There are many different forms of families in the UK today, and cohabiting couples remain the fastest growing family type.
There are 3.2 million cohabiting couple families in the UK (Office for National Statistics, 5 November 2015). Whatever the circumstances that lead to two (or more) people living together in the same property, there is often no discussion, or only a limited discussion, about cohabitation rights and property ownership. Consequently, it is very rare for a cohabiting couple to record or lay down their intentions for cohabitation rights and the underlying property ownership in a written agreement what should happen to the property they live in, in the event of a relationship breakdown.
In English law, there can be a difference between the legal title to a property i.e. who owns the property according to the Land Registry, and the beneficial interest i.e. who has an interest in the underlying equity in the property. If the legal and beneficial interests differ, the legal owner is considered to hold the property ‘on trust’ for all beneficial owners. This is not the case in many other jurisdictions – where the idea of beneficial interests does not exist, such as in Scotland.
When couples fall out, it is not uncommon for there to be a dispute about who owns the beneficial interest in the property and the size of their shares. Such disputes usually happen in the following situations:
- Couples / friends want to own a property jointly, but the mortgage company will only lend funds to one of them (due to credit ratings, affordability etc.). Therefore the legal title may be held by one person, but the property owned beneficially by others;
- Individuals want to own a property outright, but need a family member/ friend/ partner to be added for mortgage purposes (perhaps so they can get a bigger mortgage) so the legal title is put into joint names;
- People wish to maximise their tax savings and avoid capital gains tax on a second property, so arrange for their properties to be legally held by them as individuals rather than as a pair/couple;
- Parents wish to avoid inheritance tax on their estates and place properties into their children’s names, or into joint names with their children;
- People own property individually, subsequently enter into a new relationship and form a different intention about the underlying equity – for example, if the new partner funds significant building works.
This is not an exhaustive list and there are many other scenarios where disputes may arise about the beneficial interests in a property. Whilst some of the examples above may not be necessarily lawful, they are nonetheless fairly common.
As I have previously explained, there is no such thing as common law husbands and wives, and therefore the length or the circumstances of the relationship do not in their own right offer particular protection, cohabitation rights or ownership rights in relation to property. Whilst other jurisdictions such as Scotland do provide (varying degrees of) protection for cohabiting couples, English law simply does not. Therefore, if an agreement cannot be reached, any dispute about the ownership of a property, may need to be determined by the court under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). Proceedings under this Act can be pursued by anyone who considers that they have a beneficial interest in the equity of a property, regardless of whether the property is jointly owned by them and another, or solely owned by someone else.
If one party issues court proceedings, a judge has broad powers to declare what interest each party has in a property but the presumption is that the legal title (who owns the property according to the Land Registry) reflects the intended beneficial ownership.
Solely owned property
If a property is legally owned in the sole name of one party, the burden falls on the other party to show that they have a beneficial interest, based on an intention to share the property.
The court’s approach is to answer the following questions:
- Is/was there a written record of the parties’ intention to share the property?
- If not, was there an intention between the parties to share the property?
- If so, was any detriment suffered by the party asserting that there was an agreement to share the property?
The detrimental reliance required to prove an interest in a property is fairly wide, and could be evidenced by direct contributions to the purchase price, and/ or mortgage repayments.
If the court is satisfied that there was an intention between the parties to share the property, and there was detriment suffered by the party asserting that there was an agreement to share the property, the court then has to decide the quantification of the parties’ respective shares in the house. This can be imputed on the basis of what the court considers fair having regard to the whole course of dealing between the parties in relation to the property.
The detrimental reliance is not restricted to a direct contribution to the purchase price and need not be related directly to the property – but must be behaviour which goes beyond what is ‘ordinarily’ expected of a cohabitee.
If the court is not satisfied that there was a common intention to share, there may still be a propriety estoppel claim. The elements to this claim are: assurance; reliance; and detriment, and the relief will be the minimum necessary to satisfy equity. This is the topic of another blog.
Jointly owned property
The arguments to be pursued in joint names cases will depend on what is set out in the transfer form (TR1/TP1 – the form purchasing the property) or any subsequent declaration of trust. If those documents record the intended beneficial ownership then this will usually be conclusive evidence and there are only limited circumstances in which this can be rebutted. Fraud, mistake or proprietary estoppel will need to be shown in circumstances where the shares are expressly identified.
The fact that the property is held in joint names, means that the court starts from the premise that there is an intention to share the property – and the dispute ordinarily focuses on whether the property should be shared equally between its legal owners or in differing shares. The court considers the whole course of dealings between the parties, and thus fairness is considered by the judge, when he or she decides what shares each owner has in the property.
What to do if you are concerned about your interest in a property
It is possible to protect an intended interest in a property with a Declaration of Trust or Cohabitation Agreement, or a joint ownership form (JO) lodged with the Land Registry (this form will require the signature of the legal title holder). Of course, these are only likely to be options before a relationship has broken down; once the relationship has ended it is often too late to record earlier agreements as the other party may not cooperate. The ideal time to consider those options and take the necessary steps is when moving in together. Perhaps instead of thinking that discussing and entering into such documents may taint the happy event of starting a new life living together, the better approach is to consider these types of documents as an insurance policy. Moving in together without any documents in place is like buying a property and not insuring it.
If your relationship has broken down and you consider you may have a beneficial interest in a property, it is important that you seek timely advice to have this protected, or to secure your interest.
You can contact Justine Osmotherley from our Family team on 0113 336 3323 or by email at email@example.com
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