On cohabitation breakdown it can be quite common for one of the former cohabitants to buy out the other’s share in the family home. If the other party will not agree to a transfer it can be ordered by the court.
What does the law say about cohabitants buying out each other’s share?
Under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) the court can declare the nature or extent of a person’s interest in trust property as well as make an order for sale or an order preventing the sale of the property.
Section 15 of TOLATA 1996 sets out the factors to which the court can have regard when determining applications under section 14 and will include the intentions of the person or persons who created the trust, the purposes for which the property subject to the trust is held, the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home and the interests of any secured creditor of any beneficiary. It has been held that these factors are not exhaustive and are not in any particular order. Each case will turn on its own facts.
In Bagum v Hafiz and Another  EWCA Civ 801 the Court of Appeal held that is was permissible for a court to order the arrangement of a sale in such a way that one party is entitled to have an opportunity to be the purchaser for the other’s share, should that party within a stated time pay an amount determined by a valuation of the property by court order.
In Chaston v Chason  EWHC 1672 (Ch) His Honour Judge Matthews, sitting as a High Court Judge referred to Bagum v Hafiz and upheld a direction permitting one beneficial owner of a property to buy out his siblings’ (the other beneficial owner’s) interest in the property as opposed to a sale on the open market. He concluded that this decision fell well within the generous ambit of discretion afforded under TOLATA.
In Kingsley v Kingsley  EWCA Civ 297 (Ch) Sally Kingsley, the sole surviving partner of a farming partnership formerly conducted with her late brother, agreed to an application to the court brought by her brother’s widow as executor of his will for the sale of jointly owned farmland but sought an order giving her a right to acquire the land before its sale on the open market and at a price to be determined by the court. At first instance the court heard valuation evidence from the parties’ experts and determined the value of the farmland about 4% below the value contended for on behalf of the widow. The court applied the principles in Bagum v Hafiz and held it had discretion to make the order sought, ordering the sale of the farmland to Sally Kingsley at half of its value (she owned a 50% share in the farmland). The executors of the brother’s will appealed.
The Court of Appeal rejected the appeal and held that the court need not be sure that the sale price set is at or above what could be obtained on the open market. The risk that the property might be sold at an undervalue is simply one of the discretionary factors which the court must consider when determining the appropriate order. Further, such orders are not contrary to Article 1 of Protocol 1 of the Human Rights Convention. Provided the discretion under section 15 is properly exercised, there is no deprivation of property as the trustees will receive the value of the property as determined by the court.
How can Watson Morris help?
At Watson Morris, we specialise in all areas of family law. We can give help and advice when it comes to cohabitation agreements and court orders for cohabitants to buy out the other’s share. Contact us today for more information.
Written by Caroline Watson
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