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 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;
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 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
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.
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.