What is a Constructive Trust and How Do You Prove It

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A constructive trust is a legal agreement that gives a buyer an enforceable right to have their purchase price refunded if the seller later sells the property to someone else. This type of trust is commonly used in situations where the buyer suspects that the estate agent involved in the sale may have colluded with the seller to inflate the price of the property. By requiring the buyer to pay into a trust, the buyer is protected from having to pay more than they agreed to if this collusion is discovered. While a constructive trust does not guarantee that the buyer will get their money back, it does provide them with a greater level of protection than if they had simply paid the purchase price directly to the seller.

How do you prove that constructive trust exists

A constructive trust is an equitable remedy that a court will impose where one party has unjustly benefited from the property of another. The courts will often find that a constructive trust exists where there has been a breach of fiduciary duty, such as where a trustee has misused their position to advantage themselves.


To prove that a constructive trust exists, the claimant must show that:


(1) they have a valid claim to the property;

(2) the person who holds the property (the “trustee”) is not the rightful owner; and

(3) the claimant would be unfairly prejudiced if the trustee were allowed to keep the property.


If these elements are established, then the court will order the trustee to transfer the property to the claimant.



What are the benefits of having constructive trust in place?

Having constructive trust in place can provide important legal and economic protections to both buyers and sellers. For buyers, it provides an enforceable right to have their purchase price refunded if the estate agent or seller has been found guilty of fraud or collusion. This can help buyers to avoid being taken advantage of and can ensure that they are not paying more than the agreed-upon price for the property. For sellers, a constructive trust helps to protect them from liability in cases where buyers may attempt to challenge their title or ownership of the property. A constructive trust also provides an additional layer of security for both parties, as it requires that all transactions be conducted by the law and with the consent of all parties involved. This can help to reduce the risk of complications or disputes arising from the sale, which could lead to costly legal fees. Finally, having constructive trust in place can also reduce contractual risks for both buyers and sellers, as it ensures that all transactions are conducted lawfully and fairly.


The steps you need to take to set up a constructive trust

A constructive trust is a legal arrangement where one party holds the property on behalf of another. The purpose of the trust is to correct some kind of injustice that would otherwise occur if the property were left in the sole possession of the first party. For example, if someone receives a piece of valuable property by mistake, they may be required to hold it in trust for the rightful owner. Similarly, if someone fraudulently misappropriates property, they may be required to hold it in trust for the victim of the fraud. To set up a constructive trust, certain steps must be taken. First, the court must find that there is some kind of legal obligation for the trustee to hold the property for the benefit of another party. Second, the court must identify who the beneficiaries of the trust are. Finally, the court must decide how the trust should be carried out in practice. Once these steps have been taken, constructive trust can be established and put into effect.


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How to terminate a constructive trust

A constructive trust is an equitable remedy imposed by a court to prevent a person from unfairly profiting from their dealings. The court will order the transfer of property (usually money or land) from the person who has obtained it unjustly to the person who is the rightful owner. A constructive trust may be terminated in one of three ways: first, if the property is returned to the rightful owner; second, if the property is sold and the proceeds are distributed to the rightful owner; or third, if the property is transferred to a third party with the consent of the rightful owner. In any case, the court will only terminate a constructive trust if it is satisfied that justice has been done.

Also See: How Long Does Conveyancing Take? 


Who can benefit from a constructive trust arrangement

A constructive trust is a type of trust that can be created by a court to prevent someone from unfairly benefiting from another person’s property. This type of trust is typically used when there is no written agreement between the parties involved, but there is evidence that one party intends for the other to have certain rights in the property. For example, if someone purchases a piece of property to allow their child to live there, a court may create a constructive trust arrangement to ensure that the child receives the property. Another situation where constructive trust may be used is when one party has promised to give another party property as a gift but has not followed through on that promise. In these cases, a court may create constructive trust to enforce the promised gift.

Also See: How Long Does Conveyancing Take With No Chain? 



A constructive trust is a legal arrangement that can be used to rectify a situation in which one party holds property that rightfully belongs to another. If you believe you have been unjustly deprived of property, proving the existence of a constructive trust may be the best way to get what you are owed.


To set up a constructive trust, you will need to establish three key elements:


1) clear title to the property in question,

2) proof that the other party is holding the property for your benefit and

3) an intention on behalf of both parties to create a trustee-beneficiary relationship.


Once these elements have been established, a court will likely order the transfer of ownership from the trustee back to the rightful beneficiary. If you find yourself in possession of property that does not belong to you, it is important to take action quickly and consult with an experienced attorney who can help protect your rights.

Also See: How to Appoint a Conveyancing Solicitor 


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