Occupation Rent Re-visited In Bailey v Dixon (2021)

Occupation rent can arise where one property owner has been actually or constructively excluded from the property owned with another. They would then seek occupation rent for the other property owner occupying their share of the property.

This is not a new conception as there is a wealth of cases governing how this can apply and be calculated. The right arises under section 13 of the Trusts of Land and Appointment of Trustees Act 1996 (“TOLATA”), instead of the old equitable rules of equitable accounting as confirmed in the case of Stack v Dowden (2007).

The relevant application of the current law is summarised by Baroness Hale in Stack and Dowden (2007) as:

“Section 12(1) gives a beneficiary who is beneficially entitled to an interest in land the right to occupy the land if the purpose of the trust is to make the land available for his occupation…

Section 13(1) gives the trustees the power to exclude or restrict that entitlement, but under section 13(2) this power must be exercised reasonably. The trustees also have power under section 13(3) to impose conditions upon the occupier. These include, under section 13(5), paying any outgoing or expenses in respect of the land and under section 13(6) paying compensation to a person whose right to occupy has been excluded or restricted.

Under section 14(2)(a), both trustees and beneficiaries can apply to the court for an order relating to the exercise of these functions.

Under section 15(1), the matters to which the court must have regard in making its order include (a) the intentions of the person or persons who created the trust, (b) the purposes for which the property subject to the trust is held, (c) the welfare of any minor who occupies or might reasonably be expected to occupy the property as his home, and (d) the interests of any secured creditor of any beneficiary.

Under section 15(2), in a case such as this, the court must also have regard to the circumstances and wishes of each of the beneficiaries who would otherwise be entitled to occupy the property”

The courts were called upon again recently to consider occupation rent in the appeal of Bailey v Dixon (2021)

The Facts

3 Chestnut Road, Eaglescliff, Stockton-on-Tees (“the Property”) was owned by Sarah Bailey and Barry Dixon as joint tenants. It had originally been purchased in Ms Bailey’s sole name in 2000 before transferring into their joint names in 2005. There was a mortgage on the Property.

The relationship broke down and Ms Bailey left the Property. The joint tenancy was severed in October 2016.

Mr Dixon sought an order for sale which was resisted by Ms Bailey who wanted to preserve the Property as a home and counterclaim for occupation rent in the sum of £45,000.

The Decisions

At first instance in December 2020, the judge found for Mr Dixon and denied Ms Bailey occupation rent as she had not been denied the legal rights of occupation.

The example of a landlord and tenant was used to illustrate that Mr Dixon had not changed the locks or thrown her stuff onto the streets, rather Ms Bailey has chosen not to be in occupation of the Property.

Ms Bailey appealed and it went to the Queen’s Bench Division of the High Court in December 2020.

The appeal court held that a court can give credit for occupation rent if it is just to do so, whether or not there was any proof of ouster. This is exactly what the case of Murphy v Gooch (2007) had decided and did not appear to have been (properly) applied.

“It is accordingly well-established law which bound the Recorder (and which binds me) that ouster is not a condition precedent and in any event it can be established on a constructive basis.”

The appeal was allowed and the matter referred back for fresh determination on the issue of occupation rent. It will be interesting to see how the occupation rent will be calculated as there was discrepancies in the evidence as to when Ms Bailey was excluded from the Property with dates ranging from 2006 to 2010, 2013, 2016 and possibly 2017.

In Conclusion

The real test for determining occupation rent is whether it is ‘just’ in all the circumstances to do so having regard to the statutory provision under TOLATA.

Physical exclusion is not determinative but neither is there a prima facie case that leaving after a relationship breakdown will definitely give rise to findings that occupation rent is due.

Every case will rest on its own individual facts and the courts will apply the law as necessary to see justice done between the parties.

Our Dispute Resolution experts will be able to address any concerns you have about occupation rent and will assist and guide you through the entire legal process. Call us for free today on 0808 291 2273 or get in touch online.