Co-ownership of rental property is common among landlords — married couples, siblings, business partners, and investors who pool resources all routinely hold property as co-owners. Most co-ownership operates without dispute. But when relationships break down, business partnerships fail, or one co-owner dies or becomes insolvent, the legal framework for resolving the resulting property dispute is TOLATA 1996. The Act replaced the old trust for sale regime with a trust of land and gave the court wide discretion to make orders about the occupation and sale of trust land under s.14. Understanding the court's approach — and the powerful defences available to co-owners who occupy the property — is critical for any landlord facing or defending a TOLATA application.
Who Can Apply Under TOLATA 1996 s.14?
Section 14 of TOLATA 1996 gives the court a wide power to make any order it thinks fit relating to the exercise by trustees of any function, or declaring the nature and extent of a person's interest in property subject to a trust of land. The following persons can apply: (a) A trustee of land: either trustee can apply for a court order if the trustees are deadlocked (e.g. two co-owners who cannot agree whether to sell or manage the property); (b) Any person who has an interest in property subject to a trust of land: this includes: (i) beneficiaries under a declared or constructive trust; (ii) a secured creditor who has obtained a charging order over a beneficiary's interest (see below); (iii) a mortgagee who has exercised its power of sale and is seeking to realise the charged interest; (iv) a trustee in bankruptcy of a beneficial owner; (c) TOLATA applies to: jointly owned freehold or leasehold property (residential and commercial); property held by a couple (married or unmarried) as beneficial tenants in common; partnership property; property held by a nominee or bare trustee on behalf of a beneficial owner; (d) TOLATA does NOT apply to: matrimonial property in financial remedy proceedings (MCA 1973 applies — TOLATA is displaced); pension-linked property; mortgaged property where the mortgagee holds the legal title (though the mortgagee's power of sale runs in parallel); (e) The claim form: TOLATA applications are made using Part 8 (where facts are not genuinely disputed) or Part 7 (where facts are in dispute — including the size of respective beneficial interests). In urgent cases, interim injunctions to prevent a unilateral sale can be obtained on short notice.
- Trustees of land: either co-owner trustee can apply for a s.14 order if they are deadlocked on a decision about the property
- Beneficiaries: any person with a beneficial interest (including under a constructive trust) can apply — regardless of whether their name is on the legal title
- Charging order creditors: a creditor with a charging order on one co-owner's share can apply for an order for sale under s.14 TOLATA
- Trustee in bankruptcy: the trustee in bankruptcy of an insolvent co-owner typically applies for an order for sale to realise the bankrupt's share for creditors
- TOLATA vs MCA 1973: in divorce proceedings, MCA 1973 governs financial remedies — TOLATA is generally displaced; for unmarried couples, TOLATA is the primary remedy
The Court's Discretion — Factors Under s.15 TOLATA
When deciding whether to make a s.14 order (including an order for sale), the court must consider the factors in s.15 TOLATA 1996: (a) The intentions of the person(s) who created the trust: the express or implied purpose for which the property was held (e.g. as a family home; as an investment; as partnership property); if the purpose was joint occupation and that purpose has failed (relationship breakdown), this factor may weigh in favour of sale; (b) The purposes for which the property is held: if the property remains capable of achieving its original purpose, the court may decline to order sale; (c) The welfare of any minor who occupies or might reasonably be expected to occupy the property: this is a significant welfare consideration and may delay a sale to avoid disrupting minor children; (d) The interests of any secured creditor of a beneficiary: where a creditor has a charging order over a share, the creditor's interest in realising value is given significant weight; (e) Balancing factors in family home cases: where the property is occupied as a family home (including by children), the court balances the competing interests; in investment property cases (no residential occupation), the balance typically shifts strongly towards ordering a sale on application by a creditor or co-owner who wishes to realise their share; (f) Williams & Glyn's Bank v Boland [1980] established that a beneficiary in actual occupation has an overriding interest binding on a mortgagee — this principle now operates under LRA 2002 Sch.3 para.2; (g) For commercial investment property: in disputes about commercial rental property between business partners or investors (with no one in residential occupation), the court generally exercises its discretion to order a sale where one co-owner wishes to sell and the other objects — particularly after partnership dissolution.
