Equitable Accounting UK (2026): Occupation Rent and Financial Adjustments Between Co-Owners of Property

Equitable accounting is the process by which a court — in proceedings under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996) s.14 — adjusts the financial claims between co-owners of property to ensure each receives a fair share of the proceeds on sale: (1) THE GENERAL PRINCIPLE: where two or more people co-own property (whether as joint tenants or tenants in common), they each have a beneficial interest in the property. When the property is sold, each co-owner is entitled to their beneficial share of the net proceeds. However, the net proceeds may not simply be divided in proportion to the beneficial shares — equitable accounting adjusts for financial contributions and obligations that have arisen during the period of co-ownership; (2) WHEN EQUITABLE ACCOUNTING IS INVOKED: equitable accounting claims arise most commonly in: (a) cohabiting couple disputes — when a couple separates and disputes arise about the division of the proceeds of the shared home; (b) estate administration — when one beneficiary has been in sole occupation of an estate property while the administration has been ongoing; (c) family property disputes — when siblings or family members co-own inherited property and one has been in exclusive occupation; (d) joint investment property disputes; (3) WHAT IS ADJUSTED IN EQUITABLE ACCOUNTING: the court adjusts for: (a) OCCUPATION RENT (also called 'occupation payment'): where one co-owner has been in exclusive occupation of the whole property and the other has been excluded from occupation, the occupying co-owner may be charged an occupation rent; (b) MORTGAGE CONTRIBUTIONS: where one co-owner has paid more than their proportionate share of mortgage capital and interest, they may be credited for the overpayment; (c) IMPROVEMENTS: where one co-owner has made improvements to the property that have increased its value, they may be credited for the improvement expenditure; (d) OUTGOINGS: payments of insurance, ground rent, maintenance, and other property outgoings may be adjusted between co-owners; (4) THE DISCRETIONARY NATURE: equitable accounting is not automatic — the court exercises discretion in whether to order it and in what amounts. The court balances all the circumstances, including the parties' conduct, the nature of their relationship, and any agreement between them.

Occupation rent (also known as an occupation payment or mesne profits between co-owners) compensates the excluded co-owner for their loss of use of the property: (1) THE FOUNDATIONAL PRINCIPLE — EXCLUSION BY THE OCCUPYING CO-OWNER: the leading case is Murphy v Gooch [2007] EWCA Civ 603 (Court of Appeal), which confirmed the modern approach: occupation rent is payable by the occupying co-owner to the excluded co-owner in circumstances where: (a) the occupying co-owner is in EXCLUSIVE occupation of the property; and (b) the excluded co-owner has been denied their right to occupy. The exclusion does not need to be hostile — it is sufficient that one co-owner is in occupation and the other is not; (2) THE STACK v DOWDEN APPROACH: in Stack v Dowden [2007] UKHL 17, Baroness Hale acknowledged that where one co-owner voluntarily leaves the property, they do NOT automatically become entitled to occupation rent. The key is whether the leaving party was 'excluded' by the conduct of the other party, or chose to leave. If a co-owner simply moves out of their own choice (e.g. to live with a new partner), they may not be entitled to occupation rent for the period they chose to stay away; (3) THE AMOUNT OF OCCUPATION RENT: occupation rent is calculated as the market rental value of the occupying co-owner's SHARE of the property (i.e. the rental value of the excluded co-owner's share). It is not the full market rent for the entire property — it is the rent for the portion beneficially owned by the excluded co-owner. Example: property worth £600,000 with a market rent of £2,000 per month. Excluded co-owner has 40% beneficial interest. Occupation rent: 40% × £2,000 = £800 per month; (4) THE MORTGAGE OFFSET: the occupying co-owner can set off mortgage payments they have made on behalf of both parties against any occupation rent claim. If the mortgage payments exceed the occupation rent, there may be no net obligation to the excluded co-owner; (5) PERIOD FOR OCCUPATION RENT: occupation rent is not retrospective unless the excluded co-owner has made a demand or application for it. The court typically awards occupation rent from: (a) the date of separation (if accompanied by clear exclusion); (b) or the date the excluded co-owner formally requested either occupation or payment of rent.

