“Move with Caution” – Considerations for Cohabitees
Few would disagree that all too often decisions are made in happy times without sufficient (or indeed often any) thought being given to the impact of that decision in unhappy times. Nowhere is this more prevalent than in the decisions made by a couple contemplating cohabitation. After all, the choice to cohabit with a partner is almost always going to be made at a time when everything is rosy and a couple want to take the next step in their relationship. However, to avoid costly problems down the line, it is imperative that in taking this step couples tread with caution. It is simply a reality that many relationships between cohabitants will break down and unfortunately, in such circumstances, the law is widely acknowledged to be confusing, complex and very much in need of reform. This article takes a look at some of the most common cohabiting scenarios and how to best protect against problems that may arise if and when cohabitation ceases.
Moving in or buying together?
Very often one party to a relationship will already own a home in their sole name and cohabitation begins when the non-owning partner is invited to move into that property. The owning partner may continue to pay the mortgage whilst the non-owning partner contributes by, for example, paying the bills. If the relationship breaks down a number of years later the non-owning partner is left in a position whereby they have contributed, albeit indirectly, to a property which will remain in the other’s sole name. This creates unfairness because, had they utilised that money towards a property in their own name, they would be in a far better financial position.
Another common scenario is where a couple choose to purchase a property together in which to cohabit. Very often the capital contributions made towards the property will have been unequal (perhaps from the start, perhaps when further capital is invested to improve the property at a later date or perhaps where one party meets the mortgage repayments alone). If care is not taken at the time of purchase to correctly record the manner in which a property is intended to be held then real problems can ensue when the cohabitation breaks down. A property registered in the parties sole name will be presumed to be held 100% by that person and a property registered in joint names will be presumed to be held in equal shares. This may not reflect the reality and/or intention at all.
Redressing the balance
So, how does the law address these problems? If the couple had married, rather than cohabited, the home would form part of the matrimonial pot on divorce. It would be divided fairly in accordance with the Matrimonial Causes Act regardless of the legal owner of the property. Not so on cohabitation. Instead the legal remedy is based in the law of trusts.
In short, where the property is held in one parties’ sole name, the non-owning partner would have to prove one of the following in order to acquire a share in that property:
That they contributed to the purchase of the property
That they agreed with their partner that they would have a share in the property and acted in reliance upon that agreement;
That they were promised a share in the property and acted in reliance upon that promise
The same principles apply if the property is held in joint names but one party seeks to prove that it is not held in equal shares.
The problem is that establishing the above can be a very stressful, time consuming and costly exercise. Take for example the recent case of Kernott v Jones  UKSC 53. This case started in 2007 and ended up going all the way to the Supreme Court who gave judgment at the end of last year. It was a modest asset case in which the parties were disputing the ownership of a property worth approximately £245,000. The property in question was purchased in the joint names of Mr Kernott and Ms Jones for £30,000 in 1985. They cohabited there for approximately 8 years during which time they also had two children. When the relationship broke down it was agreed that Ms Jones would stay in the property. Not long after, Mr Kernott was given the proceeds from the parties’ joint endowment policy in order that he may use those proceeds to purchase his own property. Over the next 13 years both parties were solely responsible for their respective properties and met all the necessary mortgage payments and other outgoings with no assistance from the other. Then in 2007 Mr Kernott sought to claim his share in the original property as he remained recorded as a joint owner on the title. Despite Ms Jones having met the mortgage repayments entirely on her own for some 13 years, legally the presumption was that Mr Kernott’s share in the property was 50% because the parties had never recorded their shares differently. It is a sad reality that the legal fees that were incurred during the four-year legal battle that ensued would most likely have exceeded the value of the property at the centre of the wrangle. The Supreme Court eventually ruled that 10% was a fair share for Mr Kernott in the circumstances of that case. Whilst the result is widely appreciated as a fair one, the fact remains that this was a case that had to travel all the way to the Supreme Court for resolution. Furthermore, although the decision was unanimous, the judges did not agree on how that decision was arrived at. As such, more than anything it is a case that has very much highlighted the difficulties and complexities with the current law and the importance of protecting against litigation of this nature.
Protecting against the problems
Protecting against the problems highlighted above is often very simple and of relatively little cost. The ownership of a property can be regulated by the couple entering into an express Declaration of Trust which records their intentions. The declaration should be entered into at the time of purchase where a couple are making unequal contributions towards the purchase price of a property and/or where a couple are going to be making unequal contributions to the mortgage. Further declarations can be entered into at any time during the ownership to record any change in circumstances.
Examples of such changes would be if one party leaves the property and is going to cease contributing to the mortgage and/or outgoings for a time (as was the case with Mr Kernott and Ms Jones) or if one party makes a post purchase contribution towards the property such as paying for improvements or repairs or paying down the mortgage.
It is also possible to provide for what will happen upon the breakdown of a relationship with a cohabitation agreement (often called a “living together agreement”). Not only can this record how a couple intends a property to be held, it has the added benefit of being able to deal with other potential problems all in one document. For example, a couple can provide for whether they wish the property to be immediately sold if the relationship breaks down or if they are prepared for one party to remain in the property for a time. Dealing with these types of issues at the outset provides couples with certainty and limits the stress of a relationship breakdown a great deal by ensuring that financial matters are clearly recorded. The agreement can be reviewed if there is a change in circumstances such as the birth of a child or one party losing their job and being unable to contribute towards the property.
The most important thing to appreciate is that the rights of a cohabitee are a fraction of the rights of a spouse. The issues raised above are only the tip of the iceberg. For example, it is not possible to claim maintenance on the breakdown of cohabitation (save in relation to children if there are any). As such, if one partner puts their career on hold in order to bring up a couple’s children then on the breakdown of a long relationship they will be left with a significantly reduced earning capacity and no claim against the partner who carried on moving up the career ladder. Many people also simply do not realise that the position upon the death of one partner could create very real hardship. If there is no Will in place a person’s property falls to their nearest blood relatives and not to their cohabitee. If the property was in the sole name of the deceased partner, this could leave the surviving cohabitee out on the street. It is therefore particularly important for people opting to cohabit that both make sure they have Wills in place.
With so many considerations, it is very important that anyone contemplating cohabiting seeks legal advice to ensure protection and fairness if and when that cohabitation ceases.
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This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.