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Property Litigation Q&A March 2022: Tolata disputes - How to get your equity out of the Property

View profile for William Bartley
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Property Litigation Q&A March 2022: Tolata disputes - How to get your equity out of the Property

Property Litigation specialist lawyer, Will Bartley, provides advice on what happens when joint home-owners cannot agree on what to do with their Property.

How do you split up a house after a break up?

Each year thousands of residential properties are purchased in England between joint owners, the vast majority of these between couples.

However, what can one party do if the relationship has broken down in respect of selling the Property to get their share of the equity out of it? Can one party buy-out the other? Are Court proceedings needed? Do we have to go to Court and if so, is it expensive?

All of this will be addressed below.

Please note that the below advice is in respect of joint-owners who do not have ‘under-18 dependents’ residing at the Property. If they do, advice will need to be sought from a Family Solicitor.

What is Tolata?

The Trusts of Land and Appointment of Trustees Act 1996 (ToLATA) is the legislation that the Court interprets in respect of jointly owned property, allowing them to determine the extent of each party's interest in the land or property.

It can also allow the Court to provide an Order for Sale – which permits one party to market the Property for sale to realise their share of the equity from the Property.

What happens when you break up with someone you own a house with?

This is a very common situation for joint-property owners to find themselves in.

In the event that both Property owners cannot agree that the Property is to be sold (for example, one party wants to remain living in the Property), then both parties should obtain independent legal advice.

Essentially, the three options are:

  1. The owners agree to market the Property for sale with each party taking their share of the equity from the sale and going their separate ways;
  2. One party wanting to remain in the Property makes an offer to the joint-owner to buy-out their share and own the Property solely in their own name;
  3. One party refusing to sell the Property, but not being in the financial position to buy-out the other joint-owner. This is where Tolata Court proceedings are needed and an Order for Sale obtained, to permit the vacating party the power to sell the Property to realise their share of the equity in the Property.

How can I resolve disputes over home ownership with my ex-partner?

Both parties should engage in settlement discussions from the outset and be realistic as to their own financial position.

Parties should be aware that Mortgage Companies may often be reluctant to change the lending agreement from two parties to one, given the increased financial risk to them.

Parties also need to consider the additional financial outlays that come with a remortgage.

It is therefore best for the party looking to remain in the Property to seek advice from a mortgage consultant before making an offer to buy-out the joint-owner.

What if we can’t agree? Do we need to go to Court?

If the parties have made genuine attempts to mediate and resolve the dispute through settlement correspondence,  but have not been able to agree, then Court proceedings may be necessary.

How does the Court decide who gets the house?

The Claimant, the individual looking to obtain an Order for Sale, will need to substantiate on what grounds the Court should make the Order.

The majority of Properties will be held in equal shares between the parties (i.e 50/50 unless there is a declaration of trust put in place at the time of purchase).

The Claimant can therefore ask for the Property to be sold by an Order from the Court, and the winning party would usually get a contribution of their legal costs included in the Order, to be deducted from the losing party’s share of the remaining equity.

How much does a Tolata dispute cost?

This will depend on how cooperative both parties are.  If early resolution can be reached, legal costs should be relatively low.

However, in the event that Court proceedings are commenced, legal fees will almost certainly be in the tens of thousands.

Therefore, costs need to be carefully considered before commencing a claim, especially if a buy-out or jointly agreed sale can be arranged.

Costs incurred will likely be deducted from the equity share in the Property of the losing party.

How is a half share calculated?

Firstly, the parties need to establish how the Property is owned. For the vast majority of ownerships, it will be jointly and 50/50.

On this basis, the remaining equity will be calculated by deducting the remaining mortgage and redemption penalty sum from the average of three independent estate agent valuations of marketing the Property for sale.

The total equity will then be divided between the parties to establish their share. This is how a buy-out is calculated.

Property Litigation Solicitors

At Frettens, we will be able to advise you on the appropriate way of proceeding, as well as represent you throughout negotiations and Court proceedings if necessary.

If you feel that you would benefit from advice on a Tolata dispute, please contact us on 01202 499255, or fill out the form at the top of this page.

We offer a free initial appointment for all new clients.

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Will Bartley, who specialises in Property Litigation matters, authors a monthly Q&A on the website.

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