Occupation orders for a family home held by a trust

A husband and wife were in dispute about who could occupy the family home after the end of the relationship. Normally the Family Court would have the power to make an occupation order in favour of one of the parties.

In a recent case the Court refused to make an order because the family home was held by a family trust, rather than owned by the parties personally (and therefore relationship property). The husband’s application for an occupation order was refused by the Family Court on that basis.

The husband appealed to the High Court, but the High Court agreed the Family Court had no jurisdiction as the home was in a family trust and also refused the application.

This decision was also appealed by the husband. The Court of Appeal considered it might be possible to make an order if the husband had a right to occupy the home as a discretionary beneficiary under the family trust.

Usually, discretionary beneficiaries have no legal or beneficial interest in the assets of a trust, unless the trustees exercise their discretion in favour of the particular beneficiary. Until those rights have been fully vested in the beneficiary, the right to occupy the trust property by the beneficiary is at the discretion of the trustees.

The Court of Appeal found that, generally, both parties as trustees would have to make a unanimous decision to remove their own rights of occupation. The Court also commented that a resolution giving the beneficiaries exclusive rights of possession (on a reversible basis) could be sufficient to enable occupation orders being made.

The Court did not need to reach any final conclusion on that possibility, as by now the husband was residing at the property (with his rights to do so being undisputed by his ex-wife following lengthy proceedings over the two years since initial separation).

This case demonstrates the possibility in some cases for the Court to make an occupation order favouring one of the spouses, despite the home being owned by a family trust, contrary to the previously understood legal position.

Naturally, such determinations will vary depending on the individual circumstances and are very fact-specific, but nonetheless can be an area of dispute. That is why it is best to seek advice early on about the implications of a separation and, as this case shows, even where the family home or property is owned by a trust.