The law relating to co-habiting couples who separate, particularly in
respect of the home, is complex. This article will focus on how legally
the home would be divided.
Legally, the route to division
largely depends on how the house is held. If the house is in joint names,
division can be relatively simple. If the home is in the name of one
partner, division is more complex, and in some cases a long standing
co-habitee may have no legal rights whatsoever in respect of the property.
However, if there are children in either scenario the court can award the
right to live in the property to the parent with care until the child
completes his or her full time education (which can be to the end of the
child’s first degree, depending on the order the court makes).
When reading on this topic it is important that you understand the legal
terms in respect of the ownership of property. Ownership of property has 2
elements, the
legal interest and the
beneficial
interest. The legal interest is fairly straightforward – whoever
is named on the title deeds of the property owns the legal interest.
Interestingly the legal interest carries no value. The beneficial interest
means the owner of the benefit (for our purposes the value) of the
property. Usually the legal and beneficial interests are held by the same
person or people, but not always. However, as you will see, it is possible
for one partner to hold the legal interest in a property, but for both
partners to hold a share of the beneficial interest.
Division of a property in joint names:Where a house is in joint names, the starting point is that division of
the equity (whether positive or negative) is 50:50. However, if when you
purchased the property you had a declaration of trust (which is also
referred to as a trust deed) made setting out the shares each of you own,
the property would be divided according to that declaration.
So what happens if you didn’t make a declaration of trust, but you didn’t
intend for the property to be owned equally?
In that scenario
matters then become more difficult. Firstly, the intention that the
property was not to be held equally has to be a shared one. If your soon
to be ex partner does not agree that you intended your shares to be
unequal, you would have to prove to a court that was in fact the case,
which will be no easy task. Here is a list, which isn’t exhaustive, of the
main factors the court will consider when deciding if there was a joint
intention to hold the property in unequal shares:
(1) any advice
or discussions at the time of the transfer which cast light upon their
intentions then;
(2) the reasons why the house was acquired in their
joint names;
(3) the purpose for which the home was acquired;
(4) the nature of the parties' relationship;
(5) whether they had
children for whom they both had responsibility to provide a home;
(6) how the purchase was financed, both initially and subsequently;
(7) how the parties arranged their finances, whether separately or
together or a bit of both;
(8) how they discharged the outgoings on
the property and their other household expenses;
(9) when a couple are
joint owners of the home and jointly liable for the mortgage, the
inferences to be drawn from who pays for what may be very different from
the inferences to be drawn when only one is the owner of the home. The
arithmetical calculation of how much was paid by each is also likely to be
less important. It will be easier to draw the inference that they intended
that each should contribute as much to the household as they reasonably
could and that they would share the eventual benefit or burden equally;
(10) the parties' individual characters and personalities may also be a
factor in deciding where their true intentions lay."
(Should you
wish to do further reading, this list is drawn from the speech of Lady Hale
in the leading case of Stack v Dowden
http://www.familylawweek.co.uk/site.aspx?i=ed749)Should you be able to prove to the court that your shared intention
was for the property to be held in unequal shares, the court then has to
determine what those shares were intended to be. To do so, the court
“undertak[es] a survey of the whole course of dealing between the parties
and tak[es] account of all conduct which throws light on the question of
what shares were intended”. (For reference, that quote also comes from
Stack and Dowden, as above). What this means is that the court will look
at who paid what, and the impact of those payments on the shares. The
court does not curtail itself to simply the deposit and mortgage payments,
but can include the extraneous payments involved in a household:
“the
whole course of dealing between them in relation to the property includes
the arrangement which they make from time to time in order to meet the
outgoings (for example, mortgage contributions, council tax and utilities,
insurance and housekeeping)."
The court can also look beyond
payments when determining shares, hence the deliberate use of the phrase
“whole course of dealing” above. An example is evidence from you as to
conversations regarding the intended shares, which is valuable evidence,
particularly if it is supported with other evidence, such as a deposit
payment.
To summarise the position so far:If you hold the house in joint names and there is no declaration of
trust and no shared intention that the shares were to be anything other
than 50:50, the house is to be divided 50:50.
If you hold the
house in joint names and there is a declaration of trust, the house is to
be divided as per the shares outlined in the declaration.
