaning two or more people co-own the property in any percentage split they want and with no right of survivorship (which means if one co-owner dies, their share passes based on their will).
Lawyers call this ‘legal ownership’.
If you have legal ownership, you have rights over the property.
One of the rights a co-owner has is the ability to force a sale of a co-owned property under s 66G of the Conveyancing Act 1919 (NSW). We talk about this here.
But what if you aren’t on title but still paid towards the deposit, mortgage, bills and upkeep? Can the legal owner run off without giving you a cent?
Equity happens.
Equity
Equity is the unicorn of the legal world.
Developed in England to combat the rigidity of the law, equity steps in to provide fairness and flexibility when the law leads to an unjust outcome.
In situations where you aren’t on title but still made financial and non-financial contributions, you may have an ‘equitable interest’ in the property.
An equitable interest is a right that allows a person to benefit from or control property even when someone else holds the legal title.
The common situation
Mary and Sam purchase a property together. They split the deposit and mortgage repayments 50/50 but the property is registered solely in Mary’s name.
This means the legal ownership is with Mary only.
However, Sam will likely retain an equitable interest of 50% in the property. If Mary ever claims the full 100%, Sam can ask the Supreme Court of New South Wales for relief.
What can the Supreme Court do?
One of the Supreme Court’s main powers in these situations is imposing what’s known as a constructive trust.
In Muschinski v Dodds (1985) 160 CLR 583 Justice Deane held a constructive trust:
‘… can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention by the parties involved (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.’
This means Courts may recognise an equitable interest in property. They can then declare that the legal owner holds some or all of the property on trust. Holding property on trust means holding it for the benefit of the person with the equitable interest.
There are two main types of constructive trusts in these situations:
- common intention constructive trust; and
- joint endeavour constructive trust.
Common intention constructive trust
- This type of trust arises where:
- the parties agreed or had an intention as to what their interests in a property would be;
- the party claiming an interest in the property, relying on that intention, acted to their own detriment (for example making financial and non-financial contributions); and
- it would be an equitable fraud on the claimant to deny their beneficial interest in the property.
To prove this, a party generally needs evidence of conversations or agreements. That evidence must show what interest each party intended to hold in the property. Generally, the Court does not give strong weight to one party’s unsubstantiated version of events.
Joint endeavour constructive trust
This type of trust can arise when two people pool their money or effort towards a shared goal, such as buying a home. It applies when that arrangement breaks down and neither person is to blame.
It may be unfair for the legal owner to keep the benefit of the other person’s contributions. If so, the Court can declare that the legal owner holds part of the property on trust for them. The Court usually sets each share to reflect what each person contributed.
This is common when a relationship breaks down and assets need to be divided.
Conclusion
Being left off title doesn’t mean being left with nothing. If you’ve put money or effort into a property, equity may recognise your interest in it, and the Supreme Court can declare that the legal owner holds part of the property on trust for you.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
Article Written by James Cutrone, Law Graduate
