Cohabitants – make life easier for yourself!
by Gemma Hope, April 4th, 2012
Last week saw another case[1] reach the Court of Appeal in relation to property rights of cohabitating couples after separation.
In this case the couple had intended to purchase a property in their joint names but had not done so on a mortgage advisor’s advice that they would not secure a mortgage in their joint names because the boyfriend (T) had a poor and inconsistent employment history, and so the girlfriend (H) obtained the mortgage and property solely in her name.
Their relationship later broke down. The district judge found that, although they had wanted to purchase the property in their joint names, they had only been able to purchase the property at all because of H’s financial discipline; that H was solely responsible for payment of the mortgage and outgoings; that T would sometimes contribute up to £100 a week for the children and housekeeping.
The judge decided that the couple had a common intention that T would have a beneficial interest in the property, but that the couple had not given thought to what the apportionment of that interest should be. Accordingly the judge declared that T had a 10% beneficial interest and that H had a 90% beneficial interest in the property.
T appealed this decision on the basis that as a matter of common sense since they had intended to purchase in their joint names, but had failed to do so due to the mortgage advisor’s advice, the court should apportion the beneficial interest on the basis that the parties had purchased in their joint names; and on that basis the parties would be entitled to equal beneficial interests.
The appeal court however held that as the transfer had not been into their joint names there was no scope for the legal presumption that they had intended to be joint tenants. The court held that it could not be assumed that, had the parties purchased in their joint names, they would have agreed to be joint beneficial owners as well as joint legal owners based on the circumstances of the case. Having found that the parties had a common intention that T had a beneficial interest but that they had not given thought to the apportionment of that interest, the district judge had correctly considered what a fair apportionment would be and had done so in an exemplary fashion. It was impossible to say that the judge had made an error in principle or was plainly wrong so as to justify overturning that apportionment.
So how could this legal battle have been avoided? How can cohabitants avoid long, stressful and costly court proceedings to determine their property interests after separation? Well, what cohabitants can do is enter into a Declaration of Trust at the time of the purchase (and keep it regularly under review in case the circumstances change). The Declaration of Trust can set out clearly how the couple intend to hold the beneficial interest in the property. Cohabitants can also enter into a Living Together Agreement with each other at the start of the relationship to clearly set out their intentions.
By Gemma Hope
‘Co-hab’ agreements – can you afford not to make one?
by Andy McKay, November 11th, 2011
The Supreme Court has finally given its long-awaited judgment in the case of Jones (Appellant) v Kernott (Respondent). Its conclusions should be given serious thought by unmarried couples who live and own a property together.
Under the current legal system, where a property is owned in joint names by an unmarried couple, the presumption is that the property is owned equally by both parties, regardless of the individual contributions either party may have made. This was a principle recognised by the House of Lords in the case of Stack v Dowden in 2007.
The difficulty with this presumption comes if the couple split up and one or the other claims that their individual contribution should entitle them to a larger slice of the equity in the former joint home. Unless the other party is willing to accept a smaller share, the parties face the prospect of a potentially lengthy and very expensive legal battle to determine who is entitled to what share of the value of the home.
Ms Jones and Mr Kernott met in 1981, had two children together and in 1985 purchased a house in joint names. They never married. They paid £30,000 of which the £6,000 deposit was funded solely from the proceeds of sale of Ms Jones former home. The mortgage and upkeep costs were shared, as was the cost of a loan for an extension.
In 1993, the couple separated and Ms Jones remained in the former family home and from that point paid the mortgage and upkeep herself. In 1996, Mr Kernott bought his own property using money cashed in from a joint insurance policy he had held with Ms Jones. Over the years, the former family home increased in value and in 2006 Mr Kernott announced that he wanted to claim his beneficial share in the property. Ms Jones defended the claim and the long legal battle commenced.
The initial decision of the County Court was to award Mr Kernott 10% of the value of the former family home, by then valued at around £245,000. Mr Kernott unsuccessfully appealed at the High Court but did succeed at the Court of Appeal. The appeal went all the way to the Supreme Court.
