Cohabitation is an area in the law regularly viewed by many in the profession as being of out of step with the growing number of cohabitees in the UK and the need for a statutory framework for the disposal of such cases.
There are frequent calls for reform but until changes are made, the courts carry on dealing with property disputes between unmarried couples following a long and growing line of judge-made law.
Cohabitation and ownership
The difficulties faced by parties is exemplified by the recent High Court case of S v. J and others [2016] EWHC 586 (Fam).
S v. J was a case involving a couple who were engaged but for various reasons did not marry although had various property interests together. The applicable legal regime is much more limited than when dealing with property division between spouses.
The parties met in 2008 and ended in 2013. They had 2 children. The party known as S was the child-carer and had brought 2 properties in her sole name into the relationship with financial help from her parents. The other party had 1 pre-owned property also.
The parties then refinanced their property portfolio and purchased (in the name of a company) a 4th property, the finance of which was secured against the titles to all 3 properties, although S’s were more valuable and more likely to be enforced against. It was an ambitious scheme dependent on a high level of income being produced.
When after a time, the refinancing could not be maintained, the parties suffered severe financial losses and it was time to sell and divide the remaining equity.
There were no documents in place to define how the parties’ shares were to be held.
‘J’ claimed amongst other things that the parties had embarked on a joint enterprise and had pooled their resources and had sought to share equally in all equity of all 4 properties.
S claimed that her agreement to put forward her 2 properties as security for the 4th property ought not to result in equal sharing of the proceeds and she sought a declaration that each party owned their own properties still and the 4th property was owned in the shares to reflect where the parties equity stood at the time of the purchase of the 4th property.
She claimed that she had been pressurised into putting up her 2 properties for security.
In cases like this, in the absence of documentation and in the absence of any discussions between the parties as to sharing equity, the court must look at what the parties said or did at the time and seek to attribute to the parties an intention gleaned from their conduct. Here the court crucially held that J had told S that her investment of 2 properties would be safeguarded.
It was emphasised that it was not possible for the court to simply engage in redistributive justice to make amends and to allocate fairly but simply to determine what shares each party has in accordance with the evidence. This can vary from case to case and may not be what either party wants.
In this case, unfortunately for ‘J’ but fortunately for ‘S’, the court imputed for very case specific reasons that had the parties applied their minds to the issue of ownership, they would have agreed that each owned the equity in the shares according to their contributions to the 4th property but the outcome could have been very different as the case turned on evidence of various discussions held by the parties and a wealth of documentation.
Cohabitation – what should you do to protect your interests?
This case is another reminder of the enormous costs of litigation in this uncertain area and the need for those in cohabitation and owning and sharing properties together to seek advice first before purchase of a legally binding document which sets out their interests.
Such documents are a low-cost and effective way of protecting an individual’s interests in property without leaving it in the hands of the court.
If you require any further guidance or advice please email family@bishopandsewell.co.uk or call 020 7631 4141 and ask to speak to a member of our specialist Family & Divorce team.
