What Is TOLATA Equitable Accounting?

TOLATA equitable accounting is a legal remedy that enables a court to alter the financial outcome of a property sale where the co-owners are in dispute.

If you’re a co-owner who has paid more than your share, are excluded from a property, or face an unequal split on sale, then contact our specialist property litigation solicitors today. Our property litigation team have decades of experience acting in similar property disputes, and are happy to help. We use equitable accounting, and similar legal concepts, to maximise your position and potential outcomes.

Equitable accounting (EA) reflects occupation and financial contributions for a distribution of proceeds that takes into account actual contributions. In a dispute, this re-allocation makes a significant difference to how much co-owners receive.

If you’ve paid more than your share of a jointly owned property, been excluded from it, or you’re heading towards an unequal split on sale, equitable accounting under TOLATA is the legal mechanism that can adjust the financial outcome. 

This article covers TOLATA EA, what courts can adjust, and how to build the strongest possible claim.

TOLATA equitable accounting is a technically demanding area and these disputes require specialist knowledge of property trust law and TOLATA case law, not a general-practice firm handling litigation alongside conveyancing. 

What Is Equitable Accounting Under TOLATA? 

Equitable accounting (EA) under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) is a legal remedy used in disputes in property co-ownership.

Equitable accounting allows for adjustments when there’s a dispute over contributions to a jointly owned property usually as the result of a commercial or personal relationship breaking down.

It allows for fine-tuning of beneficial interests to reflect real life circumstances rather than what’s down on paper.

The clue is in the name. Equitable accounting is designed to ensure the financial outcome reflects each party’s actual contributions by adjusting the division of beneficial entitlements between co-owners before the distribution of sale proceeds.

Adjustments reflect actual financial contributions which may be quite unequal behind an equally split legal ownership to ensure fairness. However, equitable accounting doesn’t and can’t alter the parties’ underlying beneficial ownership percentages. Instead, it adjusts the distribution of net sale proceeds to reflect each party’s actual financial contributions. 

When Does TOLATA Equitable Accounting Apply? 

Equitable accounting applies as part of a broad range of remedies under TOLATA, when the joint owners of a property are in dispute about occupation, financial contributions, or whether a property should be sold.

Disputes happen over the respective shares in the property (also called the beneficial interest) typically at the point of sale, where one party has made individual contributions towards the property after a relationship failure.

In a domestic scenario, if one person leaves with the other remaining in the property to bring up children, this arrangement can continue for years, with contributions to the home mounting up to a significant financial value.

These might include mortgage payments or home improvements with the net result that one person has paid far more than the other since separation. Consequently, it would be unfair to split the proceeds 50:50 on sale; equitable accounting applies to redress the balance.

Very commonly with cohabitees, the property is only registered in the name of one of the couple who may have owned the property before the relationship started. Sometimes, in commercial and domestic relationships, buyers purchase a property that is only registered in one of their names, with an informal agreement that it’s held for the benefit of both or a joint business.

The shades of joint ownership arrangements are many and varied with the potential for sales and ownership disputes following closely behind.

Common Financial Adjustments Courts Consider in Equitable Accounting Claims 

A court can only consider equitable accounting post-separation when it’s necessary to achieve fairness between the parties. A court will generally only consider equitable accounting adjustments for financial contributions made after separation. However, pre-separation contributions may still be relevant to establishing the parties’ beneficial interests in the first place. 

Financial adjustments are most common in three main areas: 

1. Mortgage Payments 
2. Occupation rent
3. Home Improvements

It’s not unusual in a relationship breakdown for one party to move out of the property and cease paying a mortgage partly because they no longer live there but also because they have their own expenses to meet on a new home.

The party remaining in the property may take over the mortgage payments to protect the family home and avoid arrears. This is a classic scenario where equitable accounting can achieve a fairer outcome on sale.

Meeting the payments on a standard capital repayment mortgage will reduce the balance, increasing the equity in the property and consequently the value of both parties’ beneficial share. The absent co-owner shouldn’t gain equity built from payments they didn’t make.

A party who hasn’t contributed to the mortgage should not enjoy the additional equity that has been created by their ex-partners’ contributions. For this reason, the court will distinguish between capital repayment and interest-only mortgages.

In the same way, it’s easy to see how home improvements, which can add up to many thousands of pounds, increase a property’s value and beneficial share on sale. It’s fair that the party who has paid for these upgrades benefits through an increased share of the sale proceeds.

Occupation rent applies when one co-owner occupies the property and another with a beneficial interest is effectively excluded whether the other party forced their departure or simply made the situation untenable.

If a person’s occupation of the property is restricted, meaning they are excluded from it, the party who remains in the house may become liable to pay a notional rent for their occupation of the excluded person’s share of the property.

The courts have held that actual physical exclusion, such as changing the locks, isn’t required; constructive exclusion, such as leaving the property on a relationship breakdown, can be sufficient to trigger an entitlement to occupation rent according to Murphy v. Gooch (2007). 

A co-owner who chooses not to occupy the property, and who hasn’t been actually or constructively excluded cannot claim an occupation rent.

It’s also usual to make an adjustment for sums paid towards home improvements in an equitable accounting claim. Only upgrades which increase the value of the property are eligible, not cosmetic improvements.

How Do Courts Calculate Equitable Accounting Adjustments? 

The starting point is apportioning the sale proceeds according to each party’s beneficial interest. Where property is held as joint tenants, the beneficial interest is equal. Where it is held as tenants in common, the shares may be equal or unequal depending on what was agreed or declared. 

