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Practical steps for Cohabiting Couples - Knowing your rights.

Many people think that unmarried couples have the same rights as married couples under “common law” following a substantive period of cohabitation. This is a myth and cohabiting couples do not have the same rights as married couples, the position is very different.

The Law Commission produced a report on the legal remedies for unmarried couples in 2007 which concluded that the law is inadequate for unmarried couples. Unfortunately, the recommendations made by the Law Commission in their report have not been implemented by the government and it is unclear if they will do so. It is therefore important that unmarried couples consider their positions carefully prior to engaging in financial commitments.

The most obvious financial commitment is buying a house together. There is often an imbalance in respect of income and capital between the partners and it may be that one is paying a larger sum towards the property than the other. It is common for couples to not have fully considered their position at the time of purchasing the property which can lead to difficulties if they separate in the future.

Generally speaking a property purchased by two people will be held as “joint tenants”. This means that both owners retain a full share in the property which is not divided. This means that upon death of one of the owners that the property automatically transfers to the surviving partner.

Often, where one person makes a larger financial contribution than the other the intention is not that the shares in the property should be split equally. Unfortunately, the legal position is that as joint tenants the division in funds should follow the legal ownership meaning that the starting point is equality. The case of Stack v Dowden [2007] affirmed this principle and substantive evidence would be required to persuade the court otherwise.  The burden of proof falls upon the person seeking to establish a higher proportion of the equity. It can therefore be a costly and stressful exercise to deal with this after the event.

Sometimes the property is purchased in one partner’s sole name, or perhaps the property was owned by one partner prior to the relationship but upon cohabitation both partners pay towards the mortgage or home improvements. It may be that one partner is not able to obtain a mortgage at the time of the purchase but contributes towards the payments. It is possible for the non-owing partner to establish an interest in the property in those circumstances and the court will consider the intentions at the time of the purchase and any subsequent discussions or agreements reached.

It is also possible for intentions to change during the course of the relationship or following the breakdown of the relationship as in Kernott v Jones [2011].

Most couples do not consider what should happen to any assets if they separate in the future during the relationship and this can lead to difficult disputes after separation. It can be an uncomfortable conversation to have, particularly in the early stages of a relationship.  It is however sensible to have discussions, and to have those discussions formalised, to provide clarity and certainty in respect of the financial position.

In the event that you are able to agree your respective interests in the property it is possible to enter into a Declaration of Trust which is an express reflection of the position. It is also possible to enter into a cohabitation agreement to set out how financial matters within your relationship are to be managed and what should happen in the event that the relationship breaks down.

More recently in the case of Marr v Collie (Bahamas) [2017] the Court has once again highlighted the importance of a thorough examination of the intentions when determining the parties’ respective beneficial interest in the property.  Clearly, the more evidence to support the intention the easier it will be for the Court to determine the outcome.

It is therefore advisable to clearly record in writing by way of formal agreement at the time of the purchase what the intentions are. If you are considering purchasing a property with your partner you should seek advice regarding a Declaration of Trust or cohabitation agreement prior to the purchase taking place.  Such documents would assist in making your respective intentions expressly clear and should help to avoid ambiguity or protracted litigation in the future.

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Natalie Wiles, Chartered Legal Executive – Associate

Natalie Wiles

Chartered Legal Executive – Associate

Call 01522 888 555