Richard Ostle, Private Client Partner, discusses a recent ruling concerning an unwritten agreement between family members about sharing ownership of a property.
Samuel Goldwyn is supposed to have said that a verbal agreement isn’t worth the paper it’s written on. But a recent ruling has confirmed that the Courts may now consider an unwritten agreement between family members about sharing ownership of a property as binding.
In the case of Archibald v Alexander, there was a dispute between three siblings about the ownership of a family property. The background was that in the late 1990s, a property in Bromley had been purchased by their mother. Following tax advice, the property was actually purchased and registered at the Land Registry in the name of the mother and one of the siblings, a Mrs Alexander, although all of the money to fund the purchase came from the mother.
When the mother died, Mrs Alexander asserted that she was entitled to be the sole owner of the property, as the surviving joint owner. However her two siblings brought a legal challenge against Mrs Alexander on the basis that they claimed that shortly before the house purchase was completed, over 20 years earlier, the mother and three siblings had held a meeting where they agreed that the house would be bought in the name of the mother Mrs Alexander, but that it would really be held for the mother ‘for her lifetime’ and then would pass to the three siblings in equal shares.
The two siblings who brought the claim argued that the reason that they had not been registered as co-owners from the start was that they believed they did not need to be, and that they were entitled to rely upon the oral promises that they say were made. They claimed that Mrs Alexander effectively now held the property as trustee for the three of them.
In her defence, Mrs Alexander argued that the meeting in the 1990s had never taken place and that her mother intended the property to pass only to her. There was no written agreement to show that any legal trust existed, and as such the property was hers and hers alone.
When the case went to the County Court, the judge did not believe Mrs Alexander – finding that her account was ‘manufactured and her evidence untrustworthy’. But she appealed to the High Court and her argument included the assertion that an oral agreement alone was not sufficient in law to establish a co-ownership trust in the way her brother and sister alleged. The High Court dismissed her appeal and upheld the original court ruling, that the property was effectively owned in three equal shares.
The case involved some detailed and complex legal arguments but the Courts have, with this ruling, now made clear that co-ownership of property can be established purely on the basis of a verbal agreement – even if that agreement was made several decades previously. However what is equally clear is that it is still far better for all concerned, where any property is going to be co-owned, for there to be a legal co-ownership declaration drawn up and signed be all parties involved recording the basis of the agreement between them. Had the family in the case of Archibald v Alexander put such a document in place, they could have saved themselves a huge amount of expense and stress, and avoided a bitter family dispute.