A recent High Court appeal has highlighted the potential unintended legal consequences that can arise from informal relationships and dealings in property transactions.

In the case of Tahir v Faizi [2019] EWHC 1627 (QB), Mr Tahir was the legal owner of 3 Sutton Gardens, Luton (“the Property”) having purchased the Property in 2006. However, immediately following Mr Tahir’s purchase, Mr Faizi took up occupation of the Property with his family and had been making the mortgage payments.

It was Mr Faizi’s case that he and Mr Tahir had back in 2006 reached an agreement that Mr Tahir would purchase the Property on Mr Tahir’s behalf as Mr Faizi could not obtain a mortgage. On this basis, Mr Faizi brought a claim against Mr Tahir for a declaration under s14(2) of the Trusts of Land and Appointment of Trustees Act 1996 that he was the owner of 100% of the beneficial interest in the Property.

Factual Details

Mr Faizi and Mr Tahir met through a mutual friend in 2006. Shortly thereafter, Mr Faizi and Mr Tahir decided to purchase the Property. The purchase was completed on 24 November 2006 for £219,000 with the assistance of an interest-only mortgage of £208,265. Mr Tahir was registered as legal owner on 27 November 2006.

Mr Faizi moved into the Property with his family shortly after completion of the purchase. Between 2006 and 2015, Mr Faizi paid to Mr Tahir regular sums of money that corresponded with the mortgage payments due on the Property (although there was the occasional missed payment). When Mr Tahir was in Uganda from 2007 to 2010, Mr Faizi made payments to the mortgagor, Oakwood Homeloans Limited (“Oakwood”), direct. Payments to Oakwood were irregular with a number of payments being paid late or not at all. 

As of 2015 Mr Faizi had stopped paying any sums to Mr Tahir or Oakwood. A dispute arose between Mr Faizi and Mr Tahir with regards to the ownership of the Property. Consequently, Mr Faizi issued a claim in the County Court for an order under section 14(2)(b) of the Trusts of Land and Appointment of Trustees Act 1996 seeking a declaration that he was the beneficial owner of the Property. On 3 January 2017 Mr Tahir issued a possession claim against Mr Faizi seeking possession of the Property. The two claims were addressed by the Court at the same time.

Mr Faizi submitted that, in 2006, he and Mr Tahir reached a verbal agreement for Mr Tahir to purchase the Property in his name and to transfer legal title to Mr Faizi at a future date. Mr Faizi explained that the reason for this was that he was unable to obtain a mortgage and purchase the Property in his own name due to his immigration status at the time. Mr Faizi relied on the fact that he paid the deposit for the purchase of the Property and associated expenses and agreed to meet the monthly mortgage payments and undertake and pay for any works to improve the Property.

Mr Tahir denied that he purchased the Property for Mr Faizi but claimed that he bought it to assist his wife’s application for a visa to reside in the UK. Mr Tahir claimed that Mr Faizi was his tenant and that any payments made by Mr Faizi were rental payments and any payments by Mr Faizi to Oakwood were in lieu of rent.

The Issues

The issues for the Court to determine were:

i)              Was there an oral agreement between the parties back in 2006 and if there was, what were the terms of this agreement.

ii)             If there was an oral agreement between the parties, could this give rise to a real property transfer or beneficial interest.

The Court’s Findings

Both the County Court and the High Court (on Appeal) found that Mr Tahir held the Property on trust for Mr Faizi, who was entitled to 100% beneficial interest (subject to reimbursing Mr Tahir for mortgage payments made by him since 2015).

It is a formal requirement for a trust of land to be evidenced by a signed written document that is intended to give certainty to property transactions. However, this is not an absolute requirement and does not affect the creation or operation of resulting, implied or constructive trusts.

The Court found that there was an agreement in 2006 that Mr Tahir would purchase the Property and hold its legal title for the benefit of the Mr Faizi. Consequently, a resulting trust had arisen meaning that although Mr Tahir was the legal owner of the Property, he was holding the beneficial interest in the Property on trust for Mr Faizi.