A law firm which offers more

Call us: 0113 246 0622

Jones v Kernott – A Landmark Ruling for Cohabitees?

Comments

Lawyers around the country have waited with baited breath for the Supreme Court ruling on Jones v Kernott [2011] UKSC 53.  The ruling has now landed and I have read with interest the numerous different newspaper articles and legal commentary arising out of that Judgment.  The overwhelming view appears to me to be that it is a triumph for those who buy property together but who choose not to marry, as the parties are not now necessarily bound by the legal ownership of the property.

The case involves an ordinary couple, in an ordinary relationship who began a relationship in 1980.  Ms Jones bought, in her sole name, a mobile home in 1981 and Mr Kernott moved in, in 1983.  The mobile home was sold in 1985 and the property, the subject of this dispute 39 Badger Hall Avenue was bought in their joint names in 1985.  The deposit was put down from the proceeds of the sale of the mobile home and the balance by way of an endowment mortgage.  Works were done on the property; the mortgage and utilities were paid but they separated in 1993.  Mr Kernott moved out of the property and attempts were made to sell 39 Badger Hall Avenue, without success.  The parties agreed to encash a joint life insurance policy and the proceeds were divided between them.  Out of Mr Kernott’s share, he put the deposit on a home of his own and purchased his own property in 1996, partly by this deposit and the balance on mortgage.  This property was purchased in Mr Kernott’s sole name. 

In 2006, when the children were adults, Mr Kernott initiated correspondence with a view to claiming his interest in the property.  Ms Jones started Court proceedings in October 2007, and, four Courts later, the Supreme Court has ruled that her interest in the property is 90% and Mr Kernott’s interest 10%.  The case has been through the County Court; High Court; Court of Appeal and, finally, the Supreme Court.

The Supreme Court ruled on the correct approach to calculating beneficial interests in property with unmarried parties, where the legal title is in joint names but there is no express statement of how it is to be shared.  The Court ruled that, in this case, the parties’ intentions as to ownership had changed after their separation, and awarded a departure from 50/50. 

It is fundamental to understand that the law relating to married couples and unmarried couples is completely different.  There is a common misconception that after living together for a while the parties become “common law husband and wife”.  This is not the case.  A divorcing couple knows, with certainty, the various matters taken into account when considering how the assets should be divided.  All the circumstances of the case are considered, the first consideration being the welfare of any children of the family under the age of 18 and, under the Matrimonial Causes Act, there is a list of factors the Court has regard to.  The aim of the Court is to achieve fairness.  We can therefore advise divorcing clients, with some degree of certainty, as to how their assets are likely to be split.  Sadly, the same cannot be said for cohabiting couples. 

In cases where an unmarried couple buy a house together, the starting point would always be to look at the ownership of the property, namely the title deeds.  When the parties buy a property, they complete a Land Registry form TR1.  The form asks for an “X” in the appropriate box as to how they are to hold the property, namely:

In my experience, often both parties automatically cross the box confirming they hold it as joint tenants.  This means legal ownership is 50/50.  When advising clients, therefore, we have always looked at this as the starting point.  There is a presumption that if the legal title is owned jointly, then the beneficial interest is also held jointly.  However, this case shows that this presumption can be rebutted by evidence that it was not, or over a time it ceased to be, the common intention of the parties to hold the property jointly.  In some cases, this will be easy to see, for example, where the parties did not share their financial resources.  However, in the absence of clear evidence of intention, the conduct and dealings between the parties needs to be examined to see if this presumption can be displaced and, if so, can allocate different shares to the parties. Each case is therefore dependent upon its own facts. 

It is clear to see in this case that it is “fair” for the equity in the house to be divided as the Court has ruled.  It determines that even though the house was held in the joint names of both parties, Judges can divide the equity more fairly. 

The worry moving forward is that this now could lead to more litigation for other parties.  It is unlikely, over the years, that conversations will have been recorded; documentary evidence kept as to who spent what and on what basis.  In some cases, there will be clear evidence, as in this case.  In other cases, the evidence may not be so clear and it may boil down to one person’s word against the other.  My view is that it is right that the Courts can now look beyond the legal ownership of the property and this has to be right.  However, until there are clear reforms in the law, there is going to be an element of uncertainty for both parties. 

This can, however, be avoided by the parties taking steps to protect themselves early on.  We always advise couples that are going to be living together to enter into a living together agreement (commonly known as a “Cohabitation Agreement”).  This will show what the parties’ intentions are and, more importantly, will set out what is to happen if the parties separate.  Many people view these as unromantic but, sadly, it is a fact of life that relationships do end and all this document does is set out what is to happen if, not when, the relationship ends.  As long as the agreement is fair and well thought out; not signed under pressure; that legal advice was taken at the time of signing and the parties have declared their true financial positions to the other, it is likely that the Courts will uphold them. 

Justine Osmotherley is a Partner in the Family Team at Clarion and can be contacted on justine.osmotherley@clarionsolicitors.com or 0113 336 3323.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.