Who Gets The Family Home When Cohabitees Break Up?
Few people are aware when they move in together that cohabitants do not enjoy the same rights as married couples. Although it may seem outdated in 2017, as marriage rates continue to fall (albeit at a much slower rate in recent years), cohabiting couples are now the fastest growing family type in the country. But until Parliament changes the law, legal protection for couples living together when they separate remains minimal.
Deciding who should get what percentage of the family home when a cohabitating couple separate can often lead to acrimony. Unlike married couples, disputes between cohabitants regarding property are decided under trust law.
There are two main ways in which cohabitants may have an interest in property: as a joint owner or, where the property is in the sole ownership of the other cohabitant, under a trust, whether express or otherwise.
Joint owners can own property as:
tenants in common
Joint tenants are treated as a single entity, meaning you both have a 100% interest in the property and are treated as a single owner. One of the main advantages for cohabitants of owning a property as joint tenants is the right of survivorship. If one of the joint tenants dies, the property immediately passes over to the other joint tenant, even if they die without a Will.
Tenants in common own specific shares of the property and these do not have to be equal shares.
The main difference between a joint tenant and a tenant in common is that the latter may dispose of their interest either on death (via a valid Will) or during their lifetime without affecting the interests of the other co-owners.
If you separate from your partner, the priority regarding your property is to sever the joint tenancy. This can be done without the consent of your partner, and a solicitor can make the arrangements for you. Upon severance, you will both become tenants in common in equal shares.
Property disputes often arise when only one of the cohabitants is registered on the title. If your name is registered on the title of the property, you have legal ownership. However, a person who has an equitable interest in the property may have rights under beneficial ownership. While beneficial ownership should follow legal ownership, this may not always be the case.
Claims by cohabitees seeking to establish (or quantify) an interest in the family home are brought under the Trusts of Land and Appointment of Trustees Act (TOLATA) 1996. Under s.14 of the Act, the court may declare the nature or extent of a person's interest in the property or order the land to be sold.
There can be an express trust in relation to the property. This is created if you and your partner sign a Declaration of Trust when purchasing the property. A Declaration of Trust will set out each partners’ interest in the property and the share they should receive if the relationship ends. A Declaration of Trust can be set aside if there is proven to have been mistake or fraud, so is crucial to seek legal advice when drafting and signing the document.
If you do not have a Declaration of Trust in place or a Cohabitation Agreement, the courts will consider whether a constructive or resulting trust exists.
A constructive trust may occur when there is a common intention between the parties that A will have an interest in the property owned by B, and A acts in reliance of that common intention to their detriment.
A resulting trust means that one partner has made a direct financial contribution to a property which is registered in the other partner’s name. A record should be kept of this payment, making it clear it was not a gift or a loan. If a resulting trust is deemed to exist, it means the owning partner holds part of the property in trust for the other.
The court’s jurisdiction under TOLATA 1996 claims
The court’s powers under TOLATA 1996 are restricted. In Bagum v Hafiz and Another  EWCA Civ 801, the property in question was a four-bedroomed house in London, owned as tenants in common in three equal shares by the claimant, Mrs Bagum, and her two sons, the defendants Mr Hafiz and Mr Hai. A dispute arose between the parties as to the use, enjoyment and disposal of the property. Mrs Bagum sought an order for the purchase by Mr Hafiz of Mr Hai's one-third beneficial interest in the property.
The judge in the first instance declared she had no power to make such an order, but she could order the property to be sold, and Mr Hafiz should have the first option to buy. If Mr Hafiz chose not to buy within six weeks, the property should be sold on the open market, allowing all the beneficial owners to bid.
Mr Hai appealed the decision.
The Court of Appeal held judge at first instance was correct, the court had no jurisdiction to order a beneficiary to transfer their share of a property to another under section 14(2)(a) of TOLATA. However, the judge did have the power to direct the trustees to sell the property to particular beneficiaries, without the consent of the beneficiary to whom the land is not being sold. Even though this has the same effect as a forced sale, the court stated it is merely one example of the trustees' undoubted power of sale.
Claims under TOLATA can be extremely complex. It is therefore crucial to obtain legal advice if your relationship has broken down and you believe you have an interest in a property you and your partner shared while you were together.
Rosie Bracher is specialist family law solicitors based in Barnstaple. We have the knowledge and expertise to advise you on all matters involving cohabitation. Please contact our office on 01271 314 904 and arrange to speak to one of our team.