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Trusts and Occupation Rent - August 2010

Trusts and Occupation Rent

A professional or third party trustee can be personally liable to pay occupation rent if spouses separate.

In a previous article, we have talked about the Court’s ability to order that a beneficiary under a trust which owns property has exclusive occupation of the trust owned home.

The Property Law Act 2007 is a means by which occupation rent can be extracted from the party in occupation where there are two or more owners of a property.

The Property Law Act enables the Court to make an order requiring a payment by any person of a fair occupation rent for all or any part of the property.

A recent case in the High Court has directed that:

"Where one co-owner chooses to stay in possession and this makes it not reasonably practicable for the other co-owner to continue to cohabit, occupation rent will usually be ordered. The position will be different where a co-owner leaves voluntarily, would be welcome back and it is reasonably practical for that co-owner to live there.”

The case concerned a family home which was owned by mirror trusts; one set up for the benefit of the husband and the other set up for the benefit of the wife. When the relationship ended, the husband continued to live in the property and the wife left. The wife sought occupation rent from the trustees of the husband’s trust.

The High Court assessed a fair rental for the property and determined that the husband should pay that fair rental but deducted amounts that he had spent on rates, insurance and on maintaining the property. That amount was then halved to reflect that the husband was occupying half of the property which was owned by the trust which was to benefit the wife. The husband was directed to pay $68,300 to the trustees of the wife’s trust for his period of occupation which was approximately two years.

The decision is important because:

  1. It confirms that the provisions of the Property Law Act can be used to extract occupation rent in a situation where one partner occupies a home owned by mirror trusts.
  2. The order was made against the trustees of the husband’s trust who were personally liable to pay the occupation rent. In the event that the husband didn’t pay it, the wife could successfully sue the other trustee(s) personally for the occupation rent.

This article was contributed by Allison Adams, Partner in the Family Law Team. If you want to know more, contact Allison on 303 9917, allison@lawworksnz.com

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