If a romantic partner kept the home fire burning, managed the expenses, contributed to the bills and joined in your ‘friendship circle’ when you were together, do not be shocked that he/she will also want a share of the house if the relationship falls apart – it is time for you to take a step back and plan ahead to protect your assets. You may find it helpful to learn about the ‘ins and outs’ of how cohabitation and the division of proprietary assets work in the United Kingdom.
‘Common law’ marriage as we know it has legal status in some Commonwealth’s jurisdictions such as Australia, US, and Canada. This means that couples do not have to be legally married to be recognised in the Family Law of those jurisdictions. However, this position differs in the United Kingdom and many unmarried cohabiting couples are unaware of their actual rights of ownership when it comes to their property. The concept of common law marriage in the UK is just a concept. The reality is that current legislation does not go far enough to protect the ownership rights of cohabitees in the same way as married couples in the event of the property being repossessed, sold or if there is a dispute after the relationship falls apart. Hence, this begs the question – what available remedies are there after the termination of a relationship between unmarried, cohabiting couples?
The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA/TLATA 1996) introduced the concept of trust of land for people who buy a property together. This way, co-owners or joint tenants can hold the land on trust for each other and any further beneficiaries. Since common law marriage has no legal status or validity in England and Wales, Equity’s role is to seek to implement the parties’ legitimate expectations and to find out what the relevant sharing intentions were. For this reason, in the absence of an express trust (Land Registry – JO Form) – the law of implied trusts comes to the fore as it does not require any written formalities. However, this gives rise to uncertainty and potential issues of fairness.
There are two types of implied trusts: Resulting and Constructive: The former one means ‘to jump back’. In Springette v Defoe  2 FLR 388, it was established that resulting trusts were an adequate remedy to quantify equitable interests since they are solely based on the contributions to the purchase price. Nevertheless, cases such as Gissing v Gissing  AC 881 and Eves v Eves  1 WLR 1338 challenged this proposition. Both judgements considered whether other contributions to the property could create a share in the property. This flexible approach is known as a constructive trust. The principle was reaffirmed by Lord Bridge in Lloyds Bank plc v Rosset  UKHL 14 where he stated that payments of mortgage instalments would justify the inference necessary to the creation of a constructive trust.
At first glance, this seems more inclusive and rather proportionate. Although, let’s remember that Rosett took place in a commercial context and domestic cohabitation does not necessarily work this way. Very often, in the initial throes of romance and love, cohabitees make all sorts of overtures and contributions (direct as well as indirect) in a continuous bid to woo their partner. This can and do often go beyond pure financial considerations (Pettitt v Pettitt  AC 777); it is these contributions which arguably amount to a common intention as well as a detriment for such ones. An example of this is when one party makes substantial improvements such as major DIY, loft conversions or property expansion projects – which add significant value to the couple’s nest egg, home or other proprietary assets. In this regard, the leading judgment was given by Baroness Hale in Stack v Dowden  UKHL 17. The case developed the concept of ‘a holistic approach’ to take into account all of these scenarios. She provided a non-exhaustive list of relevant factors such as any advice or discussions at the time of the transfer, the reasons why the house was acquired in their joint names, the purpose for which the home was acquired, and the nature of the parties’ relationship. Consequently, this approach entitled Ms. Dowden to 65% interest in the property after ruling that resulting trusts were not adequate in domestic contexts.
Subsequent cases such as Jones v Kernott  UKSC 53 and the Privy Council’s Abbott v Abbott  UKPC 53 also followed the ‘holistic approach’. The former case (perhaps the most important case post Stack) gave some clarification to the current law of cohabitation. After the Court of Appeal initially ruled an equal 50/50% division of interests, the decision was reversed in the House of Lords which divided the assets 90%/10% in favour of Jones.
The controversy with the holistic approach, however, is whether both Stack and Jones actually lack fairness and proper legal principle when inferring or imputing common intentions on these grounds. This was probably Lord Bridge’s fear when deciding to use a resulting trust rather than a constructive trust. Lord Neuberger in his dissenting speech in Stack stated that the ‘holistic approach’ was not the law. He argued that it would not provide certainty or clarity when quantifying shares and that the approach should be the same in both commercial and domestic contexts. He emphasised the benefits of relying on the contributions of the respective parties to the purchase price of the property and the beneficial ownership. In Laskar v Laskar  EWCA Civ 34, he added that in the absence of evidence that could presumably give rise to a constructive trust, a resulting trust would be preferred. However, this later case is contentious since it is a case that involves investment property and not the residential property of cohabitants as such.
These inconsistencies have thus left the law ‘up in the air’ so to speak. In the recent case of Wodzicki v Wodzicki  EWCA Civ 95, the appellant and her children occupied a property which was registered in the joint names of the appellant’s father (George) and his second wife. Surprisingly, Lord Justice Richards in the Court of Appeal’s majority held that the approach in both Stack and Jones (which in theory is applicable to cohabiting couples) was not appropriate. Even when the appellant argued detrimental reliance and promissory estoppel, these arguments were rejected as the appellant’s name was not registered at the Land Registry and the evidence could not prove a common intention that could possibly be imputed to the parties.
So, where does this leave unmarried cohabiting couples? As shown, the law of cohabitation and division of assets is complex and may very well result the in unfair quantification of proprietary shares. Depending on the approach preferred by the judge in play, shares could be divided one way or the other. Mummery LJ in Pankhania v Chandegra  EWCA Civ 1438 viewed cohabitation between unmarried couples as ‘free agreements’ and mentioned that courts should follow the parties’ express intentions rather than imputing it. Moreover, the Law Commission in 2007 recommended a legislative reform that offers financial relief alternatives depending on particular detrimental reliance by one party in the former relationship. As such, Law Commissioner Stuart Bridge suggested implementing a scheme which allows for the status of a registered cohabitant to be taken into account and, so discretionary powers are limited by the financial needs and obligations of both parties.
The conundrum is that these recommendations have not been implemented and the Legislature has yet to reform current policies in order to adopt a coherent and codified document as the panacea to this ongoing problem. Until there is some meaningful reform, there will continue to be uncertainty in this area of law. In the meantime, like the case of the Sword of Damocles, cohabitees will continue to remain in limbo (never knowing which way a judge could decide the matter) and dependent on the law of implied trusts for what it is worth. Therefore, what’s yours could very well be mine…
For further information and a free-of-charge initial consultation regarding this topic or any other Property/Landlord and Tenant matter, please contact Ms Joy Akah-Douglas – Department Head & Solicitor-Advocate; Paula Bayona – Legal Assistant, or any of our Hillary Cooper Law Team.