Property law – Assessment of Equitable interest in a property where legal interest held a joint tenants – Parties seeking the determination of the equitable interest of each of the cohabiting parties in a residential property.

In the recent Circuit Court case of McGrane (the Plaintiff) v O’Foghlu (the Defendant) [2020] IECC 1, O’Connor J determined the beneficial interest of a residential property jointly owned by a cohabiting couple.

Background

In 1996, the Plaintiff and the Defendant purchased a property which they used as a family home with their three children. The parties were registered owners as joint tenants. The property purchase was funded by a mortgage in the parties’ joint names and both acknowledged that during their relationship they referred to themselves as a “family unit”.

The Plaintiff submitted that as a joint tenant that she was entitled to 50% net proceeds. However, the Defendant claimed that the Plaintiff only contributed 26% towards overall expenditure on the house and asked that the court carry out an analysis based on capital sums paid by each party.

Law

According to O’Connor J (the Judge), the Court must look at several factors when quantifying the beneficial interest each party holds in the premises:

1. One must look at whether the legal interest is held solely or jointly. If held in the latter, this indicates both legal and beneficial joint ownership. The person who is seeking to show that the beneficial interest was intended to be different, bears the burden of proving that intention. In such a case, that person would have to establish a constructive trust in his or her favour.
2. In the absence of written agreement, there cannot be a “hybrid intention”. As described by Baroness Hale in Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432 “At any time their interest must be the same for all purposes”. For example, parties cannot intend to have a tenancy in common in equal shares should they separate amicably and at the same time intend to have a tenancy in common in unequal shares should they separate on acrimonious terms.
3. Where a property is bought in joint names and they are jointly liable for the mortgage, there is a presumption that beneficial ownership is the same as legal ownership. The inference being that both benefit and burden are being shared equally.
4. It is possible that the common intention of the parties may change over time, this can either be decided between them or the facts may dictate it. For example, varying the financial contributions or the conduct of the parties.
5. In circumstances where the parties have separated and one of them remain living in the dwelling house, the provisions of 31(2) of the Land and Conveyancing Law Reform Act 2009 are applicable.

Decision

The Judge held, in applying the equitable maxim “equity follows the law”, that there is a presumption that parties who are joint tenants in law are also in equity. He highlighted that the parties acted as a family unit, in purchasing, mortgaging and enhancing the property, at all times, in law and in equity, in equal shares.

The Judge stated that the defendant had not shown sufficient reason to support his claim that he was entitled to a greater share in the property. He held that it was apparent from the comprehensive evidence furnished that there was equal contribution by both of the parties.

The Judge ordered that the plaintiff and defendant hold the premises as tenants in common in equal shares and that the net proceeds of sale be distributed between them in equal shares.