Picture this: Two people decide to buy a piece of land (not a couple). Both contribute half the purchase price in equal shares but the property is only in one of their names. Does the other person lose their rights to the land?
What is a ‘Resulting Land Trust’?
Normally, the person with their name on the deed has the legal title. However, equity stepped in to prevent unscrupulous persons from denying the rights of someone who contributed to purchasing the property or who transferred their share not intending to give the person ownership. In either of these cases, a resulting trust is automatically created. It is based on the presumption that the ‘transferor’ of the asset did not intend to gift it to the ‘transferree’.
Therefore, the person with title holds the land ‘on resulting trust’ for the other person. The portion held in trust is relative to the contribution made. Using our example above, the person with title would hold a 50% share on resulting trust for the other person.
Exceptions
Of course, the resulting trust will not apply if there is direct evidence that the transfer was intended to be a gift. Another exception is where there is ‘advancement’. ‘Advancement’ in this context is the idea that parents or guardians sometimes gift property to their children in their lifetimes (rather than leaving it to them after death). If that occurred, then a resulting trust also would not exist.
If the property is lived in as a family home, resulting trusts are not used to determine interests. That situation creates something called a ‘common intention constructive trust’. But if the property was purchased by family members as an investment, a resulting trust may arise.
Enforcing a Resulting Land Trust
The resulting trust is enforceable in the courts. This means that the court can compel a person to account for their use of the property or even to re-transfer the property, depending on the circumstance.
The resulting land trust is a great example of the development of equity to mitigate an unjust result that may arise if one went with the strict letter of the law.
Disclaimer: While written by attorneys, none of our articles propose to give legal advice. If you have a legal issue, you should seek advice from a qualified attorney. A particular outcome can never be guaranteed – each case turns on its own facts.
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