Ali v Khatib and others [2022] EWCA Civ 481 provides practitioners with a useful analysis of the relevant case law concerning when occupational rent is payable. The issue was considered by the Court of Appeal in the context of a long-standing family dispute concerning the administration of a deceased’s estate.
Occupational rent is the rent a beneficiary either under a trust of land or a will is required to pay another beneficiary in respect of their occupation of property from which another beneficiary is excluded.
In Ali the Court of Appeal was expressly asked to consider the circumstances when a residuary beneficiary under a will would be liable to pay the deceased’s estate use and occupation rent arising from her occupation of the deceased’s property.
When the matter was tried in the High Court, the main principles as to the award of occupation rent were not disputed, only the application of the same was disputed. The High Court considered the case law in the context of occupiers of jointly owned property and their trustees in bankruptcy.
The High Court provided a useful summary of the case law. It determined that at common law the default position was that one tenant in common was not entitled to rent as against the other unless there had been an ouster: Jones (AE) v Jones (FW) [1977] 1 WLR 438 and Dennis v McDonald [1982] Fam 63.
Where the issue arose in the context of a trustee in bankruptcy who sought rent from the occupier of property jointly owned with the bankrupt, a court of equity would order an enquiry and payment of occupation rent not only in circumstances where the co-owner had been ousted but also where it was necessary to do equity between the parties: Re Pavlou (a bankrupt) [1993] 1 WLR 1046. The default position would only be departed from in circumstances where there was some conduct by the occupying party, or feature relating to them which made it fair for occupation rent to be paid: Davis (as trustee in bankruptcy) v Jackson and another [2017] EWHC 698 (Ch); [2017] PLSCS 92.
In respect of whether a statutory right to compensation had arisen under sections 12-13 of the Trusts of Land and Appointment of Trustees Act 1996, relying on Davis, the High Court observed that there had to be some conduct on the part of the occupying party or an exclusion or restriction on the other beneficiary’s right of occupation of the property so as to give rise to statutory compensation.
On the facts of the present case there was no conduct on the part of the occupier to justify a departure from the default position. Further, there had not been any exclusion or restriction on the beneficiary’s right of occupation. The beneficiary had moved out of the deceased property when he became an adult and occupied his own family home.
On appeal the appellant argued that the High Court had been wrong to find that there had been no exclusion or that the test in Davis applied. Further, relying on French (trustee in bankruptcy) v Barcham and another [2008] EWHC 1505 (Ch); [2008] 3 EGLR 51, it was argued on behalf of the appellant that occupation rent should have been awarded because it was invariably awarded in the case of a trustee in bankruptcy, and the beneficiary’s position in the present case was analogous. The Court of Appeal disagreed.
In approving the High Court’s analysis of the case law, the Court of Appeal went further by stating that “Barcham… [did] not give rise to any kind of presumption… if it did and… an analogy [could] be drawn between a trustee in bankruptcy and a [beneficiary not in occupation], the court would be required to order the payment of occupation rent in all cases in which one co-owner [was] not in possession.”
It could not be the case that as a matter of principle the obligation to pay occupation rent should turn on the reasonableness or otherwise of the behaviour of the non-occupying party in not occupying the property.
Elizabeth Dwomoh is a barrister at Lamb Chambers
