Co-habiting couples get clairty on property rights

After four years of court cases, a landmark ruling on the property rights of unmarried couples has finally been delivered. With an estimated two million co-habiting couples living together in England and Wales, the decision goes some way towards clarifying the rights of each party in relation to shared property.

Campaigners have long fought for cohabiting couples’ rights to be brought into line with those of married couples. S.25 of the Matrimonial Causes Act 1973 permits adjustments to be made to property ownership during divorce proceedings for married couples, allowing equity to be revised in favour of one partner whey they have made greater contributions to any mortgage, maintenance or other costs.

By contrast, such adjustments to shared equity could not be made in cases of cohabiting couples going through separation. Prior to the decision in Kernott v Jones (2011), where no trust deeds existed and where property was held in joint names, cohabiting partners would each receive 50% of the equity.

Mr Kernott and Ms Jones bought a house in 1985 which they lived in with their children until they separated in 1993. Whilst together, Miss Jones funded the purchase of the property and majority of outgoings on it. Once separated, Miss Jones paid all the expenses on the property and funded the couple’s two children. During this time, Mr Kernott purchased a separate property.

After the couple separated the value of the shared property continued to increase and in 2006 Mr Kernott made a claim for his share in the property. Ms Jones subsequently defended his claim for a 50/50 share I the equity, arguing she owned the entire beneficial interest of the property which by 2008 was valued at £245,000.

In its first hearing at the County Court the judge noted that the property was originally purchased as a family home in joint names and that it would be fair to presume the couple intended to jointly share the beneficial ownership. Until their separation in 1993 there was nothing to suggest this presumption no longer applied.

However, the court ruled that after separating the presumption of joint beneficial ownership no longer existed. Due to there being no further indication as to the division of ownership between the two parties it was for the court to decide what share of the property it would be reasonable to award each party. The Judge ruled Mr Kernott would only be entitled to a 10% beneficial interest in the property.

Following this judgement Mr Kernott appealed to the High Court and when this was unsuccessful he took his case to the Court of Appeal which overturned the previous decision and awarded Mr Kernott a 50% share in the property. Ms Jones appealed this decision and the Supreme Court ruled in her favour and upheld the original County Court decision to give Mr Kernott only a 10% share in the home.

The court held that in the case of cohabiting couples, it will be presumed when a property is bought in joint names that the intention is for each party to hold an equal beneficial interest. However, where it becomes clear their intentions were different at the outset or their intentions had changed, a court may be able to revise each party’s share in line with what it believes to be reasonable and fair, taking into account financial contributions as well as other factors.

This decision does go some way towards making the law fairer for co-habiting couples but greater clarity is still needed. In the event of separation, co-habiting couples are advised to seek legal advice regarding their property rights to ensure their interests are protected.