Unmarried couples: Your property rights

A judgment from the Supreme Court on shares in property has implications for millions of unmarried, cohabiting couples.

Once upon a time, a couple fell in love, bought a home together and had two children. The unmarried pair lived happily, not quite ever after, but for eight years.

Sadly, the relationship broke down. The man moved out leaving the lady with the costs of the mortgage and bringing up the little ones for the next 13 years.

Then, when the children were all grown up, the man went to court, claiming a 50% share in his old home. The courts couldn’t make up their minds and it took the highest court in the land to decide that the man was only entitled to 10% of the value of the property he jointly owned with his former partner.

All the unmarried women breathed a sigh of relief, but hoped they would never have to go to court four times over four years if their blissful homes fell apart.

A 90:10 split - is that fair?

Not a fairy tale, this is the very real experience of Mr Kernott and Ms Jones, an unmarried couple who split up nearly 20 years ago. They bought their home as ‘joint tenants’ meaning they owned it jointly and equally. Normally in this situation, each party is entitled to half the value of the home.

And this was the decision of the Court of Appeal which awarded Mr Kernott 50% of the property’s worth. The reasoning was that the couple owned equal shares when they separated and neither had done anything to change that situation.

However, the Supreme Court thought otherwise and agreed with the two lower courts. It declared that in certain circumstances, where there is compelling evidence that the parties did not intend equal shares, the courts will give effect to that intention according to what is fair.

The judges decided that Mr Kernott’s interest in the home should “crystallise” in 1995 when the couple cashed in an insurance policy so that Mr Kernott could buy a house in his own name and Ms Jones became solely responsible for the mortgage.  

Mr Kernott said he thought 25% would have been fair as he “paid for everything and completely refurbished the place” when he lived there.

A victory for women?

When married couples divorce, the court has wide discretion under the Matrimonial Causes Act 1973 to make whatever order is fair. All assets of both spouses are put into a pool, and are then distributed between the parties.

No such protection for unmarried couples exists in England and Wales (though it's somewhat different in Scotland), through either legislation or the common misconception of ‘common law marriage’ which has not existed since 1753. The Law Commission called for this area to be reformed a few years ago, but its suggestions are yet to become law.

Ms Jones was certainly happy with the result, but the law for future couples remains vague and unclear. There is no guarantee of financial provision for a vulnerable partner, just the precedent that courts can apply the principles of fairness to specific facts.

Think the unthinkable

For this reason, it is more important than ever for unmarried cohabitees to take the uncomfortable step of considering what should happen to their home should they ever split up.

Living in a property owned by one party is the worst scenario if couples separate. There is no automatic right for the non-owning partner to stay there or to its proceeds if it is sold.

If you are in this position, it is possible to argue you have a share (known as a ‘beneficial interest’) if you agreed that with your partner and/or contributed to the costs. But unless you agree amicably with your ex, you would have to go to court. With the time, money and uncertainty involved, this is best avoided.

So make sure a property is in joint names and take legal advice about the two options:

1) Joint tenants

Shares will normally be equal when a property is held as joint tenants but this case has established that a court could alter those shares.

You do not have a separate share you can sell or leave to anyone else in a will.  If one party dies, the surviving party automatically inherits the other’s half.

2) Tenants in common

If you own in this capacity, you each have separate shares which can be unequal, usually to reflect different contributions to the property.

A little more paperwork is involved as it’s important to do two things:

- make a ‘declaration of trust’ to set out each person’s share and what will happen if one partner decides they want to sell while the other does not;

- make a will stating who your share will go to if you die as your partner is not the automatic beneficiary.

Of course, it’s not just your home you need to think about. Other unromantic considerations when living together should include entering a cohabitation agreement, making a will, getting life insurance, clarifying who your pension should be paid to if you die and any arrangements for caring for and supporting children.

What do you think of the judgment? Do you think the law favours women or was this decision a fair one? Share your views with your fellow lovemoney.com readers in the comment box below.

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