PROPERTY OWNED BY COHABITING COUPLES – WELCOME GUIDANCE FROM THE HOUSE OF LORDS

Lots of people who live together without being married. Another, more recent, trend is the result of ever-rising house prices. Some people are finding that the only way they can secure a foot on the first rung of the property ladder is to club together with other people to buy a property.

People who are not married or in a civil partnership and who purchase property together do not always know what they are letting themselves in for. One urban myth is that there is something known as a “common law marriage”. In the case of a married couple or civil partners, the question “Who Owns What?” is not of great significance – at least as between the parties themselves. On divorce, the courts have wide-ranging powers to transfer property and assets (including pension entitlements) from one party to another. By contrast, where a couple are not married or in a civil partnership, the courts do not have such powers and have to apply the basic rules of property law. This will be the case even though a couple may have been living together for thirty years. The results can be surprising and unpredictable.

In the recent case of Stack v. Dowden, the House of Lords provided some welcome guidance as to the principles that apply to such cases. The judges make clear that one starts by looking at the title deeds. If the property is in the name of one person, the starting assumption will be that that person is a sole owner. If it is in joint names, but the parties’ shares are not spelt out, the starting point will be that the parties own the property in equal shares. However, the court will take all the circumstances into account. These will include a large number of factors, including any advice or discussions at the time the property was purchased the parties’ intentions at that time;

In Stack, the couple had lived together for almost twenty years and had had four children together. The property had been transferred into joint names, but the parties’ shares were not spelt out. At the initial trial the Judge ruled that the parties owned the property equally. The Court of Appeal varied the Judge’s order in Ms Dowden’s favour to the effect that the property was held 65% / 35%. The House of Lords confirmed this decision. Not only had Ms Dowden made a far larger contribution to the purchase price, but also the parties had always kept their property and affairs separate. In that context the court found it was unlikely that the parties intended to hold the property as beneficial joint tenants, which would have meant that if one of them had died, his or her share would have automatically passed to the other, regardless of the terms of any Will left by the deceased.

The facts of Stack were unusual and the decision could well have been otherwise. In many cases, where a property is in joint names, but the parties’ shares are not spelt out, the court will rule that the property is owned equally. However, the real point to note is that disputes resulting in litigation can easily arise, with all the attendant cost and worry. All this can be avoided by ensuring that the issues are properly addressed when a property is being purchased. In some cases, it may also be necessary for the parties to make Wills to ensure that on their death, their share in the property goes to the person(s) in accordance with their wishes. Such issues will be important in many cases, but may be particularly so where one or both parties have children from a previous relationship. In such cases, there is a real danger of disputes arising on the death of one of the parties.

If you would like to know more about these issues, please contact Mary Banham-Hall

Filed: 26/10/2007 16:30:36