Within its judgment, the Supreme Court laid out five key points to try and assist how such cases should be determined: -
- The starting point is that if a couple buy a family home in their joint names, without any express declaration of what their interests are in the property, they own the property equally.
- The law does allow for that presumption to be argued against by demonstrating that there was a common intention not to share the equity of the property equally, either at the time the property was purchased or later on in the relationship.
- When deciding if there is such a common intention, the court will take into account the conduct and dealings between the parties and see if a common intention can be inferred by looking objectively at what occurred between them.
- Where it is clear that the parties did not intend for there to be an equal interest in the property at the outset or later changed their intention, but it is not possible to determine the actual shares each party would own, the court can impute what it considers a fair share having regard “to the whole course of dealing between them in relation to the property”.
- Each case will depend on the individual facts of the case and while financial contributions are relevant, there are many other factors which may enable a court to decide what shares were either intended or fair.
The Supreme Court found that the parties’ intentions had changed after the separation and certainly by 1995, when they made the decision to cash in their joint insurance policy allowing Mr Kernott to buy his own home.
In its unanimous decision, the Supreme Court restored the order of the County Court awarding Mr Kernott 10% of the value of the property. After four years and having taking the case to the highest court in the land, it is a pretty safe bet that the legal costs spent are likely to have exceeded the sums at stake between the parties.
Unmarried couples who live and own property together need to be aware that the Courts will, if necessary, impute the intentions of the couple: this could result in rulings being made by the Courts that do not meet the couples’ true intentions.
So in the continued absence of any clear lead from successive governments to legislate on the issue of co-habitees rights, what does this all mean for co-habitees that jointly own a home or are considering doing so?
The answer is that couples who do not make appropriate arrangements – either at the time of jointly purchasing a home to clarify or later on, could well find themselves facing the daunting prospect of a lengthy and costly legal battle should their relationship break down. To avoid such a depressing prospect, it is essential that unmarried couples who wish to buy a home together should seek specialist legal advice beforehand and consider getting a Declaration of Trust and a co-habitation agreement drawn up. These can be used to clearly set out the intentions of the couple regarding shared ownership. Such agreements should be reviewed as circumstances change.
While this may not appear a very romantic idea it provides some certainty and clarity at the outset about property rights which can help provide a strong foundation for the relationship, but if the relationship doesn’t work out the couple have more control over how the interest in the property should be divided up. No-one would consider buying a home without a life insurance policy and equally, unmarried couples buying a home together need to recognise that co-habitation agreements can act as an insurance that can provide clarity and peace of mind.
If you are considering buying a home with your partner and you are not married, please contact our specialist family law team for advice.
By Andy McKay
Jones v Kernott – a conveyancer’s view
by Mike Bowen, November 10th, 2011
At long last the Supreme Court has issued its eagerly awaited judgement on the above case. Or so the press release goes! In truth it was not that eagerly awaited in my view but it is interesting for a number of reasons.
Doubtless my colleagues in the Family Department are getting all excited and will blog in much greater detail and much better than I can.
However I am going to waffle on about what it means for conveyancers and the public in very simple terms because conveyancers are simple souls.
‘Tis is the latest in a string of cases dealing with shares that people own in houses. Sadly it will not be the last.
The lead case is Stack v Dowden 2007 which decided that the Courts could look at the intention of the parties at the time of purchase and imply an implied trust. What that means is that if X puts in 25% of the equity and Y 75% the Court may imply a 25/75 split of the proceeds of sale. However if X paid all of the mortgage the Courts may well imply something different.
Therefore conveyancers have a duty to advice and take instructions on how people wish to own the property and if they want to own in equal or unequal shares plus take into account other relevant factors like who pays what and what the purpose of the purchase is eg is it the family home.
We do this as a matter of course and we advise people to have declarations of trust which sets out what they have agreed. If people are not married or have children from an earlier relationship or sometimes for tax purposes it is essential to have advice on this and a declaration of trust and a will.
