The relevant law is mainly found in the Trusts of Land and Appointment of Trustees Act 1996 and in the principles of equity.
What happens therefore if you and your partner buy a property together but do not provide for how the equity should be split if you were to separate?
A 2011 Supreme Court case of Jones v Kernott  considered such a situation where a property was in the joint names of a cohabiting couple but there was no explicit declaration as to their respective beneficial shares in the property.
The case of Jones v Kernott certainly did the rounds being the subject of a trial at the county court, an appeal to the High Court, a second appeal to the Court of Appeal and a further appeal to the Supreme Court. A total of 10 judges heard this case, all with their own opinion on how the equity in the property should be split. Does this mean that we now have clear authority on how to deal with jointly held property? Well…
The case involved a dispute between Patricia Jones, who was 56 when the case eventually landed in front of the Supreme Court and Leonard Kernott then 51.
The parties met in 1980 and bought 39 Badger Hall Avenue in May 1985 for £30,000. Miss Jones provided £6,000 towards the purchase and the balance came from an endowment mortgage. The property and the mortgage were in the joint names of the parties. After purchasing the property, the couple carried out substantial extension work increasing the value of the property within just two years to £44,000. The extension was paid for in part by further borrowings of £2,000 but the majority of the cost and labour came from Mr Kernott.
By 1986 the couple had two children and continued to live at Badger Hall Avenue until 1993, when Mr Kernott left the property. Following his departure, Mr Kernott ceased to pay anything towards the outgoings at the property including the mortgage and endowment policy, which were borne entirely by Miss Jones. Mr Kernott also paid very little maintenance for the children.
In 1995 the parties agreed to put the property on the market for £69,995 but it did not sell. They had previously taken out a life insurance policy which they decided to cash in, in May 1996 and divided the proceeds between them. Mr Kernott used his share to enable him to purchase his own property namely; 114 Stanley Road, Essex for £57,000.
In 2006, Mr Kernott told Miss Jones that he wanted a share in Badger Hall Avenue, which had substantially increased in value since separation.
When the matter came before trial in 2008, Badger Hall Avenue was worth £245,000 with a mortgage secured against the property in the sum of £26,669. Mr Kernott’s property at Stanley Road was worth £205,000 with a mortgage of £38,000.
The matter first came before His Honour Judge Dedman who, when making his decision as to what interest Mr Kernott had in Badger Hall Avenue, considered a previous decision of the Court of Appeal in the case of Oxley v Hancock and a House of Lords decision of Stack v Dowden. In summary, Judge Dedman decided that although there is a presumption that where property is held jointly there is a 50:50 split of the equity in this case the appropriate division of the equity in the property was 90% to Miss Jones and 10% to Mr Kernott.
Judge Dedman’s reasoning was that although there was an intention at the outset that the parties were purchasing a home as a couple, those intentions had significantly changed over the years. Judge Dedman took into account various factors including: that Mr Kernott was able to purchase his own property due to the fact that he was no longer contributing to the outgoings at Badger Hall Avenue, Miss Jones had paid the deposit on Badger Hall Avenue, Miss Jones had for 15 years following separation paid 81.5% of the interest in respect of the mortgage and for the fact that Mr Kernott had failed to support his children during this time.
Mr Kernott was not happy with the judge’s decision and appealed to the High Court. Referring to the decision in the case of Stack v Dowden, the judge in the High Court held that the court must not when making a decision override the parties intentions by imposing on them a view of what is fair. The judge went on to say that if no intention could be inferred, the court could impute an intention which the parties “must be taken to have had” in the absence of evidence to suggest that this was their actual intention. The judge went even further in his judgment saying that in the absence of an intention as to how the 50:50 split of the property should be altered, the appropriate approach is to consider what is fair and just. Accordingly, the decision of Judge Dedman was upheld and Mr Kernott’s appeal was unsuccessful.
Again, Mr Kernott was not satisfied with the judge’s decision and made a second appeal to the Court of Appeal. The approach that was taken by the Court of Appeal and in particular Lord Justice Wall was that the question to consider was whether or not an inference could be made by the parties’ words or conduct over time which would mean that the joint intention that the property should be split 50:50 was to be varied: 90% to Miss Jones and 10% to Mr Kernott. On that basis, Lord Justice Wall held that there was nothing in this case to displace the presumption that there should be an equal division of the equity in the property. Mr Kernott’s appeal was successful.
Perhaps unsurprisingly, Miss Jones appealed to the Supreme Court. The Supreme Court said that the appropriate task in deciding whether or not to vary the 50:50 split should be taken from the words or conduct of the parties as to their actual intention. If the parties shared intention could not be deduced from their words or conduct as to the exact shares in the property then the court must consider what their intentions would be as reasonable and just people. Miss Jones’ appeal was successful and the original decision of Judge Dedman was restored.
The decision of Jones v Kernott provides some guidance in situations where cohabitating couples do not intend a joint tenancy at the outset when purchasing a property or alternatively where the parties have altered their original intention over time. In such cases where it is not possible to deduce from words or conduct what those shares should be, it is open to the court to impute an intention on the basis of what the court considers a fair division of the equity.
What is not clear however is whether or not the court will go so far as to impute whether or not there is a common intention that the beneficial interest in the property should be anything other than 50/50. The case of Jones v Kernott did not require such consideration to be given as the original judge had found that there had been a common intention which could be inferred.
There is no clear guidance as to where the line will be drawn in these cases and we may find that the courts will simply be tempted to “impute” an intention to produce a fair outcome. Without coherent legislation on this area of law, all we can do is wait for such cases to go before the courts and hope that some sense can be made of when it is appropriate to “impute” an intention.
What remains however is that there is strong presumption that where a property is purchased in the joint names of an unmarried couple, the beneficial interests are 50:50.
Although no guidance was given in Jones v Kernott as to what the situation would be if the property was owned in the sole name of one of the parties and the other was seeking a beneficial interest in the property, again there is a presumption that the person who owns the property has the sole beneficial interest. It would therefore be for the other party to establish a beneficial interest in that property and again this is not a straight forward test and is reliant on case law.
Due to the uncertainty in the law, there is no simple formula that can be applied to ascertain how property is to be divided for those with an existing joint tenancy where no declaration of trust has been entered into. As we have seen from Jones v Kernott, this can cause problems down the line if you and your partner decide to separate.
In order to safeguard against this issue arising in the future, you and your partner can have a declaration of trust drawn up within a cohabitation agreement clearly setting out what is to happen to the property if you and your partner separate. Thus, avoiding, not only the expense and emotional stress of having to involve the Court, but also the uncertainty.
For further information in relation to 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.