For many couples, the last thing that comes to mind when setting up home together is what will happen if it all goes wrong. The excitement and promise of the future means that many people never think about the consequences of separation.
Whilst this is perfectly natural, living together without thinking about ownership of property can create problems down the line if a house or flat does need to be divided.
What rights do married couples have with respect to the property they live in?
People who choose to get married enjoy a significant degree of protection regarding their property rights.
During the course of a marriage, a spouse who does not own the matrimonial home can ensure that it is not sold or transferred without their consent by registering their matrimonial home rights with the Land Registry. This allows a spouse to protect his or her interest even if it was the other partner who bought the property. The same applies to long-term lease arrangements.
After a marriage ends, there is a comprehensive regime governing what happens to property. Judges have a wide range of powers to ensure that a fair settlement is reached for both parties. The core principle is equal division, subject to considerations such as the length of the marriage, whether a pre-nuptial agreement was signed and the position of any children of the marriage. Courts will always try to reach a judgment that is fair to both parties, regardless of who the breadwinner was or who contributed most in financial terms.
The myth of the common law spouse
It is a common myth that couples that live together for a long period of time have the same rights as married partners. A survey in 2004 revealed that 61% of unmarried cohabitees believed they were effectively married in the eyes of property law. This is despite the reality being very different.
Couples who are unmarried have no automatic entitlement to financial support from each other when they separate. Nor can they register home rights to prevent their partner from selling the house without having an interest in the property in their own right. The fact of their long-term cohabitation is irrelevant.
Although other rights can be given with a little planning, when it comes to property, to assert any kind of rights in law, unmarried partners must turn to the complex, technical law of trusts. It is to this area, rather than the more personal, user-friendly family law context, that claimants must go to obtain protection when the relationship comes to an end.
Who owns what in a trust?
The law of trusts offers protection to cohabitees by seeking to protect the intention of the parties when financial arrangements were made. If cohabiting couples expressly state how they wish the beneficial interests in their property to be divided, this will always be binding. Therefore, couples can simply and effectively control what happens in the event of separation by recording their wishes in writing at any time in a separation agreement.
Whenever property is purchased, solicitors and agents will try to ensure that unmarried partners address how it is owned.
But usually, the last thing new cohabitants want to do is lay down rules about who owns what when they first move in. The plain fact is that the vast majority of unmarried cohabitees fail to mention beneficial interests and the result is uncertainty when one partner moves out.
When there is no express declaration concerning beneficial interests, the courts will try to infer what intentions the parties had. This exercise is different depending on whether the property is registered in joint names or one partner’s sole name.
Where the parties purchase a house in joint names, the law presumes that they intended to hold the property equally. This means that a court will start from the view that each partner is to be awarded 50% of the value of the property in the event of separation.
This is, however, just a presumption. It is open to the parties to rebut this presumption by producing evidence that the parties actually intended unequal division. Such evidence could include:
- advice or discussions at the time of transfer
- reasons why the property was jointly acquired (for example, as an investment as well as a home)
- purpose of the home (for example, whether it was also used as business premises)
- nature of the parties’ relationship
- arrangement of finances
- arrangement of outgoings
In cases where the parties keep their finances rigidly separate, for example, the courts are likely to find that they intended their interests to reflect how much money they had each contributed to the property. This would be different to situations where couples share money and have much closer financial dealings, in which case a court would be more likely to find that they intended the property to be split evenly. Unmarried couples should keep separate bank accounts, and contribute to a joint account from which the bills and expenses are paid.
As a result, parties can walk away with 50% of the value of their home despite contributing significantly less money to the purchase price or the mortgage repayments. The law in this sense has created a common law spouse by presuming that the parties wanted similar consequences to marriage. It is worth noting, however, that there is the potential for spouses to combat this presumption, unlike the situation with marriage. One way to set out ownership shares is to create a "tenancy in common". You may be interested in reading our article on co-ownership of property that covers this subject.
Where property is registered in the name of only one partner, the presumption is reversed. In these cases it is presumed that the partner who registered the property owns 100% of its value. The burden is then on the other cohabitee to show that they intended to hold the property equally or in different terms.
This can be unfair on partners who choose to move into each other’s houses without giving any thought to ownership. In these cases a person can make a considerable contribution to the relationship (and the mortgage through informal 'rent' payments) and still have to prove that he or she should be entitled to a small share of the property.
Once again, the most sensible course of action in these situations is for couples to expressly state what they would like their rights to be. Our tenants in common agreement achieves this.
The chances of legislative action have been hindered by political reluctance to equate the status of cohabitation to that of marriage. A few years ago, the Law Commission proposed a scheme whereby cohabitees would have to opt-out of a statutory regime providing partners with financial rights in the event of separation. No further action has been taken by Parliament and there does not appear to be any major reform on the horizon.
Until this changes, therefore, the law of trusts will continue to govern the property rights of cohabiting couples. The key points can be summed up as follows:
- Cohabiting couples, unlike married couples, have no automatic rights to financial support on separation.
- Couples can specify what they would like their rights to be when they buy property, or by recording their wishes in writing at any time. What can be covered is extensive.
- Where no express declaration is made, the position will depend on whether property is registered in joint names or one sole name.
- If the property is registered in joint names, there is a presumption that the parties intended equal ownership, which must be rebutted by evidence to the contrary.
- If the property is only registered in one partner’s name, the presumption is that the parties intended for he or she to own the property outright. This can only be displaced with evidence.