Two people, one property – what could go wrong?

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The legal principles that apply to a cohabiting couple when they separate are very different to the legal principles that apply when a married couple separate. There is a common fallacy that cohabitees are treated as common law wife and common law husband. There is no such concept in law.

The statute that deals with property owned by cohabiting couples is the Trust for Land and Appointment of Trustees Act 1996 (TLATA).

The general principle is that if a property is purchased in the joint names of the parties, the equity is owned by both parties on a 50/50 basis. This principle can apply even if one party made a greater contribution to the purchase of the property than the other, e.g. they paid the deposit or, for example, one party paid the mortgage throughout the parties relationship. Parties often think that because they contributed more at the offset, or made a greater financial contribution during the relationship, their share in the property should be more than 50%. This very rarely is the case, unless they can show there was a subsequent agreement post purchase for them to receive more of the equity.

In some situations, parties purchase a property as tenants in common and not joint tenants. The presumption with a tenancy in common, unless the parties’ respective shares are specifically set out in the TR1, is that it is again 50/50. There is, however, more scope with a tenancy in common to argue that one party should receive more than 50%, by virtue of the contributions they have made either to the purchase of that property or during the course of the relationship, if their specific shares are not recorded in the Transfer Deed or in a Declaration of Trust.

The main issue of contention between parties often relates to a situation where the house is bought in the sole name of one party, and the other party is trying to assert a claim. The burden lies on the non-owning party to show they have acquired a beneficial interest in the property. This generally means they need to demonstrate that they contributed to the purchase price, e.g. by paying the deposit. In some situations, one party may pay all or some of the monthly mortgage payments, again this can help to support their claim that they have acquired a beneficial interest. They can also assert, if applicable, that there was a “common intention” for them to have a share in the property.

The Court has a very limited discretion to vary the beneficial interests of the parties if those interests are set out very clearly in the Transfer Deed at the time of purchase.

It is therefore extremely important that when cohabiting couples are looking to buy a property, whether it is in their joint names or solely in the other party’s name, there is clear evidence of their intention as to what their shares are. The Transfer Deed should specify whether it is to be a joint tenancy or tenancy in common. If it is the latter, their shares should be set out specifically in the Transfer Deed or in a supporting Declaration of Trust.

If the property, for whatever reason, is being purchased in one party’s sole name and the other party is making a financial contribution, but they cannot go on the title or be joined on the mortgage, there must be a cohabitation agreement setting out what their share is to avoid costly arguments later down the road.

In summary, it is essential that parties seek legal advice before purchasing a property, so that they fully understand the law relating to holding a property as joint tenants, tenants in common and in the sole name of one party. This area of the law is complex and expert advice is needed.

When a relationship breaks down the Court can undertake a post separation accounting exercise. If one party leaves the property, and the other pays the full mortgage, they may be given credit for those payments. Equally the non-occupying party may seek an occupation rent from the other party.

Careful thinking and planning ahead is essential to avoid costly litigation in the event that the relationship breaks down. This is particularly important where there may be children involved who are living in the property, and again the law under TLATA proceedings can be quite harsh in relation to whether or not the primary carer of those children would be allowed to remain living in the property. In some cases, it is possible to bring a claim under Schedule 1 of the Children Act 1989 to run in conjunction with a TLATA claim. In the former, the Court has a wider discretion to take into account the welfare of any minor children still living in the property.