- Purpose of trust: court considers why the property was co-owned; purpose of joint occupation failing (after relationship breakdown) supports a sale order
- Minor children: welfare of children who occupy the property is a statutory factor; may delay (not prevent) an order for sale in residential cases
- Secured creditor interests: creditor with charging order over a share is given substantial weight; the court will generally order sale where the property has equity
- Deadlock between investment co-owners: where commercial or investment property is deadlocked between co-owners, courts routinely order a sale — no residential occupation to balance
- No statutory presumption of sale: TOLATA replaced the old 'trust for sale' (which had a default in favour of sale) with a trust of land; the court now has a genuine discretion
Charging Orders and TOLATA Applications — The Creditor's Route
Where a judgment creditor obtains a charging order over a co-owner's beneficial interest in jointly-owned property, TOLATA s.14 provides the mechanism for enforcing that charge by way of an order for sale: (a) The charging order process: the creditor first obtains a money judgment in the county court or High Court; applies for an interim charging order (Form N379) over the judgment debtor's beneficial interest in the property; the charging order is registered on the legal title (Form K form Land Registry); an application for a final charging order is then made at the charging order hearing; (b) The order for sale application: once the final charging order is made, the creditor applies under TOLATA s.14 for an order for sale of the property to enforce the charge; if the debtor is a co-owner, the court must also consider the interests of the non-debtor co-owner(s); (c) The non-debtor co-owner's position: the non-debtor co-owner is joined as a respondent to the TOLATA application; they can argue: (i) the property is a family home and children's welfare requires delay; (ii) the amount owed is small relative to the equity and other enforcement methods (attachment of earnings) would satisfy the debt; (iii) they can buy out the debtor's share to avoid a forced sale; (d) Claughton v Charalambous [1999] and Co-Co Ltd v Nortel [1995]: in practice, courts balance the creditor's right to enforce against the other co-owner's rights; for residential property occupied as a family home, a sale may be delayed 3-6 months; for investment property with no occupation, a sale order is almost invariably made; (e) Insolvency and automatic stay: on bankruptcy, the automatic stay under IA 1986 prevents TOLATA applications without leave — the trustee in bankruptcy applies under s.335A IA 1986 (which incorporates s.15 TOLATA factors); (f) Severance of joint tenancy: a creditor who obtains a charging order over a joint tenancy must first apply for severance (converting the beneficial joint tenancy to a tenancy in common) before the charging order can take effect — severance is automatic on bankruptcy.
- Charging order sequence: judgment → charging order application (Form N379) → interim charging order → registration at HMLR → final charging order → TOLATA s.14 application for sale
- Non-debtor co-owner's defence: argue buyout of the charged share, or welfare of children, or disproportionate enforcement — courts are increasingly willing to allow buyouts to prevent forced sales
- Investment property — almost always sold: where there is no residential occupation of co-owned investment property, courts routinely order sale on a creditor's TOLATA application
- Insolvency trustee: applies under IA 1986 s.335A (not directly under TOLATA), incorporating the same s.15 factors; after 1 year from bankruptcy, the court must order sale unless exceptional circumstances
- Severance required: a charging order over a beneficial joint tenancy requires severance first — register the charging order at HMLR to sever the joint tenancy automatically
Quantification of Beneficial Interests — Constructive Trusts and Stack v Dowden
Before a TOLATA order for sale can be made, the court must (if disputed) determine the respective beneficial shares of the co-owners. This is a separate exercise from the order for sale application and is often the most bitterly contested part of the litigation: (a) Express trust declaration: the cleanest outcome; a Declaration of Trust or Form TR1 box 11 (where 'other' beneficial interests are stated) expressly fixes each party's beneficial interest; if the property was transferred with an express declaration of beneficial interests, the court will generally hold the parties to those interests — Goodman v Gallant [1986]; (b) Resulting trust: where property is purchased in joint names without an express declaration, the starting presumption is that beneficial interests follow the financial contributions to the purchase price — including mortgage contributions; (c) Common intention constructive trust: where the express or resulting trust analysis does not fully reflect the parties' intentions, the court can impose a constructive trust based on a common intention inferred from conduct and contribution — Stack v Dowden [2007] UKHL 17; (d) Stack v Dowden: where joint legal owners hold property and there is no express declaration of interests, the starting point is that beneficial ownership follows legal ownership (50:50 for joint tenants); departure from equality requires clear evidence of different common intention; the court considers: financial contributions; payment of mortgage; improvements; outgoings; overall conduct; (e) Kernott v Jones [2011] UKSC 53: where the common intention changes over time (e.g. one party leaves the property and stops contributing), the court can infer a change in the beneficial shares, even without an express agreement; (f) Practical implications for landlords: all co-owned investment property should have an express Declaration of Trust fixing the beneficial interests from the outset — this avoids costly TOLATA litigation; the declaration should record each party's capital contribution, expected profit split on sale, and how ongoing mortgage payments affect respective shares.
