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A slice of the equity?

on Tuesday, 04 August 2015.

Allowing someone into a property without clear documents is always a risk. This is apparent from the recent Court of Appeal case of Southwell v Blackburn (2014).

The Facts

In this case Ms Blackburn moved into a house owned by Mr Southwell. Ms Blackburn was able to demonstrate that she had relied on Mr Southwell's promise of a private home and financial security and claim part ownership of the property.

Ms Blackburn had left her housing association accommodation, in which she had invested around £15,000, to live with Mr Southwell in a property bought in his sole name.

Mr Southwell was ordered to pay £28,500 to Ms Blackburn after the breakdown of their relationship some 9 years later.

Although the couple were not married, and Ms Blackburn did not contribute financially towards the property in which they both lived, Mr Southwell was ordered to put Ms Blackburn back in the same position she was in before moving in with him. The figure awarded to her reflected the amount she had invested in her previous property.

The Reasoning

The Court of Appeal stated that the focus was not on the relationship between the parties, but on the detrimental reliance Ms Blackburn had placed on the assurances made to her by Mr Southwell.

The Court found Ms Blackburn detrimentally relied on Mr Southwell's promise of a secure home, by leaving the property she previously lived and invested in, to move in with him.

Ms Blackburn was awarded a slice of the equity in the new property based on the principle of proprietary estoppel - it was unfair for her to suffer because she had relied on Mr Southwell's promise.

What This Might Mean

This decision is likely to raise some concerns about when a close relationship can give rise to an equitable interest in land.

Whether it is a business or a private property, parties should clarify at the outset their respective interest in a property, in case a relationship breaks down.

This could be in the form of a simple cohabitation agreement, a declaration of trust or even a more complex joint ownership agreement. VWV can provide advice on the various possible mechanisms and give guidance on the best way to document the parties' intentions.

If you would like to discuss further any of the issues in this article, please contact our in our Commercial Property Law Team.

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