It’s a great feeling getting the keys to your first property with your partner. It may seem a little unromantic to think about what might happen if the relationship doesn’t last forever, but as lawyers it is our job to consider the “what ifs”.

In this article we highlight what happens when a cohabiting couple break up, or if one in the partnership dies.

Ownership of Property

When buying a property together, the legal owners are listed on the register at Land Registry.  There are two main ways the beneficial ownership can be structured (the ‘money in the property’), as follows:

·       With Tenants in Common, each person owns a specific share of the property. This is often recorded in a Deed of Trust, which sets out what each person owns. The shares might be equal, or they could be different depending on what the couple has agreed.

o   If one owner dies, their share of the property does not automatically pass to the other owner. Instead, it passes according to their Will, or by the rules of intestacy when there is no Will.

·       Whereas, with Joint Tenants, both people own the property together as an indeterminate whole, rather than in separate shares.

o   On the death of one owner, under a Joint Tenancy the other legal owner automatically inherits the property by survivorship. Married couples generally hold property like this; the property passes to the survivor on the first death, and is then dealt with by a Will on the second death.

Common Law Marriage – misconception or reality?

There is a common myth that living with someone for a period of time, or having children with them, means that a “common law marriage” exists; it doesn’t. There is no recognition under the law for a common law marriage.  A marriage is recognised under English law only in certain, very clear circumstances. Simply living together does not create a marriage in any legal sense, and the rights that follow on separation in a marriage do not exist when couples simply cohabit.

Ownership of property after a relationship breakdown

When a legal marriage breaks down, the assets of that marriage are dealt with under the Matrimonial Causes Act 1973.  This deals with matters in a very specific way, and takes into account a large number of factors, ensuring that each party to the divorce has a fair share in accordance with both the law and the circumstances that the parties find themselves in.

The law relating to cohabitees is very different. There is no specific legal framework dealing with these types of relationships. Instead, disputes usually fall back on property ownership under Trust law. Specifically, the Trusts of Land and Appointment of Trustees Act 1996; commonly referred to as TOLATA.

Equity share

Let’s look at a simple scenario. Ben buys a property with his partner, Rose:

• Ben pays £100,000 as the property deposit
• Rose does not contribute financially to the deposit
• The property is jointly owned and the mortgage payments are split 50/50 between the couple 
• There is no Deed of Trust and the property is held as Joint Tenants.

After having children together, Ben and Rose split up. At the point of the split, there is £200,000 of equity remaining in the property. What are they each entitled to?

The law generally starts from the position that Ben and Rose are entitled to a 50/50 split of the equity in the property. Remember, Ben put in £100,000 more than Rose, yet on the sale of the property, he would only be entitled to one half share of the equity. Rose would be entitled to the other half share.  Ben gets no credit for the extra money contributed by him alone.

In this case, a Deed of Trust dealing with the money that Ben put in, and what is to happen on sale, would have been helpful.

Pension rights for cohabiting parties

I am often asked whether there can be a pension share between cohabiting parties, and the answer can be surprising.  This links closely with the belief that a common law marriage will give rights to each party.  It’s not the case. 

Pension sharing is an exclusive right between divorcing couples, introduced into legislation only as recently as 2000.

Even if one of the cohabitees is working, while the other stays at home and looks after the children (as in the case of Ben and Rose), Rose has no right to share Ben’s pension.

Practical tips for cohabiting couples

Whilst legal advice might be considered “expensive”, I would suggest that “regret” has no price worth paying. 

If you are considering purchasing property with another, and do not intend to marry, you should seek professional advice on that purchase:

·       You can take practical steps to protect your investment and ensure that in the event of a cohabiting relationship breaking down, you have pre-agreed how the money in the property is dealt with on sale.

·       There is no specific legal framework dealing with cohabitation, so disputes usually fall back on property ownership under Trust law, known as TOLATA. These cases are surprisingly common and can be very expensive to resolve. 

·       And finally, the importance of a Will should not be forgotten, especially with a Tenancy in Common arrangement; on the death of a cohabiting partner, the surviving partner does not automatically inherit the deceased’s share in the absence of a Will.

How can Pardoes help?

When a couple chooses to buy a home together, Pardoes Solicitors can help at every stage, with:

·       Cohabitation agreements and setting up a legally binding Deed of Trust to record how much each person contributes to the purchase and how the proceeds will be divided if the property is sold. And what happens to these if you choose to marry.

·       Conveyancing – from offer acceptance to post-completion registration, ensuring contracts are valid, legal checks are completed, and funds are transferred safely

·       Forms of joint property ownership

·       Will writing

Give Pardoes a call on 0800 862 0442 or email enquiries@pardoes.co.uk for a confidential chat. Our Residential Conveyancing, Family and Wills teams work closely together and are happy to help.