Occupational Rent ToLATA

Cohabiting couples are each entitled to possession of their co-owned property providing that the purpose of the joint property was to provide a home for them both. If this right is restricted in any way then the occupying party may become liable to pay a notional rent for his or her occupation of the other’s share in the property. This is called Occupation Rent.

The right to Occupation Rent arises when one party is actually or constructively excluded from his or her property. The party excluded may seek Occupation Rent from the party still in residence. A relationship breakdown will often be regarded as a constructive exclusion. The modern approach is to assess the relevant proportion of Occupation Rent based on the market rent of the property. However, in practice, the right to Occupation Rent is often cancelled out by a claim against the excluded party for re-imbursement of mortgage payments.

In Stack v Dowden (2005) the court’s approach was somewhat different as the occupying party was still caring for the parties’ four children in the family home. The property was initially purchased by the parties in order to provide a home for the whole family, including the children. As the property was still being used as a home for the children, the court found that no Occupation Rent was to be awarded to the departing party.

The remaining party may well be continuing to pay the mortgage payments due under the joint mortgage. Case law is unclear about whether the remaining party can claim only capital or interest payments or both.

Where the remaining party has made improvements to the property, he or she may be entitled to claim either the cost of the work to the property or the increase in value as a result of the work done, whichever is the lower figure.

When considering such cases, the court must conduct a review of “the whole course of dealing” between the parties and not just the issue of Occupation Rent, mortgage payments and improvements made to the property therefore the outcome is likely to be very different for each separating couple.

Stack v Dowden [2007] UKHL 17 clarified that while the equitable principles would remain relevant, the question of occupation rent would be governed by sections 12 to 15 of TOLATA. Section 13(5) then provides for payment of outgoings or expenses and compensation to a party whose right to occupy has been unreasonably restricted or excluded. Section 15 lists relevant factors to consider when determining any applications by a person with an interest in the trust property.

Murphy v Gooch [2007] EWCA Civ 693, Lightman J held that there was a wider ambit of relevant considerations and that the task of the court was now not merely to do justice between the parties, but to do justice between the parties with due regard to the relevant statutory considerations and in particular (where applicable) the welfare of the minor, the interests of secured creditors and the circumstances and wishes of the beneficiaries specified.

in Bailey v Dixon [2021] EWHC 2971 (QB) the court felt that that the cornerstone of a successful application for occupation rent was whether Mr Dixon had excluded Ms Bailey. He found that she had failed to show she had been barred from exercising her legal right to occupy. He considered the analogy of a landlord changing the locks, and throwing out a tenant’s stuff onto the streets, and found that there had been no such exclusion. 

In Rowland v Blades [2021] EWHC 2928 (Ch) the court granted compensation to Mr Rowland in respect of the restriction Ms Blades had imposed upon his use of their weekend holiday retreat property, where, after the break down of their relationship Ms Blades refused to allow Mr Rowland’s new partner to visit with him. Such conduct was considered an unreasonable restriction of his right to occupy pursuant to s12 of TOLATA and market rental compensation was awarded.

The rate of occupation rent is normally calculated according
to the market rent for the property or the cost of alternative accommodation
(see Neuberger, Stack v Dowden, dissenting judgment, para 157). There is also
authority to assess the rental value on the basis of a ‘fair rent’ assessment of a
rental officer (Dennis v McDonald (1982) 3 FLR 398).
Expert evidence may be required to provide rental values.

The responsibility of both parties to continue to house their children may provide
a good defence to a claim for occupation rent.

In Stack v Dowden [2005] EWCA Civ 857, [2006] 1 FLR 254 the Court of
Appeal was in no doubt about its power to order a beneficiary under a trust of
land who is in occupation of that land to make payments to a beneficiary whose
own entitlement to occupy the land has been excluded or restricted. However,
this was subject to the factors set out in s.13(4) TOLATA which required the
court to have regard to the intentions of the person who created the trust, the
purposes for which the land is held and the circumstances of each of the
beneficiaries. The trial judge had overlooked the fact that the occupying party
(Miss Dowden) continued to provide a home for the four children of the couple.
Consequently, there was no continuing obligation to pay occupation rent (or in
the words of TOLATA “…make payments by way of compensation…”) pending
sale of the property. It is clear from the judgment of Lord Justice Chadwick that
the position may have been different if the court concluded that Miss Dowden
was deliberately stalling the sale of the property.

Close Menu