Young v Lauretani

An oral agreement requiring a cohabitant to apply proceeds from another property towards reducing the mortgage on their shared home need not satisfy formalities governing dispositions of interests in land where it neither creates nor disposes of such an interest. The agreement may remain separate from a trust deed concerning the home.

In equitable accounting between former cohabitants, contributions made while they lived together are generally treated as part of an indivisible household arrangement unless there is a clear agreement requiring separate accounting. After one co-owner leaves and the other has exclusive occupation, mortgage payments and occupation rent may be brought into account. Capital adjustments must reflect the parties’ agreed basis of beneficial ownership and contributions.

The claimant and defendant had lived together in South Road, which was held in equal beneficial shares under a trust deed. The claimant provided the principal mortgage finance. The defendant contributed money raised by remortgaging Sedgeford Road, in which she held a one-third beneficial interest with her grandmother.

The claimant alleged that the defendant had orally agreed to apply proceeds from the sale of Sedgeford Road towards the South Road mortgage. He also sought an equitable account and directions concerning a possible buy-out or sale. The defendant denied that obligation and counterclaimed for relief concerning the parties’ respective interests.

The issues included the existence and formality of the alleged agreement, its extent, the appropriate equitable accounting, occupation rent, and the future disposition of South Road.

1. The court found, on the balance of probabilities, that the defendant had orally agreed to apply proceeds from the sale of Sedgeford Road towards reducing the mortgage on South Road. The obligation extended beyond her one-third beneficial share. She was required to bring in either all the net proceeds or enough to match what the claimant had put towards the acquisition, whichever required the lesser payment.

2. The agreement neither created nor disposed of an interest in land, declared a trust of land, nor disposed of an existing equitable interest. Accordingly, the formalities in section 53(1)(b) and section 53(1)(c) of the Law of Property Act 1925 did not apply. Nor was section 2 of the Law Reform (Miscellaneous Provisions) Act 1989 engaged, since the agreement was not a contract for the sale or other disposition of an interest in land.

3. The claim for rectification was abandoned. Although the oral agreement existed, the evidence did not establish that the parties had intended it to be incorporated into the trust deed. Parties may enter into a trust deed while leaving a related matter as a separate oral agreement.

4. Applying the principles discussed in Wilcox v Tait [2006] EWCA Civ 1867, and having regard to Stack v Dowden [2007] 2 WLR 831, the court directed an outline equitable account without awaiting a sale to a third party. Until the claimant left South Road, the parties’ household expenditure and respective mortgage contributions were not to be separately analysed. The court treated them as having been put into an indivisible household pot, absent clear agreement otherwise.

5. After the claimant left, the defendant was liable for half the mortgage payments and half an occupation rent, subject to appropriate credits for qualifying outgoings. Capital adjustments were required for the claimant’s Laurel Avenue proceeds and later mortgage reduction, the defendant’s £168,000 loan, and the required contribution from Sedgeford Road proceeds. The claimant was also debited for the rental payments promised under the trust deed and for lost rent during void periods in Sedgeford Road.

6. The parties were given an opportunity to negotiate a buy-out. If no agreement was reached, South Road was to be sold with vacant possession by public auction, with liberty to both parties and the grandmother to bid. The parties were given liberty to apply, initially to a Chancery Master concerning sale arrangements.