If you
hold the house in joint names and there is no declaration of trust, but
there was a shared intention that the house was to be held other than
50:50, the house is to be divided as per the agreed shares. If your soon
to be ex partner denies the shared intention, you would have to ask a court
to firstly determine there was a shared intention, and then secondly what
the shares are.
However, before deciding to take legal action in
respect of the last of those scenarios, the words of Baroness Hale, again
as drawn from Stack v Dowden, should ring loudly in your ears:
"At the end of the day … cases in which the joint legal owners are to be
taken to have intended that their beneficial interests should be different
from their legal interests will be very unusual."
Should you
have children, you should also read the section relating to cases where
children are involved below.
Division of a property
in one partner’s sole name:When the home is in the
name of one partner matters are fairly complex. There are 2 main scenarios
to consider here:
1. When you purchased the house there was an
expressed intention or understanding that it was for both of you and the
unnamed partner has in some way contributed;
2. When you purchased the
house there was no expressed intention, but the unnamed partner has in some
way contributed;
Scenario 1: When
you purchased the house there was an expressed intention or understanding
that it was for both of you and the unnamed partner has in some way
contributed;
This is the way the law phrases it:
An
interest will be found where “the court finds an agreement, arrangement or
understanding between the parties that the beneficial interests will be
shared, based on evidence of express discussions, no matter how
imperfectly remembered and however imprecise their terms; and the claimant
acted to his / her detriment or significantly altered his / her position in
reliance on the agreement.”
(This is taken from Lloyds Bank Plc v
Rosset
http://www.bailii.org/uk/cases/UKHL/1990/14.html )
To break it down, you must first demonstrate to the court
that it was intended you share the beneficial interest. As the quote from
Lloyds Bank shows, this can be by way of a statement or oral evidence of
the conversations between you when you purchased the property.
Once you have demonstrated that you have an interest, the court will then
go on to determine what share you should have.
To determine a
share, the court will first look again at the discussions you had. If the
issue was discussed and a share decided upon, that is as far as the court
needs to go. However, if those discussions did not extend to what the
shares should be, the court once again then looks at the whole course of
dealing between you to determine what the shares should be. In this
scenario the whole course of dealing is:
“the whole course of
dealing between them in relation to the property includes the arrangement
which they make from time to time in order to meet the outgoings (for
example, mortgage contributions, council tax and utilities, insurance and
housekeeping
Scenario 2:When
you purchased the house there was no expressed intention, but the unnamed
partner has in some way contributed;
This is the way the law
phrases it:
An interest can be found “based entirely
on the parties' conduct. Direct contributions to the purchase price by the
claimant, whether initially or by the payment of mortgage installments,
will readily justify the inference of a common intention to share
beneficially, and thereby the creation of a constructive trust. But it is
at least extremely doubtful whether anything less will do.”
(This is
again taken from Lloyds Bank v Rosett as above)
As you can see,
we have now moved away from looking at the whole course of dealings, and
into direct contributions to either the deposit or the monthly mortgage
payments. Although this quote says is it extremely doubtful that anything
less than a direction contribution will do, it has been confirmed by later
cases that is it not only doubtful, that nothing less will actually do.
(For further reading I recommend Oxley v Hiscock
http://www.familylawweek.co.uk/site.aspx?i=ed1894 )
In this scenario, once you have established an interest by pointing
to your contribution, the court then determines your share based
upon those contributions, so that in effect you receive your money back
plus a directly relevant share of the profit, so if say you contributed 10%
of the overall purchase price, you will then receive 10% of the net
proceeds of sale.
But what if we have
children?That you have children together will not
alter your shares as set out above. However, the parent with care has an
additional avenue under Schedule 1 of the Children Act 1989 to apply for
the non resident parent’s share to be held on trust until the youngest
child finishes full time education, which should be expressed in any order
as to whether that is to include the first degree. What this means is
that say your shares are 50:50. Under Schedule 1, the court can then say
that you have the right to remain in the house until the children are
either 18 or 21. The house is then sold and you each receive your 50% of
the net proceeds of sale, or you can buy the other share at 50% of the
market value.
However, that the parent with care has the right
to make the claim does not of course mean that the claim would succeed.
The court has to carefully balance the property rights of the non resident
parent with the need to house the child, which is no easy task. Each case
will very much so turn on its own facts, and legal advice should be sought.
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