With more than 50% of couples aged between 18 and 44 now cohabiting rather than marrying, the law dealing with cohabitation disputes is growing. This especially given that most cohabitees will not have a formal agreement in place which clearly sets out how the property should be divided in the event of a relationship breakdown. These problems become even more acute when only one of the cohabitees owns the property.
The law in this area is complicated and, in some cases, the case law is contradictory. Often clients are having to grapple with concepts such as resulting and constructive trusts, proprietary estoppel and equitable accounting. Factor in such concepts as subrogation and common intention and it is not difficult to see the minefield that needs to be navigated. Cases come under the umbrella of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). Disputes in TOLATA claims usually fall into one of the following areas:
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Claims against the legal owner of a property by a claimant not named in a title document;
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Disputes as to the quantum of beneficial ownership where there is no Declaration of Trust;
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Claims that a Declaration of Trust that appears to regulate ownership should be disregarded;
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Disputes between former cohabitees (usually where they have children) as to whether a property should be sold; and
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Accounts: i.e. disputes about whether one or other party is entitled to recompense for extraordinary contributions made before or after the breakdown of their relationship.
Without clear statutory definition, case law has shaped the courts’ approach. In the case of Jones and Kernott, the parties bought a house in 1983 for £30,000 but did not make a declaration of trust. Miss Jones paid 20% deposit with the balance funded by a mortgage. Miss Jones and Mr Kernott had two children together and contributed equally to the house expenses until Mr Kernott left the home in 1993 and made no further financial contributions towards the running and upkeep of the house. In 1995 the house was put on the market, but failed to sell. A joint life insurance policy was cashed in to provide Mr Kernott with a deposit to buy his own house. In 2006 Mr Kernott claimed the beneficial interest in the property, despite having not contributed anything financially since 1993.
In the first instance the County Court decided the case in line with the House of Lords decision in Stack and Dowden (2008). The Judge found Mrs Jones owned 90% and Mr Kernott 10% on the basis of what was fair and just, taking into account the whole course of dealings. Mr Kernott unsuccessfully appealed to the High Court; the Judge found that there had been a change in the party’s original common intention to share the house equally, as inferred by Mr Kernott’s conduct in 1993. Mr Kernott successfully appealed to the Court of Appeal, the majority held that nothing inferred that the original intention had changed. All five Judges restored the County Court Order. They found that the common intention had changed in 1995 when the policy was cashed in and at that point Mr Kernott’s equal share crystallised. Based on the value of the house in 1995 this equated to approximately 10% of the value of the house at the time of the County Court judgement.
This judgement sets out the principles to be applied in cohabitee joint ownership cases when a house is bought in joint names with no declaration of trust or cohabitation agreement in place. The starting point is that the property is owned in equal shares by the cohabiting couples. This is what is known as the presumption. However this presumption can be set aside if it is clear that the equal ownership was not intended, either, at the time of the purchase, or at a later date (a common intention). Likewise if the behaviour and/or dealings of the couple demonstrate a common intention, this will override the presumption. Finally, if the common intention cannot be determined from evidence, the Court will consider what is fair having reviewed the dealings between the couple in relation to the property. Each case will inevitably turn on its own facts and whilst financial contributions are relevant, other factors will be taken into account.
In cases where the home is in the sole name of a party, the starting point is different and, an intention of joint beneficial ownership must be established. Therefore there is no presumption of joint tenancy, and shares will be decided as above based on contribution and common intention.
The decision in Jones and Kernott gives impetus to the message to cohabiting couples – make a Declaration of Trust or Cohabitation Agreement so that it is quite clear who owns what and on what basis.
Matthew Clemence