Unmarried couples who jointly own property are being urged to consider entering into a cohabitation agreement or separation agreement following the decision of the Supreme Court in the Jones v Kernott case. Following a lengthy legal battle, involving four different courts, the Supreme Court ruled last week that 90% of the share of the bungalow jointly purchased by the unmarried couple in 1985 should be awarded to Ms Jones, leaving Mr Kernott entitled to only 10%.
Property law states that where properties are purchased in joint names the equity should be equally split. However, the decision in this case although not altering the law, sets a precedent that in cases where a 50/50 split would not be a fair representation of the contributions of the parties, the courts have the power to redistribute the share.
The decision holds weight for the estimated two million unmarried couples living together in England and Wales and almost certainly paves the way for a raft of appeals and contesting of cases involving the distribution of property ownership where unmarried couples have separated.
The Facts of the Case
Ms Jones and Mr Kernott purchased a house in in their joint names in 1985. At the time, the 20% deposit paid was paid solely by Ms Jones’s from the proceeds of her previous home and the mortgage and upkeep on the house was shared between them. No declaration was made as to how the beneficial interest in the property was to be held. In 1986 they jointly took out a home extension loan, Mr Kernott did some of the work himself.
The relationship deteriorated and in 1993 Mr Kernott moved out. Ms Jones lived in the property with the two children the couple had together, solely paying the mortgage and upkeep of the property for the majority of the period to date.
In 2006 Mr Kernott indicated that he wished to claim a beneficial share in the property. In response, Ms Jones, in 2007, applied to the county court for a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 that she owned the entire beneficial interest in the property.
Although the property was purchased as a family home and in joint names; intended that the couple would jointly share the beneficial ownership, Ms Jones claimed that in the years following Mr Kernott’s departure that common intention had changed.
On the facts of this case, the county court judge held that the parties’ intentions had changed after their separation, saying that it was a logical intention that Mr Kernott’s share had crystalised when the property was taken off the market and they had cashed in an insurance policy to allow him to purchase a property in his own name. With no clear evidence as to the division of shares in the property it falls upon the court to infer or impute intention to the parties as to the division of the property. Such intention is that which reasonable and fair people, would have intended. He decided that Mr Kernott was entitled to only a 10% share.
Mr Kernott appealed to the High Court which was dismissed, he then appealed to the Court of Appeal which, by a majority allowed his appeal, asserting a 50% entitlement to the home’s value.
The Supreme Court last week ruled that the original 90% and 10% split awarded by the county court should hold. Where people purchase a family home in their joint names the presumption is that they intend to own the property jointly in equity, however, this presumption can be rebutted in certain circumstances. The Court can infer or impute an intention to the parties which they may never have had.
In deciding the division of the property share, the following principles apply:
- the starting point where a family home is bought in joint names is that they own the property as joint tenants in law and equity;
- this presumption can be displaced by evidence that their common intention was, in fact, different, either when the property was purchased or later;
- common intention is to be objectively deduced (inferred) from the conduct and dealings between the parties;
- where it is clear that they had a different intention at the outset or had changed their original intention, but it is not possible to infer an actual intention as to their respective shares, then the court is entitled to impute an intention that each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and
- each case will turn on its own facts; financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair.
What does this all mean for cohabiting couples?
The fact is that the current UK law does not make specific allowances for cohabiting couples in relation to property ownership rights and obligations. Despite calls from family lawyers in England in Wales, and indeed despite recommendation from the Law Commission, the government has announced that they will not be reforming the law in this area in the current parliamentary term.
And so for separating couples, particularly in this financial climate where they cannot afford to buy each other out or indeed sell the property, it is important to effect an agreement as to intentions at separation rather than risk a court inferring an intention which may not have been intended.
Just as it is important to consider pre-nuptial agreements prior to a marriage and cohabitation agreements prior to living together, it is important to consider separation agreement whether you are married or not. To do otherwise may be a very costly mistake.
For more information about drafting a cohabitation or separation agreement, or to seek legal advice about separation, please do not hesitate to get in touch with one of our experienced family law solicitors.