A common misconception is that a partner automatically, after a set period of time, acquires the same rights as a married spouse. This remains a prevalent view amongst the general public but is untrue.
There are however changes afoot in the law. The Cohabitation Rights Bill reached committee stage in December 2014 although it has yet to be implemented. Whilst the Bill, if passed as law, will not give cohabitees the same rights as married couples, it does go some way to providing statutory arrangements for non married couples who separate. However, for the time being, the current position for unmarried cohabitees remains the same.
The position presently is ‘what’s mine is mine and what’s yours is yours’. Neither of the unmarried couple has a financial obligation towards to the other upon separation, save for any child maintenance responsibility which would be dealt with separately through the Child Maintenance Service, and is something which the Family Court generally has no authority to deal with.
In the absence of automatic financial rights and obligations unmarried couples will need to ensure that their financial rights, in the event they separate, are already protected. This can be done in a number ways.
The most straightforward way to safeguard a financial interest in a property is to take specialist legal advice when purchasing a property with a partner. There are a number of ways in which a property can be owned. A conveyancing solicitor should fully explain these to both parties, but if in doubt it would be prudent to take separate legal advice.
The ways in which a property can be owned are as follows:-
Joint Tenants – this is the easiest way to ensure that financial interests are protected upon separation. Where a property is held as joint tenants, both parties have a legal and beneficial (financial) interest in the property. Should the couple separate then either can then seek their half interest in the property. A further benefit of holding a property as joint tenants is that if one of the couple dies during the course of the relationship, the principle of survivorship arises meaning that the surviving partner will automatically acquire the deceased’s share in addition to their own half share.
Tenants in Common – Most unmarried couples buy a property as tenants in common. The property is still held in joint names with both parties having a legal and beneficial interest in the property. However, it is held in distinct and defined shares. A couple may chose to hold the property in unequal shares to reflect the differing capital contributions made by them. Also, the principle of survivorship does not arise which means that should one of the couple die, their share will not automatically pass to the surviving partner. Instead it will pass in accordance with the terms of their Will. In the absence of a Will, their share of the property will pass in accordance with the rules of intestacy (dying without a Will), which will be to direct family members and not the surviving partner, who by law, has no automatic right to inheritance. A surviving partner can make a dependency claim against the estate if they were living together for at least two years up to the death, but the claim is limited to income only.
Declaration of Trust – In both of the above circumstances, if one party has contributed more financially towards the purchase of the property, such as one party funding the whole of the deposit upon purchase, then a Declaration of Trust is a useful tool to ensure that this financial contribution is recognised and protected. The property can still be held in the same ways highlighted above but with a Declaration of Trust in place setting out the details of the larger contribution made by one party. On the sale of the property, or should the parties separate with one wishing to realise their interest without the property being sold, then the person who has made the larger contribution will get that amount back.
A further example where a Declaration of Trust is useful is where the parties intend to hold the property jointly and in joint names but for some reason one of them is unable to be named on the property, most commonly due to bad credit rating. In these circumstances, only one of the couple will hold the legal interest in the property in their sole name, which in the absence of anything expressly put in writing, would mean that even if there was an intention to hold the property jointly, the party who is not named on the mortgage could find it extremely difficult to prove a financial interest in it, even if they have been living in the property for many years. A Declaration of Trust would protect this position as it will expressly state that the intention of the parties is to hold the property jointly and that upon sale the proceeds shall be divided equally, or in any other distinct shares as expressly defined in the Trust documentation.
Cohabitation Agreements – often called a Living Together Agreement, these are legal contracts between couples which regulate who owns what assets and who is entitled to what in the event of a relationship breakdown. It can also cover more day-to-day matters such as the way the household is run, how contributions to general living expenditure are apportioned and other issues such as bank accounts, savings, investments and also debts. As long as it has been entered into with legal advice on both sides, with full financial disclosure the Agreement will hold heavy weight with Courts generally trying to uphold agreements reached between the parties, so long as they are fair and reasonable.
With all of the above being said, there are circumstances where a person who has no legal interest in a property can acquire a beneficial interest. Usually the party claiming an interest has to be able to show they made a financial contribution, such as a capital contribution when it was purchased, or that they paid for improvements to the property which has resulted in an increase in its value, or where they have been paying the mortgage. A beneficial interest may also arise from an express agreement or understanding to share the property and there is detrimental reliance on that agreement consisting of direct or indirect contributions to the property.
This area of law can be very complex. The easiest way to ensure your rights are protected is to seek specialist legal advice when buying a property with an unmarried partner or setting up home together as cohabitees. It is imperative that couples who are separating and are concerned about their rights take specialist legal advice from a family lawyer.
Paul Richardson, a Senior Solicitor in the Family Department at Lupton Fawcett states:-
“The complexity that can often arise in property disputes between unmarried couples means that it is extremely important that couples get legal advice as to their rights before even purchasing a property. If one of them is any doubt as to their own personal legal position it is imperative that they obtain their own independent legal advice. The law as to rights to property and ownership of property for those who are unmarried remains unclear and at present is only governed by complex case law.
The best advice I could give to any client is to seek professional legal advice and get all intentions of ownership and intentions of contributions recorded in writing at the outset in order to achieve clarity. Without such intentions being recorded in writing it can be a very long and gruelling process in trying to prove what the intentions of the parties were. This can then leave one party who genuinely believes that they have a beneficial interest in a property actually having no such interest whatsoever. They could then live with someone for many years and ultimately when that relationship comes to an end, end up walking away with nothing”
For any advice on the issues raised in this article please Richard Buckley.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.