Sadly most people do not do so and so in time if they are not married the case can end up before the Courts and the Courts can decide what the parties intended. Obviously X intended something different from Y otherwise the Court would not be involved so someone is going to be disappointed. So do it right when you buy.
What Jones v Kernott does is take this a step further and it is something we mention already. If the intention of the parties changed since purchase then the Courts can imply a further implied split of proceeds.
Simply put in this case the property was purchased in 1981 in joint names by an unmarried couple as a family home. Ms Jones paid all of the equity. They had no declaration of trust. They paid outgoings jointly. Later they took a further loan and extended the property.
In 1993 the separated and Ms Jones stayed with the children in the property. Mr Kernott had little or no further involvement with the property and family. In 1995 the property was marketed but not sold but an endowment was cashed so Mr Kernott could buy his own home. In 2006 he decided to claim a share in the property and Miss Jones applied for a declaration under Sc 14 of the Trust of Land and Appointment of Trustees Act 1996 that she owned it all.
The case then moved to the Courts and after appeals the Supreme Court has decided that where the intention of the parties has changed since the date of purchase the Court can infer what those intentions are and imply a trust.
Mr Kernott was awarded 10% share of the equity based upon the situation in 1995 as at that time the Court inferred that at the time the parties intended that the property was no longer the family home.
It is stated that each case will be judged on its facts so there will be more cases like this and more trauma for families. Get a declaration of trust AND if circumstances change you can by agreement amend the declaration. It will save a lot of time and money in the future.
Personally I find it difficult that the Courts can imply what the parties intended at a certain time. However until there are cohabitation laws this is what we have to work with. The most important point is to think about what you want both now and in the future should one person die and to amend an agreement if circumstances change.
In my case we have a declaration of trust as I have a step daughter that way she will inherit her mothers share in due course. My wife had most of the equity. When she left work we amended the declaration so my share increased and hers went down until we got to 50/50 as I paid the mortgage.
In theory in this case there could have been a declaration of trust that Ms Jones got the first £6,000 (being the equity) plus 75% of any increase in equity and Mr Kernott 25% of any increase they would both have covenanted to pay the mortgage and outgoings equally.
When they did the extension they may have adjusted this perhaps if for example Mr Kernott was (as was the case) doing some of the work then a straight 75%/25% split may have sufficed.
When they split and certainly when Mr kernott purchased his home an amendment crystallising the parties situation would have been sensible so a 90/10 split with Ms Jones covenanting to pay all the outgoings and a statement that the property was intended to be a home for her and the children until the oldest was 21 for example would have been a possibility.
Declarations of trust can be complex you need advice on them – take it.
A clearer future ahead for couples who live together?
by Gemma Hope, May 4th, 2011
An appeal from Kernott v Jones is starting in the Supreme Court this week and it will have an impact on couples who own property and live together who are not married or in a civil partnership.
There is a common misconception about the legal status of cohabitants. Many believe in the myth of “a common law marriage”, however there is no such thing. There is a variety of statutory and non-statutory regulations that can be used by cohabitants to determine what, if anything, should happen to the couple’s assets at the end of their relationship.
The general laws relating to the ownership of property play a vital role. When a couple purchase a property together their solicitor should advise them to enter into a declaration of trust to determine what shares the property is held in. Where no expressed trust is entered into there can be an “implied” trust by looking at each of the parties financial contribution or intention. However, trust law is complicated and uncertain resulting from technical difficulties and the nature of evidence required to prove any claim to the property.