- Express declaration of trust: the surest method; Goodman v Gallant confirms the court will hold parties to an express trust declaration — no room for dispute
- Stack v Dowden starting point: where joint legal owners hold without an express declaration, beneficial interests start as 50:50; departure requires clear evidence of different common intention
- Kernott v Jones: common intention can evolve over time; where one party stops contributing, beneficial interests can shift — relevant for long-held rental properties
- Constructive trust factors: financial contributions; mortgage payments; home improvements; payment of outgoings; conduct generally — all relevant to the court's assessment of common intention
- Practical protection: for all new co-owned investment properties, register an express Declaration of Trust specifying each owner's beneficial share — prevents Stack v Dowden disputes entirely
Frequently asked questions
What does TOLATA 1996 allow a court to do?+
The Trusts of Land and Appointment of Trustees Act 1996 s.14 gives the court a wide power to make any order it thinks fit relating to the functions of trustees of land or declaring the nature and extent of a person's interest in the property. In practice, this includes: orders for sale of co-owned property; orders restricting or facilitating a sale; declarations of the respective beneficial interests of each co-owner; and orders regulating the occupation of trust land. The court must have regard to the factors in s.15 TOLATA, including the purpose of the trust, any minor children, and the interests of secured creditors.
Can a co-owner be forced to sell their share under TOLATA?+
Not exactly — one co-owner cannot simply force a sale of another's interest; they can only apply for a court order for sale of the whole property. The court has discretion under s.14 TOLATA to order sale, refuse sale, or impose conditions. For residential investment property (with no occupation by the co-owners), the court generally orders a sale if one co-owner applies for it and the other objects without good reason. For co-owned family homes where children are resident, the court may delay a sale for welfare reasons but will almost always eventually order a sale if the co-owners cannot agree.
What is the difference between a beneficial joint tenancy and tenants in common under TOLATA?+
In a beneficial joint tenancy, each co-owner owns the whole of the property jointly, with no distinct 'share' — on death, the surviving co-owner(s) inherit automatically (the 'right of survivorship'; latin: 'jus accrescendi'). A beneficial tenancy in common gives each co-owner a distinct fractional share (e.g. 50:50 or 60:40) which passes under their will or intestacy on death. For buy-to-let investment, tenants in common is almost always preferred for tax planning — each owner declares their own share of rental income and capital gains separately. A beneficial joint tenancy can be severed at any time by written notice, court order, or bankruptcy.
How does a charging order interact with co-owned investment property?+
A judgment creditor can obtain a charging order over one co-owner's beneficial interest in a property, even if that co-owner holds the property jointly with others. The charging order is registered at HMLR. Once the final charging order is made, the creditor can apply under TOLATA 1996 s.14 for an order for sale of the whole property to enforce the charge. For co-owned investment property with no residential occupation, the court will generally order a sale. The non-debtor co-owner typically receives their share of the net proceeds after the charged share is applied to the debt. Alternatively, the non-debtor co-owner may buy out the charged share at an agreed or court-determined value to avoid a forced sale.
What is a Declaration of Trust and why do landlords need one?+
A Declaration of Trust is a written legal document that expressly states the beneficial ownership of co-owned property — typically the percentage share each owner holds and how the proceeds will be divided on sale. For buy-to-let landlords who co-own investment property, a Declaration of Trust is essential for: tax planning (HMRC requires formal notification of different beneficial shares between spouses/civil partners via Form 17); avoiding Stack v Dowden constructive trust disputes if the co-ownership breaks down; protecting each owner's specific financial contribution; and ensuring the correct split of rental income in self-assessment returns. A Declaration of Trust should be prepared by a solicitor and registered at HMLR alongside the title deed.