Do you own property with your partner? Do you need to review your position? What if your relationship breaks down – are you protected?
Many people think that after living together for a number of years they have the same legal standing as married couples. This is not the case. The finances of separating co-habitees can be more complex and more expensive to resolve than a divorce, as a local couple, Mr Kernott and Mrs Jones found out. The couple have been trying to untangle their financial affairs since 2006, culminating in their case being heard in the Supreme Court (the highest court in the land) which gave its decision today.
History of the case
Patricia Jones was a 26 year old hairdresser, living in a caravan, when she met Leonard Kernott in 1980. Leonard sold ice creams during the summer months and worked as a builder in the winter. They had a daughter and, in 1985, they bought their first house together in Thundersley for £30,000 with Patricia selling her caravan to raise the £6,000 deposit. They put the title deeds to the house in their joint names in equal shares. Their son was born a year later but they still did not marry. Patricia paid all of the family’s bills and Leonard gave her £100 per week and he was responsible for extending the property, increasing its value.
The relationship broke down and Leonard moved out in 1993. The parties cashed in a life insurance policy and Leonard used his half to pay the deposit on his new home in Benfleet in 1995. In May 2006, when the children were adults, Leonard asked for payment of his half share of the Thundersley property, starting court proceedings in October 2007. It was clear that Leonard would have been entitled to half of the property when the parties separated in 1993. However, during the 12 years of their separation, Patricia had lived in, and paid all of the bills (including the mortgage) for the Thundersley property. The question for the Court to decide was whether Leonard should still receive half of the equity in the Thundersley property now?
The Courts found this question very difficult to answer. The Judge at Southend County Court decided that Patricia should receive 90% of the £218,000 equity in the Thundersley property. The Judge in the High Court agreed. The Court of Appeal accepted that Leonard had made no contribution to the Thundersley property since 1993. However, the factors that are considered in divorce do not apply to an unmarried couple. The couple bought the property as equal owners, agreed they were equal owners when they separated and the passage of time did not change that. The Court of Appeal decided that Leonard was entitled to one half of the equity in the house.
Today’s decision
The Supreme Court’s decision was published today. They disagreed with the Court of Appeal and upheld the original decision which gave Patricia 90% share of the equity. The Court said that the starting point when a couple buy their family home in their joint names is that they intend to own it equally (unless they enter into a trust stating differently). However, that presumption can be overturned if there is evidence that they did not intend to own the property jointly. The court can decide from their conduct what their intentions were, even when they were not discussed. The court can also make its own decision about what share in a property each party can have, considering fairness and the couple’s whole course of dealings in relation to the property.
The Supreme Court decided that Patricia and Leonard’s intentions with regard to the Thundersley property changed when they cashed in an endowment policy to enable Leonard to buy his home in Benfleet – he would not have been able to do this if he still had to contribute to the mortgage and outgoings for the Thundersley property. Therefore, the parties intended that Leonard have the benefit of any increase in value of his Benfleet property and Patricia have the benefit of any increases in the value of the Thundersley property from that date. This would give Leonard roughly 10% of the current equity in the Thundersley property (representing one half of its value at the time he purchased the Benfleet property.)
Conclusion
The courts have really struggled with this decision. The first two courts ordered that Patricia pay Leonard 10%, estimated at £30,000, for his share of the house. The next court ordered that she pay him 50%, estimated at £109,000. She would have to sell the house to raise the money and Leonard would still own his home in Benfleet as well as receiving an estimated £109,000. The Supreme Court has ordered that she pay him 10%, bringing us full circle to the first decision in the County Court.
The moral of the tale is that it has taken 9 Judges 4 years to sort this case out. Unmarried couples should take no chances. You need to be clear about what you and your partner own and ensure your agreement is recorded in a legal document when you first start cohabiting. If circumstances change, review the agreement – if you do not, you could face the same uncertainty, legal expense and heartache as Mr Kernott and Mrs Jones.
