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Action after a sale or disposal

This content applies to England & Wales

Limited circumstances in which it may be possible for a non-owning cohabitant to take action after a sale or disposal by the sole owner.

For both registered and unregistered land, if the sole owner has taken action to sell or dispose of the home, it may be possible, in extremely limited circumstances, for the non-owning cohabitant to:

  • get the transaction set aside on the grounds that it was affected by the 'undue influence' of one party upon the other or by material misrepresentation
  • preserve her/his occupation rights by proving that the transaction took place for no money or the buyer/lender had notice of her/his interest
  • realise a beneficial interest in financial terms under the concept of 'overreaching'.

Undue influence or material misrepresentation

Where a transaction can be shown to have been procured by the 'undue influence' of one party on the other, or by 'material misrepresentation', it may be possible to get the transaction rescinded (set aside). To establish undue influence it is necessary to show that one person has abused a relationship of trust and confidence (by exercising some form of pressure or domination) and exploited the emotional involvement and trust of another. To establish misrepresentation it is necessary to show that one person misrepresented information to the other by making a false statement, for example about the amount of a loan or the purpose for which the loan was required. In both cases, it is also necessary to show that, as a result, the second person has entered into a transaction. If a third party is involved in the transaction, it will also be necessary to show that the third party was, or ought to have been, aware of the likelihood of undue influence or misrepresentation.[1]

Some success has been had in cases involving banks, for example, where a loan is being taken out solely for one partner's benefit, such as for a business.[2] If the lender is aware of the possibility of undue influence or misrepresentation to a cohabitant then, in order to make sure that any charge is enforceable, it would need to take reasonable steps to protect the cohabitant, to avoid being fixed with notice of the wrong, for example, by making sure that the person who may be affected has independent advice. The area of undue influence is a complex one that is subject to developing case law, and it should be stressed that the courts are often very reluctant to make a finding of undue influence. It will always be necessary to seek expert opinion before pursuing this option.

Transfer for no money/buyer or lender had notice of the interest

It is possible for a beneficial interest to survive where the transfer of the property takes place for no money, or the buyer or lender had, or ought to have had, notice of the beneficial interest (see 'unregistered land' on the page on Cases where action is necessary for details).

In either case, the practical result for the non-owning cohabitant is that her/his rights, ie to occupy the property or in financial terms, will take precedence over those of the new owner or lender. This could mean that the non-owning cohabitant is allowed to remain in occupation, although the former cohabitant no longer owns the property, and the new owner is not able to occupy. The non-owning cohabitant's financial interest could also be registered as a charge on the property, and will take precedence over any other charges. If the non-owning cohabitant remains in occupation, s/he may have to pay an 'occupation rent' to the new owner or lender.

Overreaching

Overreaching means that a buyer buys land free of any beneficial interests, provided the money is paid to two trustees. Where there is a sole owner and a non-owning cohabitant with a beneficial interest, in theory the buyer should pay the purchase price to two trustees in order to take over the property free of the beneficial interest. In practice, the buyer may not know of the beneficial interest and is likely to pay the money to the sole owner, rather than two trustees. In this case, there will have been no overreaching, and whether or not the non-owning cohabitant's beneficial interest is protected will depend on whether the buyer had notice of it (see 'notice of beneficial interest' on the page on Cases where no action is necessary for details). In contrast, where overreaching has occurred (ie payment was to two trustees), the non-owning cohabitant will have no rights to remain in the property, but can get her/his money back by pursuing the trustees.

[1] Royal Bank of Scotland Plc v (1) Chandra (2) Chandra [2011] EWCA Civ 192.

[2] Barclays Bank plc v O'Brien plc (1993) 26 HLR 75 HL, 4 All ER 417; Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 43.

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