CG65427 - Private residence relief: settled property: common intention constructive trusts: detriment

TCGA92/S225

Having established that there was a common intention to give the occupier an interest in the property the occupier must have acted to his or her detriment in reliance on that agreement. It is the detrimental reliance which makes it unconscionable for the legal owner to deny the beneficiary an interest in the land.

Direct financial contributions to the purchase price or the payment of mortgage instalments would be evidence of detriment but may be unlikely in the case of claims under TCGA92/S225. It is more likely that the occupier would have to show a significant change in his or her position in reliance on the common intention. This means that the occupier must have done something which he or she could not reasonably be expected to have done unless they were to have an interest in the property. For example, they may have given up their right to occupy another property or to buy it at a discounted price. They may have given up a job and moved to another part of the country maybe to assist a disabled relative.

The detriment has to be significant. A person who sells his or her own house and keeps the sale proceeds has not acted to their detriment if they move into a house owned by another person. Any detriment has to be balanced against any benefit received such as being allowed to occupy the property rent free. Merely maintaining and insuring the property would not be evidence of detriment; paying for significant improvements may be.

For example, a nephew may agree to provide a flat for his elderly uncle and aunt. They sell their property and use the proceeds to pay for medical expenses. There is a common intention that the uncle and aunt should occupy the property for their lives or until they do not need it. But there is no constructive trust because the uncle and aunt have not acted to their detriment in reliance on the common intention. They have been allowed to occupy the property rent-free and keep the disposal proceeds of their own property.