When changes in the ownership of a property are contemplated, it is essential that the appropriate documentation is produced to substantiate the new ownership.
In a recent case involving an insolvent estate, this issue was crucial in determining the outcome – costing the family concerned hundreds of thousands of pounds.
The deceased became insolvent because of losses incurred as a result of being a ‘name’ at Lloyds. The trustee of his insolvent estate (who is required to act on behalf of the creditors of the estate, not the beneficiaries) sought to set aside the transfer of an interest in the man’s residential property, made in 1996. He also sought the court’s ruling as to the extent of the deceased man’s interest in the property and an order for the possession and sale of the property.
The man’s family opposed the applications, arguing that the contribution paid by the deceased’s son for the construction of an extension to his parents’ house gave him an equitable interest in the property. The son and his wife had subsequently moved into the extension.
When his father died, the son claimed that he had acquired a 15 per cent interest in the property through his contribution and a life interest in the remaining 85 per cent, which was owned by his parents. He claimed to have spent more than £38,000 on the property, but was unable to provide evidence of expenditure on that scale.
The net effect of the arrangements, if accepted as valid by the court, would be to reduce the open market value of the property and the sum available to creditors by more than £300,000.
However, in the absence of the appropriate paperwork to substantiate the son’s claim, the court rejected his argument.
The moral of the story is that if you want to avoid future legal costs, delay and disputes, get the paperwork completed properly at the outset.
Partner Note
Williams v Lawrence & Anor [2011] EWHC 2001 (Ch).