Can you claim interest in property if you have invested in improvements but are not the legal owner?
Usually you are not entitled to a share in a property or to recover your costs if you carried out works without the consent of the legal owner. For example, a tenant who spends money improving a property cannot expect a reduction in rent or money back at the end of the tenancy.
However, if the legal owner knows about the works there is a possibility that you have a claim for a share in the property. This will depend on the relationship between the parties and what the parties recall of discussions at the time that the works commenced. Was there an agreement or any promises made in connection with the works?
If the parties are married then the issue will be resolved as part of a financial remedy claim. But often these kind of disputes arise in the context of extended family or friendly relationships such as cohabitees or a son-in-law with wife’s parents or long standing tenants. If the dispute ends up in court, the judge will make a decision based on whose account of what was agreed or promised is the most credible.
The person claiming a share of the property, the claimant, has to convince the court that there was an agreement or that the parties had a common intention that they would acquire an interest in the property as a result of carrying out the works. Often this is difficult in a family or friendly context because there is an underlying trust and in these circumstances people don’t tend to put their agreement in writing. However, the court is good at discerning who is telling the truth and oral evidence can be persuasive. And often the subsequent behaviour of the parties will be a good sign of what was initially agreed between the parties. But it is up to the claimant to provide the evidence to support the claim and if the claimant cannot then he or she risks losing the claim and having to pay all parties’ legal costs.
If the claimant is successful in persuading the court then the court will make an order that the legal owners hold the property on trust for themselves and the claimant. The claimant’s share will be decided on the basis of what was agreed or how the improvements increased the value of the property.
Alternatively, the claimant may be able the provide evidence for a proprietory estoppel claim. To succeed on these grounds the claimant must show that the legal owner made a promise that the claimant would receive an interest in the property and that the claimant relied on that promise in incurring the costs of the works.
Both types of claims are risky and will depend on how good the claimant will be in the witness box. In reality, most claims are settled out of court. But claimants do well to remember it is not a question of fairness and proportion, but whether a legal entitlement to a property interest has been acquired. That can be a black and white matter that depends on the strength of the evidence the claimant can provide to the court.
Written by Justine McCool – Partner.