Many people place enormous trust in those closest to them. As we grow older, it's natural to rely on family members or friends for advice and support with important financial and property decisions. However, there are situations where that trust can be abused, resulting in individuals making decisions they would not otherwise have made.
One area where this can arise is in relation to the family home. An individual may be encouraged to transfer all or part of their property to a relative, friend or partner for reasons that initially appear sensible or well-intentioned. While some arrangements are entered into freely and with a full understanding of the consequences, others may be the result of pressure, manipulation or an imbalance of power. In legal terms, this is known as undue influence.
This article explains how undue influence can affect property ownership and transfers, and the circumstances in which these arrangements may be challenged.
Undue influence occurs when one person uses their position of power, trust or influence over another in a way that is abusive or unfair. As a result, the affected individual may be persuaded into making a decision that does not reflect their own wishes.
In property disputes, undue influence can arise where someone is encouraged to transfer ownership of their home, or a share of it, to another person. Whilst the individual may have made this decision autonomously, another scenario is that they have made this decision in response to persuasive statements made by the transferee, e.g. that the arrangement would:
protect the asset from potential care home fees,
simplify future inheritance arrangements; or
benefit family members who are expected to inherit in the future.
A common scenario involves an older person transferring their property, or a share in it, to a younger family member such as a niece or nephew. While this arrangement may have been entered into voluntarily, the reality is that the older person loses a degree of control over their home and is vulnerable in the event of the family relationship breaking down in the future.
Undue influence may involve direct pressure or threats, but it can also arise more subtly in relationships underpinned by trust and confidence, including those between an individual and their partner, friend, carer or colleague.
Broadly speaking there are two categories of undue influence.
Actual undue influence – this arises where there is evidence that a person was subjected to pressure or coercion which led them to enter into a transaction.
Presumed undue influence – in some circumstances, the nature of the relationship and the transaction itself may be such that the court presumes undue influence has occurred. The burden then shifts to the person who benefited from the transaction to demonstrate that it was entered into freely and without improper influence.
The property transfer scenario outlined above is often one in which allegations of presumed undue influence may arise, requiring evidence to show that the transfer was not the product of a genuinely independent decision.
Co-ownership exists where a property is owned by more than one person. Co-owned property requires all owners to agree on key decision-making, such as adding another person as a co-owner, creating a trust over the property for the benefit of someone else or altering the beneficial ownership shares so that one owner receives a greater proportion of the sale proceeds.
Even if there is legal documentation evidencing this decision-making, this does not mean that undue influence did not occur.
The key question to ask is: did the individual genuinely give informed and independent consent, or was their agreement obtained through pressure or other unacceptable means?
The courts have recognised the principle of undue influence for more than 200 years and have long acknowledged the need to protect vulnerable individuals from the misuse of power and influence.
If a court finds that an individual was the victim of undue influence, then it may set the transaction aside. This remedy is known as recission. In practical terms, recission treats the contract as if it did not exist and the individuals involved are restored to the position they were in before that contract was entered into. Depending on the circumstances, this could result in ownership of a property, or a share in it, being returned to the person who transferred it.
Claims involving undue influence are often complex and fact-sensitive. Success will usually depend on establishing a strong body of evidence demonstrating both the nature of the relationship and the circumstances in which the transaction occurred.
If you're concerned that you have been pressured into transferring ownership of your home or suspect that a friend or loved one may have been a victim of undue influence, then it's important to seek specialist legal advice as soon as possible.
For more information please contact our property disputes team.
