– Equity’s role in providing redress

According to the Office for National Statistics, the number of opposite-sex cohabiting couples in 2013 was almost double the figures from 1996. In relation to opposite-sex cohabitation, the statistics do appear to confirm a substantive shift away from marriage. For same-sex cohabiting couples, the increase over the same period is believed to be in excess of 400% (even allowing for the introduction of civil partnership in 2006.)

In a recent, 58% of the respondents thought co-habiting couples who live together for some time “probably or definitely” had a “common law marriage” which gave them the same legal rights as married [or civil registered] couples. This is despite extensive media coverage across a variety of platforms stressing that cohabitation, regardless of its circumstances and length, does not bring with it a general protected legal status. The Ministry of Justice has even funded a “Living Together” campaign to address this common misconception seeking to make cohabitants more aware of their legal status (or more accurately their lack of legal status) and how to protect themselves.

In the 2011 census, 10% of adults indicated that they were cohabiting – many are likely to be doing so without realising the full consequences of their position.

While MPs, the Law Commission, senior members of the judiciary and family lawyers may strenuously argue the point (both for and against a change in the law), the fact remains that for those increasing numbers of cohabitees (whether opposite or same sex) there remains no legal recognition of their relationship and therefore, no guaranteed or even presumed rights to ownership of each other’s property when that relationship breaks downs. Nor is there any statutory guidance regarding the division of assets in these circumstances (compared to on divorce or dissolution of a registered partnership).

It is possible for cohabiting partners to contemplate (however painful it might be to do so) the possible breakdown of their relationship and agree for themselves the ownership of their joint home. However, in the absence of this foresight, when, on relationship breakdown, property disputes escalate into litigation, cohabitees are reliant on the courts making orders based on legal rules arising from Equity. There is some perception that, given the current social environment, a more sympathetic judicial approach might be evolving when it comes to the assessment of the property rights of co-habiting partners. However, as one Supreme Court justice highlighted “the absence of legislative intervention [makes] it necessary for the judiciary to respond by adapting old principles to new situations…..not an easy task.” However, as another member of the judiciary has also said, “[judges have to] ignore human sympathies and apply the law”.

So how does the judiciary approach these disputes between cohabitees? What is the law that guides their decision making? They look to Equity’s most recognisable creation, the trust.

A trust gives rise to a split in the ownership of the property forming the subject matter of the trust. This split relates to the separation between the “legal” interest in the property – the public face of ownership, associated with the responsibility to manage and control that property – and the “beneficial” interest of the property – those who are actually to benefit from the property (i.e. have a right to occupy, a right to the sale proceeds and/or rental income). The holder(s) of the legal interest are the trustees while those with the beneficial interest are, unsurprisingly, called the beneficiaries. The trustees are under a duty to look after the property for the benefit of those beneficiaries. It should, however, be noted that having a “beneficial” interest in the property does not necessarily mean that those beneficiaries have equal interests in that property.

For cohabitees, this trust structure can mean different things depending on the circumstances relating to the “legal” ownership of the property:-

It is possible for cohabitees to buy property together and for both to be named as the legal owners. While they are joint, “legal” owners, they may also be beneficial owners of the property. In the absence of any contrary evidence (i.e. an express written statement by the beneficiaries), there is a presumption in law that the beneficial interests are to be shared equally. However, it may be the case that, in the circumstances, one beneficiary will have (or believe that they are entitled to) a larger share.

It is also possible for only one cohabitee to be named as the sole legal owner. While there may be a very sound reason for this to have occurred and the sole legal owner may be very clear that he/she has legal ownership for the benefit of both cohabitees (again by way of written document expressly stating this), it is also a scenario which can give rise to significant dispute. The presumption here is that the beneficial interest mirrors the legal interest – there is no presumption of joint beneficial ownership – and one cohabitee (the one without the legal interest) will find him/herself having to provide sufficient evidence for a judge that a trust actually does exist and they are entitled to some kind of beneficial interest.

As there is no legislation to guide the court, it is equitable principles established in case law that will determine the circumstances and evidence that the court will be looking for to see if a beneficiary is entitled to a larger beneficial interest or is entitled to a beneficial interest at all.

An important consideration to remember is that if the cohabitees agree for themselves the nature of the beneficial interests in their joint home and then documented this in a written deed, the court is unlikely to look beyond this agreement (unless there is a clear error or undue influence). However, more often than not, cohabitees, in the initial glow of their relationship, look at sorting out legal issues as unromantic and there is no agreement to provide clarity and stress-free resolution.

When the court is asked to make a decision, they will be forced to interpret evidence to see if they can identify the intention of the parties in relation to the ownership of the” joint” home.

So what will the court be looking for?

Before the property was bought (or at some time later in the relationship), is there evidence of a common understanding or agreement that the property was to be shared. Direct financial contributions in relation to the property (i.e. direct payments to the purchase, taking on the burden of/paying off a mortgage, monetarily contributing to an extension) would be a good indication of such an understanding, even if there was no explicit discussions between the parties. These financial contributions can be taken into account in determining whether a trust exists at all (and the property is therefore shared beneficially) and/or determining the size of any beneficial interest.

Historically, direct financial contributions have been the only indicators that a court would consider to decide these arguments. Currently, direct financial contributions are, to a certain extent, still the primary considerations in determining whether the parties did have an intention to share ownership of the property, that a trust of the joint home existed notwithstanding that the “legal” interest is only registered in one of the parties (although the court will look closely as to why the legal interest is not in the name of both).

However, these financial contributions are not the critical factors they once were, especially in determining the size of each beneficiary’s share. More recently, the court may arrive at its decision by taking a more “holistic” look at the parties’ conduct in relation to the property (rather than the relationship itself) during their period of ownership to determine what the parties intended in relation to the property. In the absence of any intention being evidenced, the court will look to the parties’ “whole course of dealing” to determine what it considers fair. The length of time that the parties have co-habited is not necessarily relevant. However, while financial contributions will still be relevant, now courts will also take into account things such as the advice given to the parties at the time of purchase (or a re-mortgage), the purpose for which the property was acquired, the financial arrangements of the parties, how the parties discharged the property outgoings (i.e. council tax, utilities, repairs, insurance).

As with any court proceedings, the courts will have to rely on evidence to enable them to understand the situation. Given that “context is everything”, each dispute will turn and be decided on its own facts. It is to be anticipated that the parties will be called upon to give oral evidence (and should be prepared to do so). Given the strong feelings that these disputes often arouse and the impact that this can have on oral evidence, courts are likely to place more weight on documents where they are available – a conveyancing file from the time of purchase (or any re-mortgage), bank statements and other financial documents from both before and after the property was bought.

For the foreseeable future, cohabiting couples are likely to remain without guaranteed rights of ownership of each other’s, or what is thought to be joint, property on relationship breakdown. It is open to couples to regulate their relationship in legal terms should they wish to. However, what couples must recognise is that if they do not elect to establish their rights for themselves, the mythical concept of ”common law marriage” will not safeguard them. Upon relationship breakdown, they will be looking to time-honoured equitable principles and the concept a trust for assistance.

Alison Bicknell

This blogpost is for information purposes and should not be relied upon as legal advice because it does not consider or take into account your own personal circumstances. If in doubt, seek legal advice.