Many couples buy a property when they start living together, but many others live for years in a property already owned by one of them, without altering the ownership of the property. During the cohabitation, both people may make significant financial contributions, perhaps extending the property, making capital payments, or simply sharing mortgage repayments. Very often there is little discussion about whether these contributions are intended to give the non-owner an interest in the property.

Recent cases highlight the real dangers for cohabiting couples who, unlike those who are divorcing, cannot ask the court to make orders to achieve a fair division of the assets. Couples who have lived together have very limited options and the court's message, that it is essential for couples living together to take advice, to make properly informed decisions about the ownership of the home and to keep these under review, has become increasingly loud and should not be ignored.

A recent case, Kernott v Jones [2010] CWCA Civ578, particularly highlights the need, not only for financial and property issues to be agreed at the start of the relationship, but also to be resolved swiftly at the time of separation to avoid problems arising later. Even where significant financial contributions have been made by only one of the joint owners over a long period of time, without good evidence of the former couple's intention to change the shares in which they own the property, those contributions may not be enough to alter the original percentage shares in the property and the following case provides a cautionary tale.

Mr K and Ms J bought their house in 1985 for £30,000 in joint names, with Ms J paying the majority share. It appears that they did not have any real discussions about their contributions and whether the property would be owned as 'joint tenants' (in which case the shares would automatically be equal) or as 'tenants in common' (in which case the shares could be equal or unequal, depending on their intentions). They had not set out their intentions when they started living together and they did not do so on separation. When a dispute arose 17 years after the end of the relationship, the court had to look at all the circumstances, going back almost two decades and make a decision as to what the couple's intentions had been.

During the long separation, Mr K had purchased a second house and had not continued to contribute to the first mortgage; Ms J had been solely responsible for the mortgage repayments during that time. The court decided that at purchase, the couple had intended to own the house in equal shares and that, despite the differential payments over a long period of time, at no point had they intended to change the original ownership of the property. Because there was no evidence to show that the change of arrangements was accompanied by an intention to allow Ms J an additional share of the property, the court held that Mr K retained a 50% share of the property. This decision, of course, had serious financial consequences for Ms J.

The implications of choosing a tenancy in common or joint tenancy at the time of purchase are often overlooked, with the focus of any advice received often being on estate planning for death, rather than lifetime arrangements. Because property held under a joint tenancy passes on the death of the first owner automatically to the other, this form of ownership is often favoured for its simplicity over a tenancy in common, even though it may not be appropriate. If there is a tenancy in common each party's share passes either by their will or by the intestacy rules (discussed further below). However, if couples do not appreciate that unequal shares in a property cannot be reflected in a joint tenancy, then potentially serious problems can arise later.

As Lord Justice Wall put it in Kernott v Jones, cohabitating parties and their advisors 'must contemplate and address the unthinkable, namely that their relationship will break down and that they will fall out over what they do and do not own'. It is now of the utmost importance that separating couples resolve any property ownership issues as soon as they can following separation. The court simply does not have the broad discretionary powers it would have on divorce to solve a difficult case by considering what a fair outcome would be. However, Ms J is appealing the Court of Appeal decision and so there will shortly be further guidance in this area. The appeal is due to be heard by the Supreme Court in May.

Couples who have been engaged, but who separate before marriage, may be treated slightly differently and will need detailed advice. Substantial financial contributions to a property owned by the other person will, unless there is an agreement to the contrary, result in the contributor gaining an interest in the property. Therefore, while getting engaged may sometimes be seen as a rather informal change of status, it may also have important property consequences.