05-12-2011

Cohabitees’ ownership of property in equal shares can change as relationship changes

The Supreme Court has ruled that a £30,000 home brought by a co-habiting couple in equal shares, later worth £245,000, is now owned by them in 90:10 proportions as a result of their actions since the purchase.

An unmarried couple bought a home in 1985, which they agreed they owned jointly in equal shares. They shared mortgage payments and other expenses. They lived there until 1993 when the relationship broke down and the man moved out. He stopped paying his share of the mortgage and expenses. The couple also had children, but he made only small payments towards their maintenance when he moved out. At the time, the couple also cashed in an insurance policy, which was used to help him buy a new home to move into.

In 2008, the original home was put up for sale at £245,000 and the man claimed half the proceeds on grounds he was equal joint owner of it.

The High Court had decided that the woman’s share should be 90 per cent and the man’s only 10 per cent, despite the fact the couple had made no express agreement to change the shares in which they originally held the property. On appeal, the court’s reasoning included the following:

  • Where a property is put into joint names, the parties can expressly agree the shares in which they will hold it.
  • If they do not, it is presumed that they intend that each should have an equal share. This presumption can be displaced, but only in very unusual circumstances – for example, it is not enough that each contributes a different sum to the purchase price, unless they also keep their finances completely separate generally.
  • If it is displaced, the court will quantify their respective shares by reference to the “whole course of dealing” between them, “taking account of all conduct which throws light on the question what shares were intended”. So the court uses the parties’ conduct to infer what they actually intended.
  • If there is no evidence of their actual intention, the court has to decide what is ‘fair and just’.

This was overturned in the Court of Appeal but the Supreme Court agreed with the original ruling. It said that, if the owners’ intentions are not clear, the court can decide on a fair split of the value of a jointly-owned property.

In this case, their conduct was evidence from which the court could infer that they intended their respective shares in the property to alter, but there was no evidence to indicate what they intended the new shares to be. Where there was no such evidence, it was therefore valid for the court to decide what was objectively fair, and it had done so.

Recommendations

  • Always ensure that the shares in which jointly owned property is to be held are expressly agreed when it is purchased.

On any change of circumstances, such as a relationship ending or one of the owners moving out, ensure that there is express agreement on whether, and if so how, those shares are to intended to be altered.