I was promised the house: Can you enforce a verbal promise?

Can you enforce a verbal promise?

Simple verbal agreements concerning property and other substantial assets, particularly within families, are common. After all, why bother formalising a clear understanding with those closest to you? But what if things go wrong? Can you enforce a verbal promise?

Guest v Guest

The answer to this question is perhaps best illustrated by referencing a genuine example. In 2022, the UK’s highest court, the Supreme Court, gave judgment in the case of Guest v Guest, which involved the enforceability of a verbal promise concerning a family farm. The legal principle here is known as proprietary estoppel.

Mr and Mrs Guest were dairy farmers. Their eldest son, Andrew, left school at 16, and further to his parents’ assurances that he would one day inherit half the farm, he lived and worked full-time on the farm for almost 33 years. Throughout that time, he received less than minimum wage. Unfortunately, the relationship between Andrew and his parents deteriorated. Ultimately, his parents removed him as a beneficiary from their Wills. Andrew left the farm in 2015.

Subsequently, he brought a proprietary estoppel claim that his parents’ assurances entitled him to a share of the farm.

Can you enforce a verbal promise? Proprietary estoppel

Proprietary estoppel is a legal term that essentially means being stopped from reneging on a promise relating to property. It applies when a property owner promises another person a right to the property but fails to fulfil that promise. There are three parts to the legal test, all of which must be present:

• Representation. There must be a representation, i.e. an assurance, by the owner. Mr and Mrs Guest assured Andrew he would inherit half the farm.
• Reliance. The claimant must act in reliance on the representation. Andrew worked for over three decades for less than minimum wage, expecting to inherit half of the farm.
• Detriment. The claimant’s reliance on the representation has caused them detriment, resulting in an unconscionable outcome.

If a claimant satisfies this test, the court can enforce the promise.

The court’s decision

It should come as no surprise that Andrew succeeded in establishing a proprietary estoppel at trial. The judge ordered a ‘clean break’, requiring a lump sum payment to Andrew equivalent to 50% of the farming business’ value and 40% of the farmland and buildings. This broadly reflected the terms of Mr and Mrs Guest’s original Wills.

Mr and Mrs Guest’s subsequent appeal concerned the clean break remedy, not the court’s finding of proprietary estoppel. They argued that Andrew expected to receive half of the farm at their deaths. Granting him relief during their lifetimes meant having no option but to sell the farm. The Court of Appeal dismissed their appeal, with the matter referred to the Supreme Court.

On a 3/2 split decision, the Supreme Court justices found that Andrew was entitled to an immediate clean break settlement. However, they offered Mr and Mrs Guest a choice. One option was to put the farm in trust for Andrew, with Mr and Mrs Guest having a life interest but restricting their ability to leave the property to anyone else. The alternative was an immediate payment to Andrew, discounted for early receipt.