In the current case being appealed Ms Jones and Mr Kernott began living together in 1983. They bought a house two years later with Ms Jones providing the 20% deposit, with the balance of the purchase price raised by joint endowment mortgage. The property was purchased in their joint names. During their relationship Mr Kernott contributed to housekeeping and mortgage payments and carried out improvements to the property. The couple had two children and then separated in 1993. Ms Jones continued to live at the property and assumed responsibility for the mortgage and endowment premiums, she did not claim child maintenance from Mr Kernott. Mr Kernott went on to buy another property in his sole name to re house himself. In 2006 Mr Kernott sought his 50% of the equity in the property and Ms Jones opposed. The first judge decided that Ms Jones’ payment of the deposit and her payment of the mortgage for 14 years after the separation should result in Ms Jones receiving 90% of the equity. Mr Kernott appealed and lost his first appeal – he then appealed to the Court of Appeal. The Court of Appeal judges concluded that they could not ‘infer intent’ on the part of Ms Jones and Mr Kernott about the division of the property proceeds in the absence of a recorded agreement or verbal discussion. Accordingly Mr Kernott was held to be entitled to 50% of the proceeds of sale of the property. Ms Jones’ appeal of this decision is now being heard in the Supreme Court.
This case has been described as a ‘cautionary tale’ for unmarried partners/un registered civil partners. Mr Kernott and Ms Jones should have taken full legal advice at the time they purchased their property, and on their separation, to clarify their intent and interests.
The issues currently being considered in the Supreme Court have significance beyond debates within the legal profession in a society where many couples do not want to get married or enter into a civil partnership for a variety of reasons.
Despite the rising number of cohabiting couples there is currently no coherent scheme of remedies to relieve financial hardship if the relationship breaks down and comes to an end. The lack of rights for cohabitants is currently under review by the government and it raises important questions in relation to social policy. However, in the meantime it is hoped that the outcome of the appeal in the Supreme Court will offer some guidance, although the judiciary have a tough task ahead of them as ultimately the law relating to cohabiting couples and ownership of their property is for the government to determine.
By Gemma Hope
Cohabitation Rights
by Lisa Burton-Durham, February 7th, 2011
Sir Nicholas Wall, President of the Family Division of the High Court in England and Wales has said that unmarried couples should have more rights to property and money if they separate.
However, whilst the government has previously indicated that they favour reform there is no definite decision regarding the legislation in England and Wales.
Many couples who choose to live together mistakenly believe they have legal rights as ‘common-law husband and wife’. For years people have believed that just by living with someone for long enough they will automatically have financial rights. This is a complete myth. Unmarried couples have very little protection compared with married couples. Neither does it make any difference whether you have lived together for three or thirty years.
So, if you are unmarried but live with your partner, what rights to property and money do you have should your relationship break down?
- Where there are children the claims of the parent with care of the child or children are generally limited to child maintenance through the Child Support Agency. The court can however order that the non resident parent provide a property in which the child or children may live but the property will revert back to the provider when the children have finished their education.
- Each partner will keep whatever is in their own name and anything in joint names is likely to be split equally between them. Any property that is owned solely by one partner will be kept by that person unless the other can establish that they should have an interest it. Proving you have an interest in someone else’s property can be extremely difficult and costly.
- An unmarried partner cannot make a claim for property, maintenance or a share in any pension in their own right.
- The law does offer a little more protection if either partner were to die. If one partner dies without making provision for the other in their Will, the surviving partner could potentially make a claim against the estate.
By contrast married couples, on divorce, have far more financial claims available to them. The court has wide discretion to make whatever order is fair. They can order a payment of a lump sum, a transfer of property and/or maintenance for the other spouse and the children.
Sir Nicholas Wall has commented to The Times that women tended to lose out under the current system. This was because there was an absence of any law on dividing up the assets of couples who lived together. He believes that judges should be able to decide on claims in such situations. He went on to say that the courts would be more sympathetic to a claim for rights where a couple had lived together for a long time.
There will undoubtedly be conflicting arguments following Sir Nicholas Wall’s views. I would certainly welcome some legislation for separating unmarried couples although I do not accept that the rights should be exactly the same for both married and unmarried couples. Society can no longer ignore the change in the structure of couple’s relationships. However some will argue that by giving unmarried couples the same rights as married couples the institute of marriage will be undermined.