Private ClientFILE September 2008
In-House News
Brethertons Announce Record Number of New Recruits
As part of it’s planned expansion, Brethertons has announced the appointment of 7 new dedicated professionals who have joined the Property Management, Marketing and IT Departments.
Debbie White, Nikki Beckinsale, Lyndsay Peters, Joanne Lawson and Edward Carlton all join as Property Managament Assistants. Claire Thompson joins as Senior Marketing Executive and Shahed Miah joins as IT Assistant.
Whilst many businesses are looking to cut costs and reduce expenditure, Brethertons recognise that getting through economic downturns includes investing in people and business where appropriate.
Country Landowners – Something to Cheer
Following a recent ruling of the Court of Appeal, country landowners will have something to cheer about. The judgment means that hundreds of applications made by councils representing off-roaders and other users, for right of way over rural tracks, are likely to fail.
The Court ruled that access to land via two rights of way over Twyford Down in Hampshire was to be denied. The applications were not made in the correct form, but the Court concluded that even if they had been, in this case it was unlikely that they would have satisfied the requirements of the Wildlife and Countryside Act 1981, which aims to protect the rural environment.
The Natural Environment and Rural Communities Act 2006 had as one of its aims the extinction of vehicular rights over green lanes where the rights had fallen out of use. This resulted in a deluge of applications by off-roaders to get councils to recognise vehicular rights, so that they could pursue their activities. Many of these applications have not been accompanied with the full Definitive Map and other documentation necessary and seem doomed to fail as a result.
Easements and Covenants – Changes to the Law Proposed
The law relating to covenants, easements and ‘profits à prendre’ over land is a relatively complex area given that such rights are common – the Land Registry has suggested that nearly two thirds of properties have some sort of easement over them and nearly 80 per cent have a covenant of some sort.
An easement is a right enjoyed by one landowner over the land of another. A positive easement (such as a right of way) is a right to go onto or make use of something in or on a neighbour's land. A negative easement is essentially a right to receive something (such as light or support) from the land of another without obstruction or interference.
Covenants are promises made with regard to land (i.e. not to allow it to be used for stated purposes).
Profits à prendre allow the holder the right to remove products of natural growth from another's land. Shooting and fishing rights come under this category.
The Law Commission has stepped in to reform the current system by proposing a simpler system for dealing with covenants and easements. It has issued a consultation paper which aims to remove anomalies and complications in the law. However, the proposed changes are limited to private law rights and will not deal with rights available to the public at large, such as rights of way, or with covenants between landlords and their tenants.
HIP Temporary Provisions Extended
The Government has announced that it is extending the temporary provisions for first day marketing whereby a property can be put on the market without a Home Information Pack (HIP) provided one has been commissioned and paid for and is expected to be in place within 28 days.
Originally, the dispensation was to end for properties marketed after 31 May 2008 but the date has now been postponed to 31 December 2008.
The temporary dispensation that applies to leasehold properties, whereby the only compulsory document in the HIP is a copy of the lease, will also continue until the end of the year. This change has been made because the Government has instituted a new consultation process following industry complaints about the additional costs and delays being experienced when obtaining the documents necessary for inclusion in a HIP for a leasehold property. It is expected that the rules relating to the contents of HIPs for leaseholds may well change significantly between now and 31 December.
In Case They Don’t Live Happily Ever After…
If you have family wealth that you wish to protect, the joy at the prospect of one of your children getting married may be tempered somewhat by a touch of trepidation in case the marriage doesn’t last, particularly if a large settlement of assets is to be made on the happy couple.
In such circumstances, the use of a pre-nuptial agreement (‘pre-nup’) is likely to make a great deal of sense. Legally speaking, such agreements are still rather a grey area. However, the judge in a leading case on the subject has most helpfully suggested a number of criteria which would assist the courts in deciding whether or not a pre-nup should be regarded as enforceable.
The most important of these from the perspective of the parties to a pre-nup are:
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does the spouse being asked to sign the pre-nup understand it?
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has he or she been properly advised as to its terms?
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was pressure exerted by one spouse to make the other sign?
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was there full disclosure of the relevant assets?
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was pressure exerted by anyone else to make them sign?
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was the agreement signed willingly?
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did one spouse exploit a dominant position?
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was the agreement entered into in the knowledge that there would be a child?
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has any unforeseen circumstance arisen which would make enforcing the pre-nup unjust?
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does the order preclude the payment of any periodical payment for maintenance of a spouse and if so, would it be unjust to hold the parties to that agreement?
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are there grounds for believing that upholding the agreement would be unjust?
For a pre-nup to achieve the desired object, it must be properly drafted and put into place in the correct circumstances. In particular, both parties to it should have the benefit of independent legal advice.
If you are concerned that a relationship might not have a happy ending, we can assist you to help protect your family’s assets from the depredations of an ex-spouse.
