When one cohabitee wants to buy from the other

Cohabitation|August 4th 2015

Orders transferring one former spouse’s interest in the former matrimonial home to the other in return for a lump sum are commonplace. They are made under the court’s wide powers to make financial/property orders following divorce.

But what if the owners of the property were not married? It is still highly likely that if their relationship breaks down one of them would like to keep the property by buying out the other’s share. However, as we know, the court does not have the same powers to deal with property disputes between former cohabitees as it does between former spouses.

Property disputes between former cohabitees who jointly owned the property are dealt with under the Trusts of Land and Appointment of Trustees Act 1996, affectionately known by family lawyers by the acronym ‘TOLATA’. TOLATA enables the court to order that the property be sold and the net proceeds be divided between the former cohabitees, but it does not give the court power to order that one party sell their share to the other.

There is, however, something else that the court can do, as demonstrated by the recent Court of Appeal decision in Bagum v Hafiz and Another.

Bagum v Hafiz did not actually involve cohabitees, but the principles are exactly the same (the provisions in TOLATA relate to any jointly owned property, irrespective of the relationship, if any, between the owners). It concerned a property that was jointly owned by a mother (Mrs Bagum) and her two sons (Mr Hafiz and Mr Hai). Originally, all three lived in the property, but unfortunately there was a falling out between Mr Hai and the others, following which Mr Hai left.

Eventually Mrs Bagum issued proceedings seeking an order that Mr Hai sell his interest in the property to Mr Hafiz or, in the alternative, that the property be sold. Clearly, she and Mr Hafiz wished to remain in the property, so the preference was for Mr Hai’s share to be sold to Mr Hafiz.

The court made an order providing that Mr Hafiz should have the opportunity to purchase the property at a price to be determined by the court, within six weeks of that determination. If he did not complete the purchase within that six week period, the property would have to be sold.

Mr Hai appealed against this decision, complaining (amongst other matters) that the judge had no jurisdiction to make the order, that the order prevented him from bidding for the property and that, without exposure to competitive bids, it did not ensure that the best possible price would be obtained for the property.

The Court of Appeal dismissed the appeal. Giving the leading judgment Lord Justice Briggs acknowledged that the order was unusual, but he found that it was within the judge’s jurisdiction to make such an order (I won’t go into the details of why he considered this was so – suffice to say that it involved arguments relating to the impenetrable legal subjects of equity and trusts).

As to whether it was right for the judge to make such an order, she had clearly considered the intentions of the parties regarding the property, namely to secure its continued availability as a home for Mrs Begum and Mr Hafiz and to secure a financial interest in the property for Mr. Hai (the property had been transferred from Mrs Begum’s sole name into the joint names of all three parties at Mr Hai’s request, in order to protect the investment he had made in it). The judge had also taken account of the fact that there were a number of similar houses in the same street, so the risk of undervaluation by the court was low, due to the large number of available comparable properties.

The judge had given clear reasons for her conclusion that the order which she made was best calculated to serve the differing interests of all of the parties, and hence the appeal was dismissed.

The full report in Bagum v Hafiz can be read here, although it is only recommended for those brave (or foolish) enough to enter the murky world of equity and trusts.

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

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