Mortgage contributions and improvements by one co-owner are credited in equitable accounting to avoid unjust enrichment: (1) MORTGAGE CAPITAL CONTRIBUTIONS — RESULTING TRUST / EQUITABLE ACCOUNTING: there are two distinct legal routes for mortgage contribution claims: (a) RESULTING TRUST / CICT: contributions to the mortgage PURCHASE PRICE may establish or increase a beneficial share in the property via resulting trust or common intention constructive trust; (b) EQUITABLE ACCOUNTING: mortgage contributions made by one co-owner ABOVE their proportionate share during the period of ownership are credited via equitable accounting — they are a financial adjustment of the net proceeds on sale, not a change to the beneficial shares in the property itself; (2) INTEREST-ONLY vs REPAYMENT MORTGAGES: for equitable accounting purposes, the distinction between capital and interest payments is relevant: (a) Capital repayments: increase the co-owner's equity in the property — they reduce the mortgage and increase the net value available on sale. A co-owner who has paid more capital should be credited; (b) Interest payments: these are the cost of occupation (equivalent to rent). If the occupying co-owner is paying the mortgage interest, this is often set off against any occupation rent liability — not credited as a capital contribution; (3) IMPROVEMENTS: where one co-owner has made capital improvements to the property (e.g. an extension; a new kitchen; rewiring) that have increased the market value of the property, the court may credit that co-owner for: (a) the cost of the improvement, OR (b) the increase in value attributable to the improvement (if lower). Repairs and ordinary maintenance do NOT attract a credit — only capital improvements that enhance value; (4) AUTHORITIES: the general principles derive from cases including Re Pavlou [1993] 1 WLR 1046 (Millett J — occupying co-owner in sole occupation liable to account for occupation rent; mortgage capital payments credited); Stack v Dowden [2007]; Bernard v Josephs [1982] Ch 391 (equitable accounting on sale of shared home); (5) THE NETTING: on a TLATA 1996 s.14 application, the court orders sale and directs how the net proceeds are to be divided — applying all equitable accounting credits and debits before arriving at the final figure payable to each co-owner.

Equitable accounting is frequently relevant in estate administration when a beneficiary has been in exclusive occupation of an estate property: (1) ESTATE PROPERTY IN SOLE OCCUPATION OF A BENEFICIARY: it is common for the surviving partner or one of the children of the deceased to remain in occupation of the family home during the administration of the estate. If the property is to be sold as part of the estate, the other beneficiaries may have an equitable accounting claim against the occupying beneficiary for occupation rent; (2) THE PRE-TRANSFER PERIOD — PERSONAL REPRESENTATIVES' ROLE: during the period of administration (while the property is vested in the personal representatives), the PRs have a duty to the estate as a whole. A beneficiary who is in occupation of estate property may be a licensee of the PRs rather than a co-owner — in which case occupation rent is governed by the licence terms rather than equitable accounting. However, if the property has been assented to beneficiaries as tenants in common, the TLATA 1996 framework and equitable accounting applies; (3) POST-ASSENT OCCUPATION: if the estate property has been assented (transferred) to two or more beneficiaries as tenants in common, the same equitable accounting principles apply as between any other co-owners — one in sole occupation may owe occupation rent to the other; (4) PRACTICAL DISPUTES: equitable accounting disputes between estate beneficiaries most commonly arise when: (a) the surviving spouse remains in occupation of the family home (which passes to children on the survivor's death) for a prolonged period and the children wish to sell; (b) siblings inherit a property in equal shares and one moves in; (c) a parent lives in a property they have given to their children as tenants in common; (5) APPLICATION TO THE COURT: a co-owner (or beneficiary) who wishes to claim occupation rent must apply to the court under TLATA 1996 s.14. The court can order: (a) a declaration of the parties' beneficial interests; (b) an order for sale; (c) an equitable accounting of occupation rent, mortgage contributions, and improvements; (d) a direction as to how the proceeds of sale are to be applied. The s.14 application is made to the County Court (or High Court for larger estates).

Equitable accounting disputes are costly and emotionally difficult. They can be avoided or managed through clear agreements and documentation: (1) DECLARATION OF TRUST AT PURCHASE: a formal declaration of trust records the beneficial shares AND can include provisions for: (a) how mortgage payments are to be made (jointly or by one party); (b) how improvements are to be treated (shared equally or credited to the party paying); (c) what happens if one party leaves and is replaced; (d) whether occupation rent is payable if one party occupies exclusively; (2) COHABITATION AGREEMENT: a cohabitation agreement between unmarried partners can address: (a) the treatment of mortgage overpayments; (b) the basis on which one partner can remain in occupation if the relationship ends; (c) whether occupation rent will be charged and how it is calculated; (3) FORMAL AGREEMENT ON SEPARATION: when a couple separates, an immediate written agreement about how the property will be dealt with avoids later dispute about: (a) the start date for any occupation rent; (b) who continues to pay the mortgage; (c) the timeline for sale or transfer; (4) EXECUTOR'S DUTY TO MANAGE BENEFICIARY OCCUPATION: personal representatives should ensure that any beneficiary in occupation of estate property either: (a) pays a formal occupation payment to the estate; (b) or has their occupation formally recognised by the PRs under their powers. An informal arrangement risks equitable accounting claims by other beneficiaries; (5) TLATA 1996 s.13 DIRECTIONS: the trustees of land (including PRs after assent) can exclude or restrict a beneficiary's right to occupy under s.13 — but must impose conditions (e.g. an occupation payment) where the exclusion would otherwise be unreasonable. A formal s.13 direction with a defined occupation payment creates certainty and avoids litigation.