No Trust Created Where Intentions Not Clear
When a couple’s conduct over a period of time is consistent with co-ownership of a property, it might be thought that the property would come to belong to them both, no matter what the legal form of ownership may be. Such assumptions are often tested in divorce cases when a property is owned by one or other of the divorcing couple.
Recently, a case came before the Court of Appeal dealing with just such an issue. It involved a dispute over the financial settlement decided by the lower court.
The divorced couple lived in the family farm, which was originally owned by the mother of the husband. Latterly, the husband and his mother had created a partnership to run the farm and the farmhouse was then owned by the two of them as joint tenants.
Early in the couple’s relationship, the wife had helped out with the farming business and took part in business decisions regarding the farm. She received no payment for this. She also bought additional land, which added value to the property, and subsequently operated a successful riding school on the farm. This was initially financed by an interest-free loan from a company owned by her husband. She later incorporated her business.
Following the break-up of their marriage, the wife moved out of the farmhouse and claimed a share in the farm in the divorce settlement. Neither her ex-husband nor his mother had ever raised the question of the wife’s ownership specifically and nor had she. However, she claimed that her right to a share arose because her ex-husband and his mother had conducted themselves in a manner which supported the view that there was a common intention to hold the farm jointly – in legal parlance that a ‘constructive trust’ had arisen in her favour. The judge awarded her a quarter share in the value of the farm. Her ex-husband and mother-in-law appealed.
In the Court of Appeal, the judge took a different view, holding that the conduct of the parties did not necessarily prove the fact that the ex-wife was intended to have a beneficial interest in the farm. In the absence of any legal agreement regarding the ex-wife’s ownership of the farm, he could not see how encouragement of the horse-riding business or her minor role in the farming business could be interpreted as constituting sufficient evidence that a constructive trust had been created. In any event, her claim would be counterbalanced by the support she was given when setting up her business.
Brethertons' view:
“In truth, claims of this nature can be a bit of a lottery and much will depend on the availability of contemporary evidence of the intentions of the parties involved. The simplest way to avoid an appearance in court is to make sure that the intentions of the parties are properly evidenced in the first instance so that, in the event of a later dispute, the position can be readily resolved. We can assist you in making sure that your assets are legally held as you wish them to be and can also advise you on planning to minimise capital taxes."
Selling Your Property at Auction
In recent years, increased mobility and growing rates of home ownership have meant that ever-larger numbers of people nowadays inherit properties from relatives who lived many miles away. Similarly, many buy-to-let properties have been purchased in areas with a large student population, miles away from where their owners live. In such cases, when the time comes to sell the property, it is often difficult for the usual process of showing it to prospective purchasers to be carried out by the owner.
In such circumstances, it is quite common for a property to be sold at
auction. If you are considering selling a property by this method, here are
some steps you can take to help make sure your sale goes as smoothly as possible.
Well before the auction is planned, make sure you put together the necessary documentation, such as the Home Information Pack.
Make a list of the information a prospective buyer will find useful, such as
the age of the central heating system, wiring etc. and include any guarantees.
Set your reserve price, which is the lowest price you will accept for the
property. If the reserve is not met at auction, the property will not be
sold. The reserve price should therefore be reasonable as if the property
does not sell, there will still be costs to meet for the marketing of the
property and the related legal work.
You should also decide when you want the completion date to be. The contract to buy and sell is created when the auctioneer's hammer falls and the deposit is payable immediately, with the completion normally a few weeks later.
Work out your plan B. In the present market, property is becoming more
difficult to sell, so do not assume that the property will inevitably sell
at auction. It may not. Make sure, therefore, that you are prepared for the possibility that after the auction, the property will still be yours. Vacant properties do qualify for rate relief, but other costs (such as insurance) may rise.
Get your solicitor to check the title and carry out any additional searches that prospective bidders are likely to want to see, and to advise you on any potential legal problems and steps you can take to minimise risk of bidders being deterred for legal reasons.
Settlement Must Be Fair
When the financial arrangements are being made on divorce, the court must ask itself whether these are fair and do not discriminate against one party bearing in mind all the circumstances.
Recently, a woman appealed to the Court of Appeal regarding the orders for ancillary relief (as they are known to lawyers) made for her benefit following her separation from her husband. The couple had married in 1992 and had a child that year. They separated twelve years later. The wife had inherited a substantial sum which the couple lived off without working for the first five years of their marriage. In 1997 they used her capital to set up a car wash business, which the husband ran, paying a below-market rent to his wife.
When they separated, the couple’s assets were valued at a little under £1.4 million, which included the car wash business. The judge concluded that the yardstick of equality was applicable to the division of the assets and ordered the transfer of the building housing the car wash to the husband.
The wife had argued that her husband’s misconduct had been so grievous as to justify departing from the normal 50:50 split. Indeed, she argued that his application for ancillary relief should be rejected altogether. This argument was rejected on the facts in the lower court, as was her contention that since she had introduced all the assets to the marriage, they did not constitute ‘matrimonial assets’ for the purposes of making an equitable division. She appealed to the Court of Appeal.