Each party then has a notional pool of money which can be adjusted up and down. The idea is that the pools are fluid and money can move between them with an outcome the court considers proportionate to the parties’ contributions.

Mortgage & Occupation Rent

Mortgage payments are easy to quantify. If one co-owner has been solely responsible since the breakdown of a personal or commercial relationship, the court may offset these against any occupation rent.

Occupation rent (if awarded) is typically based on the open market rent. The occupying individual pays a percentage of that figure to the non-occupying person equal to their beneficial share.

The court can consider other factors such as the cost of alternative accommodation.

Mortgage payments and occupation rent can be linked; if both exist, the court may effectively use one to offset the other. Occupation rent offsets the interest element of the payments on a standard capital repayment mortgage.

Home Improvements

The equitable accounting for home improvements is based on their cost or the uplift in the property value afterwards. The person who carried out the work receives a percentage of the lower of these two values based on the other owner’s beneficial share.

The value of home improvements is arguable. The court is only interested in significant upgrades like structural changes including loft conversions, extensions, or conservatories. New kitchens or bathrooms don’t always increase value.

What Evidence Can Strengthen an Equitable Accounting Claim? 

As a baseline starting point, you’ll need to document all payments made towards the property; this is easy with mortgage payments where there’s a documented record. Compare this to home improvements where paperwork may have been lost or payments made in cash.

Independent professionals such as surveyors and estate agents can formally support a claimed increase in the value of the property following home improvements.

Messages between the parties and other documents relating to the property may also be relevant, particularly if they refer to financial arrangements and verbal promises post separation.

How Equitable Accounting Fits Within a Wider TOLATA Claim 

Equitable accounting is just one element of resolving disputes over property ownership.

TOLATA claims are broad and cover:

• Who’s entitled to occupy a property,  allowing one party to remain while compensating the otherWhether there should be a forced sale of a property if there’s disagreement amongst co-owners.

Can Equitable Accounting Be Resolved Without Going to Court? 

If parties are reasonable and on amicable terms then it may be possible for them to agree their own equitable accounting as part of the terms of a negotiated settlement.

More ideal is a Declaration of Trust and a cohabitation agreement from the outset which deals with these issues should the relationship fail. Clearly recording intentions in writing regarding the property and a record of financial contributions all help.

TOLATA claims that end up in court are extremely lengthy, complex, and expensive, so it’s ideal to try and resolve a property dispute through negotiation or mediation first.

The court has discretion on all equitable accounting adjustments, and the outcome will always depend on the evidence available. Not every claim is strong enough to pursue, so an honest early assessment of your position is essential before committing to litigation.

Alternative Dispute Resolution (ADR) is not mandatory under the Civil Procedure Rules (CPR). However, a court will take a dim view of parties who have not tried to resolve their differences via this route. This can result in an order to pay some of the other party’s legal costs. The court has the power to order parties to engage in ADR. 

Unfortunately, mediation doesn’t provide an enforceable ruling. However, the process can help parties overcome their differences and reach a mutually acceptable settlement.

Commercial agreements tend to contain specific provisions about financial contributions. This doesn’t prohibit disputes arising which create a place for equitable accounting. It depends on the individual facts in each case.

Again, mediation or negotiation should always be the first option.

Frequently Asked Questions 

Can I claim back mortgage payments from a co-owner under TOLATA?

You can claim back mortgage payments from a co-owner under TOLATA if you have made financial contributions and even if you aren’t named on the title deeds as a legal owner, if you can establish a beneficial interest in the property.

However, if the court decides that occupation rent is payable then this may offset the benefit of any mortgage payments.

What is occupation rent in a TOLATA dispute? 

Occupation rent in a TOLATA dispute is financial compensation awarded to an individual whose right to occupy the property has been unreasonably restricted or excluded by another beneficiary.

Occupation rent is calculated at the market rental value of the property and can be cancelled out if the other party is claiming for mortgage payments.

Does paying for renovations increase my share of a property? 

Renovations and home improvements which increase the value of the property are a legitimate part of equitable accounting. This includes work like re-roofing or adding a new extension, loft conversion, or conservatory.

Renovations which are more cosmetic and don’t uplift value won’t count. If you want to claim for renovations under TOLATA then you’ll need proof of your payments and strong evidence that they’re linked to a higher value.

Is equitable accounting available if the property has not been sold? 

A property sale is a trigger for disputes which are covered by TOLATA and that require equitable accounting to reflect the parties’ respective contributions. However, if the property isn’t for sale but one party has left due to relationship breakdown, using the principles of equitable accounting to reflect the new normal can help avoid disputes later.  

Need Advice? Contact Helix Law.

There are plenty of co-owners of commercial or residential property where disputes may focus on sale proceeds, financial contributions, or occupation. Equitable accounting under TOLATA is one remedy but there are other options which can redress the balance.

We’re a team of specialist litigation solicitors providing practical and strategic advice on all aspects of property disputes including domestic and commercial relationships which have irretrievably broken down.

We offer direct, cost-effective routes to resolution with options clearly set out and honest advice on your prospects from the first conversation. We put our own fees on the line for qualifying cases. No- Win, No Fee funding is available on qualifying property disputes typically valued over £10,000 with strong prospects of success, subject to case assessment and our funding criteria.

If you’re a property co-owner facing a dispute over contributions, occupation, or sale proceeds, contact our specialist property litigation team at Helix Law today. We have decades of experience, are recognised specialists in this space, and act nationally. We would love to help you.