Couples who are neither married nor in a civil partnership often believe that they have the same rights as married people. There is a widespread belief in the concept of “common law marriage”, which couples think will protect them when they buy property together. There is also an assumption that the law provides a “fair” financial remedy if a cohabiting relationship breaks down. These beliefs are incorrect.
Common law marriage does not exist and couples do not have the same rights as married people, nor do the courts have powers to reallocate assets (as they can on divorce) even if a property is involved. Couples must therefore carefully consider and appropriately document their intentions regarding the sale proceeds of a home in which they cohabit.
The information below explains the ways in which a cohabiting couple’s property ownership may be determined following relationship breakdown.
- Evidence of property ownership
How is the property owned? A review of the Land Register (or title deeds) should reveal this, including who legally owns the property and has the right to sell it, and who is entitled to the equity in the property
1.1 Joint Tenants If a couple owns a property as “joint tenants” then they are deemed to both hold the legal title to the property and the equity. Any sale proceeds will be given to both of them. If one of them dies, the other automatically receives the entire property, regardless of any other wishes that the deceased may have left by will.
1.2 Tenants in Common The best way for a couple to avoid a dispute regarding ownership would be to buy the property as tenants in common, or convert an ownership as joint tenants to tenants in common. “Tenants in common” means the parties hold the equity in property for themselves in the shares that they have agreed. The equity could be held in equal shares so that, should the relationship end or a party die, each party (or their beneficiaries) will receive 50 per cent of the sale proceeds. Alternatively, the couple could state that they will receive unequal shares, which may be more appropriate if one party is contributing more financially.
1.3 Sole ownership It may be that only one party appears on the title records and owns the property. In the absence of marriage or proof on the Land Register as to how the equity will be divided, the sole owner is in a strong position to argue that he is entitled to all the equity.
1.4 Cohabitation Agreement A legally binding cohabitation agreement can be entered into by a couple. This sets out who is expected to contribute what to purchase prices, fees, household expenses and so forth. Such agreements can provide some assistance in property division upon the ending of cohabitation.
- Trust law
If either member of a couple questions their share of the equity in a property, they would have to apply to the court for a ruling under trust law. The parties would have to provide evidence to the court that there was a trust over the property governing how the equity was held and how it would be divided. Such trust cases are complex and often lengthy in process. They can be very costly and can end in a seemingly unfair result compared to that which could have been achieved had the ownership been properly recorded.
Going to court and relying on trust law to resolve a cohabitees’ dispute over property should always be a last resort. While their relationship is strong, cohabitees should consider and legally document their intentions regarding any property that they share. Such action might include correcting Land Registry documentation, notices of severance, preparing a declaration of trust, a cohabitation agreement and an appropriate will. Failure to take these steps can lead to great uncertainty as well as financial and emotional cost, should their relationship break down.