In the Court of Appeal, it was held that the assumption of equality of division of assets could only be departed from if there were a good reason for so doing. In the present instance, the assets had been disproportionately brought into the marriage by the wife. Whilst it made sense that the ex-husband should be able to continue in business, this did not mean that the property he let should be transferred to him.
The Court therefore concluded that the ex-husband should be allowed to continue to occupy the premises, paying rent at half the present market rate, and that on the sale of the premises, the money received should be divided equally. The judge declined to transfer the car wash premises into joint ownership because to do so would have adverse tax consequences.
In practical terms, the decision split the family assets so that approximately two thirds remained with the wife.
Brethertons' view:
“The judge made the point that each case must be dealt with on its own facts and that this case did not set a precedent. It is instructive to note that as is normal, arguments relating to the conduct of the husband were not considered relevant.”
Shared Intentions Determine Ownership
The danger of cohabiting without making an express agreement as to how the title to property is to be held has again been underlined by a recent case.
It concerned a woman who had lived with a man for several years in a house which was registered in their joint names and financed by a mortgage. However, there was no document recording the couple’s respective shares in the ownership of the property. The man had paid the deposit on the house from his own funds and also paid the mortgage repayments. He also paid other costs relating to the property, such as rates and utility bills. The couple had children and the woman, who worked, spent the majority of her income on them and the maintenance of the family. The couple drew up wills leaving their estates to one another.
When their relationship broke down, the man argued that whilst he intended that his partner should inherit the property on his death, he had not intended it to be owned in equal shares. In court the judge decided that ownership of the house should be apportioned by the respective contributions of each party to its purchase. Since the woman had made no contribution, her share was nil. She appealed to the Court of Appeal, asserting that a beneficial joint tenancy had been created with her rightful share being 50 per cent. The man argued that his intention had been only that she would inherit the property if he predeceased her and they were still a couple on his death.
The Court of Appeal found that the judge in the lower court had erred in considering the couple’s respective contributions to the cost of the property as representing their intentions with regard to its ownership. The fact that the property was jointly owned justified the assumption that both were beneficial owners. The ownership split had to be determined by the intentions of each party and the important issue was that the relevant intention was the intention understood by the other party. Furthermore, the respective contributions of each party could not be conclusive. The man’s intentions were not made clear. His argument that his partner’s share should be a lesser sum did not rest on logic and he could not demonstrate that the couple had shared the common intention that her share should be other than a half of the total.
In this case, had there been documentation created when the property was purchased to show how it should be owned, there would have been little room for dispute. The fact that there was no evidence of any such agreement made it possible for the case to go all the way to the Court of Appeal.
If you are buying a property with someone else, having the agreed ownership documented when it is purchased is inexpensive and easy to do.
Webinar Programme
5th September 2008:Overpayment of Salaries - The Right to Recover Webinar
As all Payroll Managers know, recovering money from ex-employees can
be fraught with problems. Overpayments can include salaries, benefits,
holiday pay and employee loans. Brethertons have a specialist team of
collections staff who have many years of experience in these types of
recoveries.
Subjects which will be covered include:
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How problems occur and how they can be avoided
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Christmas and holiday periods - safeguards employers can make
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Contractual terms of employment – what your contracts should
contain
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Genuine errors or mistakes of law – what’s the difference?
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Court action
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Defences
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Remedies
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Situations when the employees have spent the money.
Click here to download the booking form for the Overpayment of Salaries webinar.
11th September 2008: ‘Terms and Conditions, Whats the Point?’ webinar
All business should have Terms and Conditions of Trading, as failure to do so could mean that it is left to the Court to decide on what terms businesses have entered into contracts. Who in there right mind will want a Judge deciding the terms on which you should do business?
Click here to download the booking form for the Terms and Conditions webinar.
22nd September 2008: ‘New Build Problems - How to Overcome Them’
This webinar will cover the following topics:
Click here to download the booking form for the New Build Problems - How to Overcome Them webinar.
13th November 2008: ‘Small Claims Court Procedures In A Nutshell'
How to maximise your chances of successfully recovering your cash if you go to a court hearing
If your debts remain unpaid you may find yourself attending a hearing before a District Judge in the Small Claims Court. This Webinar will cover the following subjects:
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How to avoid bad debts in the first place
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Small claims County Court proceedings
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Preparation of cases
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Conducts at hearings
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Enforcement proceedings and recovering expenses
Click here to download the booking form for the Small Claims Court Procedures In A Nutshell
4th December 2008: Effective Letter Writing
How to write letters which will grab a debtor’s attention
If your debts remain unpaid you may find yourself attending a hearing before a District Judge in the Small Claims Court. This Webinar will cover the following subjects:
Click here to download the booking form for the Effective Letter Writing Webinar
