Mediation or Pay Up: New Cost Rules for Property Disputes Under TOLATA

As of 1 October 2024, any claims under the Trusts of Land and Appointment of Trusts Act 1996 (TOLATA) and the Inheritance (Provision for Family and Dependants) Act 1975 (the Inheritance Act) will now be scrutinised heavily, as the courts of England and Wales will have powers to order legal costs against parties who refuse to engage with non-court dispute resolution. This is particularly important for couples who cohabit but are not married, especially when only one person’s name is on the property title.

What are the key changes?

The amendments encourage parties in disputes to consider mediation as a first step before heading to court to resolve any issues. If a litigant refuses to engage in mediation and subsequently loses the case, they may be ordered to pay the other party’s costs. This shift emphasizes the courts’ preference for resolving disputes amicably and efficiently, reducing the burden on the legal system.

The most significant change concerns the scope of the Civil Procedure Rules (CPR) 1 where the overriding objective is enshrined. The objective of “enabling the court to deal with cases justly and at a proportionate cost” has now been expanded to include “(f) promoting or using alternative dispute resolution (ADR)”. The court’s duty of active case management had previously included “encouraging the parties to use an alternative dispute resolution procedure, and facilitating the use of such procedure”, and this has now been strengthened with the addition of an express power to order ADR.

The amended CPR rules require the court, when considering any order to make about costs, to consider the conduct of the parties, and now makes express reference to “whether a party failed to comply with an order for ADR, or unreasonably failed to engage in alternative dispute resolution”.

Implications for cohabiting unmarried couples

Many unmarried couples cohabit and share property, but complications may arise when only one partner’s name appears on the title. Under TOLATA, the Court is granted power to make property decisions in disputes arising from informal partnerships concerning ownership and occupation of property. TOLATA enables the court to decide:

• The ownership of a property;
• Whether a party has interest in a property;
• Whether there should be sale of the property; and
• Who may remain in the property

This may also include property that is jointly owned as joint tenants or tenants in common and property that is solely owned. Therefore, the non-registered partner may have rights to the property, especially if they can prove contributions or an agreement regarding ownership.

The recent amendments mean that if disputes arise over such property, parties may face significant financial repercussions if they refuse mediation. For example, if one partner feels entitled to a share of the property but rejects mediation, they risk incurring costs if they subsequently lose at court.

Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416

The Court of Appeal’s recent ruling in Churchill is paramount to the changes to the CPR regarding mediation. The judgement overturned the precedent set by Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, where previously, requiring ADR would breach the right to a fair trial under Article 6 of the European Convention on Human Rights. This recent ruling in Churchill clarified that the courts will now have the power to induce parties to participate in ADR.

As of 29 April 2024, family courts have gained similar powers to impose sanctions in financial remedy proceedings. The amendments to the Family Procedure (Amendment No 2) Rules 2023 are specifically designed to promote the early resolution of private law child arrangements and financial remedies. Previously, these rules applied only to financial remedy cases and did not encompass other proceedings such as Schedule 1 of the Children Act 1989, appeals, or interim applications, nor did they include claims under TOLATA or the 1975 Act. The new powers effectively bring TOLATA and the 1975 Act cases under the broader framework encouraging ADR participation.

Mediation: A Valuable Tool

Mediation offers a collaborative and less adversarial method for resolving disputes. It allows both parties to engage in constructive discussions and potentially leading to a satisfactory resolution. With the recent amendments, opting for mediation could help save time, reduce stress and minimise costs.

Navigating Property Ownership Disputes

It is essential to understand the legal rights involved in circumstances where a couple is cohabiting but only one partner is listed on the property title. The partner not named on the property title may still assert an equitable interest in the property. However, if the parties choose to bypass mediation and go straight to litigation, they could incur substantial costs orders from the court.

Conclusion

The amendments effective from 1 October 2024 highlight the importance of mediation in resolving disputes, particularly in the context of TOLATA and the Inheritance Act. For unmarried couples living together, understanding these changes can help navigate potential property disputes more effectively. Engaging in mediation not only aligns with the court’s preferences but can also protect against financial repercussions in case of a legal dispute.

Our Property & Trusts Litigation team has substantial knowledge and experience in this specialist area of law. For further information, please contact Shams Rahman or any of our partners in the Property Litigation team.

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