Stack v Dowden [2007] UKHL 17
The House of Lords established that joint legal ownership of a property does not automatically imply that the equity in the house is to be split equally.
Introduction
When a property is bought, the Land Registry only records who the legal owners of the property are. It does not record how the beneficial interest, otherwise known as the equity in the home, is to be distributed once the property is sold.
For couples that are married, the distribution of assets is determined in line with relevant matrimonial statutes. For cohabitees, there are no such governing laws. This has meant that without an express declaration of trust setting out the parties’ intentions, there was no uniformed approach.
In this landmark decision, the House of Lords sought to provide clarity to this.
Background to the Case
This dispute arose following the end of an 18-year relationship, in which a couple had lived together, bought property together, had raised children together, but had never married.
Their relationship began in 1975 and in 1983, Ms. Dowden had purchased a home in which she was the sole legal owner for £30,000; had taken out a mortgage in only her name; and had taken the down payment from a savings account held in her own name, which had untraceable contributions from Mr. Stack.
It was whilst residing at this address, that the couple welcomed their four children.
In 1993, Ms. Dowden sold that home for £90,000 and used the funds from the sale, plus additional savings and bought a new home for the family. This time, the property was registered under both parties names as joint-owners, and the mortgage was held in both of their names.
Except for the property, the couple kept their finances completely separate from one another.
When they separated in 2002, Mr. Stack sought court permission for them to sell the house, and for the proceeds to be distributed equally. The first court agreed.
Ms. Dowden appealed against this decision to the Court of Appeal. Who, upon further examination as to how the couple ran their household and organised their finances, determined that whilst the property may have been held jointly, it was not the intentions of the parties for the equity to be split equally between them. They then sought to determine what percentage should be awarded to who and determined that Ms. Dowden should receive 65% of the proceeds, whilst Mr. Stack should receive 35%.
Mr. Stack appealed to the House of Lords.
The House of Lord’s Decision
The Lords concluded that when considering ownership, the starting point where there is sole legal ownership is that there is also sole beneficial ownership, and that where there is joint legal ownership, there is also joint (equal) beneficial ownership.
Anyone who seeks to argue otherwise, must prove it and must state in what way they intended the division to be. In this instance, the burden was on Ms. Dowden to prove that the equity should not be 50/50.
The Lords determined that there are many factors that may be relevant in determining the parties’ true intentions. This could include:
- The reason why the home was acquired in their joint names
- The nature of the parties’ relationship
- Whether they had any children
- How the property was financed, both initially and subsequently
- How the other expenses of the house were paid
This is not an exhaustive list.
In reviewing this case, the House of Lords agreed with the Court of Appeal and dismissed the appeal.
Why Stack v Dowden Matter
This decision confirmed that there is a presumption regarding legal ownership and beneficial interest which can be rebutted.
Practical Implications for Clients
- Obtain an express Declaration of Trust
It remains advisable that should you intend the legal ownership of a property to be different to the beneficial interest that an express declaration of trust be executed.
This will be your written agreement detailing what you intend.
- If no express trust
Keep and maintain clear records of how the funds to purchase the property were accumulated and apportioned.
Keep and maintain clear records of any conversations, correspondence in which you discuss the distribution of assets in the event you sell the property.
Keep and maintain clear records of how you oversee and handle your financial affairs during the course of your relationship
Practitioner Takeaways
The ruling gives family lawyers a stronger framework for advising clients how to challenge the considered starting point.
Practitioners should:
- Advise clients to obtain an express declaration of trust
- Identify and trace the origin of the payments towards the purchase price
- Examine the timing and purpose of the purchase
- Assess how the finances of the couple were handled during the course of the relationship
- Identify if there are any other aspects which support the challenge
Conclusion
Stack v Dowden provides a clear framework for the courts when considering the intentions of an unmarried cohabitating couple who seek to sell their home.
By: Abigail Gledhill