Things to think about if you are planning to live with your partner
Last year, family lawyers all over the country tried to raise awareness about the fact the law treats couples differently, whether they are married or unmarried. Despite this campaign to dispel the myth of the “common law marriage” I still get met with comments like “we have lived together 25 years so we are treated the same as if we were married”….. WRONG!
To help, I have highlighted some of the things you should keep in mind if you are in an unmarried relationship .
In the beginning…purchasing a property together
If you wish to purchase a property jointly, have an equal deposit and plan on making equal contributions to outgoings and the mortgage then you would need to consider whether you would like to own the property as joint tenants or tenants in common.
This means that you each own the entire property (subject to mortgage) equally. Should either of you die, the survivor becomes entitled to the entire property, irrespective of the contents of any Will.
Tenants in Common
This means that you each own a specific share in the property (subject to mortgage), which could be in equal or unequal shares. Should either of you die, then the deceased’s share will pass in accordance with their Will. For this reason, it is extremely important that you make a Will leaving your share to whosoever you choose. In the absence of a Will, the Intestacy Rules apply.
Most couples that live together and who plan to purchase a property with equal contributions would likely opt to purchase their property as joint tenants, so that in the event of one person’s death their share of the property would pass automatically to the other.
If the relationship subsequently broke down, it is possible to change from owning your home as joint tenants to owning as tenants in common by serving a Notice that you wish to sever the joint tenancy. This Notice takes effect as soon as it is received by the other person. If you do sever the joint tenancy it is extremely important that you obtain advice about the execution of a Will. You should be aware that severing the tenancy is a double edged sword. If you severed the tenancy and the other person passed away first, their share would pass in accordance with their Will and not to you automatically. The decision to sever a tenancy therefore needs to be considered carefully.
If your objective is to simply record an agreement as to the distribution of net proceeds in the event of a sale, either by way of specific percentages or to ensure a fixed sum is returned to one or both of you and the balance then divided equally (or unequally as you may agree), this sort of agreement can be recorded within a Declaration of Trust document.
A Declaration of Trust should be executed where legal title to a property is held as tenants in common or where the beneficial interest in jointly owned property differs from legal ownership, and it will record your respective beneficial interests in the property per your intentions.
Alternatively, you may like to consider entering into a Cohabitation Agreement, which can include a Declaration of Trust but also go on to deal with a wider range of issues. It can record your rights and responsibilities in relation to the property, financial arrangements between you, both during and following cohabitation and the arrangements to be made if you decide that you no longer want to live together, including the following:
- How the mortgage and other household expenses are to be paid, by whom and in what proportions.
- What should happen if a co-owner wants to sell the property and realise their investment and the other does not.
- The arrangements for one party to buy the other’s share and in these circumstances how and by whom the property is to be valued.
- How and when the property is to be sold, to include consideration as to who may occupy the property pending sale and how mortgage and living expenses should be paid pending sale.
- Ownership of joint and separate property, including personal chattels that you may wish to share whilst living together but should revert to one of you, if cohabitation comes to an end.
- Ownership and treatment of any joint bank accounts after cohabitation ends.
- Financial support between you during and after cohabitation ends.
- The living arrangements and financial provision to be made for any children, if cohabitation ends.
Whilst it is generally accepted that Cohabitation Agreements are enforceable, there have been no cases before the Court testing this point. It is also worth noting that they are governed by ordinary rules of contract and can therefore be challenged on grounds of fraud, duress, undue influence, misrepresentation, mistake or illegality.
At the end… if the relationship breaks down
Who owns the property?
There is no such thing as a common law spouse. This means that despite the fact that you might have been in a relationship with someone for many years and may have been living together as husband and wife during this time, it does not necessarily follow that you would have any interest in a property in which you live together. Following a separation you could find yourself in a position whereby you have no right to remain in the property and no financial security to enable you to find somewhere else to live.
If a property has been purchased in your partner’s sole name but you have been contributing on the assumption that you would have an interest in the property then you may be able to establish a beneficial interest in the property, but you would need to be able to demonstrate that:
- You and your partner had an agreement to share the beneficial ownership of the property, which would need to be supported by evidence, and in addition that you acted to your detriment in reliance of that agreement
- That the court should look at your conduct and infer a common intention that the beneficial ownership should be shared, based on that conduct, i.e. you may have paid the deposit towards the purchase price or made extensive repayment contributions towards the mortgage.
It is certainly not a guarantee you could establish an interest and is often an expensive and difficult argument to pursue as evidence is difficult to obtain.
If you own a property with your partner jointly, and purchased this after April 1998, it is likely that the TR1 form you completed to purchase the property will indicate your beneficial interests. Often people do not realise the relevance of this form, but it can be conclusive in determining your interests and should be considered carefully when going through the conveyancing process. This will be considered an express declaration of trust and where there is such an express declaration it is rarely possible to argue anything otherwise.
If there is no express declaration of trust and a property is owned jointly, the presumption is that the property is owned in equal shares, although in limited circumstances this presumption can be rebutted. It will be an uphill struggle for a party to produce relevant evidence to convince a court that the presumption of equal ownership should be rebutted, and even if successful in arguing an unequal interest, the court must then determine what the unequal shares are.
What if there are children?
An addition to the property claims considered above, a person may be able to make a claim under Schedule 1 of the Children Act to assist with property rights following a separation if they have children.
Where an unmarried couple have a child together, a person could potentially claim against the other for:
- Ongoing financial support (but only where the child maintenance service does not have jurisdiction to make an assessment);
- A lump sum payment;
- Settlement of a property; and/or
- Transfer of a property.
The key limitation of claims made under this provision however is that you are only likely to receive settlement of a property on trust until the youngest child is no longer a minor, unless there are special circumstances, hence the occupation of a property can often be on “borrowed time” and can revert to the other person once a child reaches majority.
Top tips for cohabiting couples to consider:
- If you are purchasing a property, consider whether you would like to hold the property as joint tenants or tenants in common.
- If you are being provided a deposit from a third party such as a family member, consider whether this is a true gift to both parties or whether it is intended to revert to one party only should the relationship breakdown and, if the latter, obtain advice about how best to protect that sum of money.
- If a property is being purchased in your partner’s sole name, consider whether this is actually reflective of your intentions for the property and what your understanding is in terms of your interest.
- If a property is being purchased in joint names, be aware that it is likely that a mortgage will be in joint names also, which means you may be jointly and severally liable for this debt. There may also be early redemption penalties payable to get out of a fixed term early, which you would be equally liable for should the relationship break down. Make sure you understand your financial responsibilities and that the legal situation is reflective of your intentions.
- If a property is being purchased with an unequal deposit and/or with unequal mortgage contributions consider entering into a declaration of trust or cohabitation agreement to clarify your respective interests.
Be aware that there is no such thing as a common law spouse!
- If you subsequently have children together, consider whether the financial dynamic has changed and whether your intentions regarding the property have changed. If so, consider updating the legal title and/or entering into a declaration of trust or cohabitation agreement to reflect the updated position.
- If in doubt at any stage, get legal advice. At Trethowans, we have a team of solicitors experienced in cohabitation law who can provide you with expert guidance and advice. You can get in touch with us on 0800 2800 421.