One of the most common assumptions people make about property ownership is this:

If your name is not on the title, you have no rights to the property.

That is often true - but not always.

New Zealand courts have long recognised that there are situations where someone may have an interest in property even though they are not the legal owner. One way this can happen is through what is known as a constructive trust.

Looking beyond the title

Particularly in a family or relationship context, people may contribute to a property that they do not legally own. Family members may invest money, carry out renovations, move into a property, or make sacrifices based on an understanding that the property is “for both of us” or that they will have a place there in the future.

When those arrangements later break down, the legal title may not reflect what actually happened.

That is where the concept of a constructive trust comes in.

What is a constructive trust?

A constructive trust is not a trust that people intentionally create. Instead, it is something the Court may impose where it would be unfair or unconscionable for the legal owner to deny another person’s interest.

At a high level, the Court will ask questions such as:

• Did one person contribute money, labour or effort toward the property?
• Was there an understanding or expectation that they would share in the property?
• Did the legal owner encourage or accept those contributions?
• Would it now be unfair for the legal owner to keep the entire benefit?

If the answer is yes, the Court may recognise that the person without legal title nonetheless has a beneficial interest.

A simple example

Margaret owns a home through her family trust.

Margaret is elderly so her daughter, Jane, moves in to help care for her. Over the years, Jane contributes to household expenses, pays for repairs and improvements and spends significant time maintaining the property and supporting Margaret.

Jane comes to believe that she will eventually have an interest in the property and makes decisions about work, money and where she lives based on that understanding.

Years later, the relationship breaks down and Margaret asks Jane to move out. The trustees say Jane has no interest in the house.

Jane says: “I structured my life around the understanding that I would share in this property.”

At that point, the question may not simply be who legally owns the property.

In a situation like this, the Court may look beyond legal ownership and consider what was understood between the parties, what contributions were made, and whether it would be unfair to deny any interest altogether.

That does not mean that Jane automatically receives an interest in the property - constructive trust claims are highly fact-specific - but it illustrates why title and trust ownership are not always the complete answer.

The practical takeaway

Where people have contributed, relied on understandings, or arranged their affairs in a particular way, the Court may look beyond formal ownership and recognise interests that do not appear on paper.

For people involved in family, relationship or trust arrangements, it is worth remembering that the question is not always simply: “Whose name is on the title?”

Sometimes the more important question is:

“What actually happened - and what did everyone understand the arrangement to be?”

If you have contributed to a property but are not on the title, or if someone is asserting an interest in property that you consider to be solely yours or trust-owned, it may be worth getting advice before assuming the legal position is straightforward.

If this resonates with you, or you need advice on a particular structure, our team of experts can help. Get in touch for a confidential conversation.