Thursday 24 November 2011

A case that has hit the headlines recently is that of Kernott v Jones.  Mr Kernott and Miss Jones began living together in 1983.  In 1985 they bought a home together jointly for £30,000.00. They separated in 1993 and at that point there is no dispute that they owned the property in equal shares.  Mr Kernott left the property and 14 years passed.  He bought another home for himself, while Miss Jones stayed in the original property, paid all of the outgoings and raised the couple’s two children – without any contribution from her former partner.  In 2007 Mr Kernott went to court to try and obtain his 50% share of the property.

The question before the Court was, should Mr Kernott and Miss Jones share their interest in the property 50/50 or should their interests be adjusted?  When the case first went to Court the Judge held that Miss Jones should receive 90% of the value of the property and Mr Kernott 10%.  That decision was reversed by the Court of Appeal which awarded the parties 50% each of the net equity. Miss Jones appealed to the Supreme Court and its decision was handed down on 8th November.

The Supreme Court, in deciding that a 90/10 split in Miss Jones’ favour was in fact the appropriate decision, has helped to treat cohabitees more fairly than in the past in two ways:

1. if there is no clear written or oral agreement, the Court will consider the parties’ conduct not only during their relationship but also after their separation.

2. where there is an agreement (express or inferred) that ownership should be shared but the shares are not agreed, the Court should try to infer the parties’ agreement from their conduct. But, if it cannot be inferred the Court can “impute” their intentions i.e. effectively impose the Court’s view of what they would have done if they had been acting reasonably and fairly.

The case has caused a huge amount of uncertainty and expense to the two parties – and it’s important to be aware that it does not provide absolute clarity for cohabitees in similar circumstances. Every case is different and judges make decisions based on the facts of the individual case before them.

Kernott v Jones deals with a situation where a couple owned a property jointly.  There are still many examples of couples who live together in a property that is in one party’s name only.  What happens to them in the event of a dispute?

It can sometimes be possible for the non owning party to prove that the owner holds the property or part of it on trust for them.  If there are children involved under the age of 18 then protection is provided to the non owning party (usually the woman) by the Children Act 1989.  If there are no minor children the Court must consider whether a constructive or resulting trust arises or whether the principle of proprietary estoppel should apply.  These are complicated legal issues, particularly if there has been a long relationship where the parties’ finances can be difficult to untangle. If the non owning party has made direct financial contributions towards the purchase of the property by way of an initial deposit or mortgage repayments it will be relatively easily to find that a trust arises.  If not then the court will try to discover what the parties intended their respective shares to be as far as this can be discovered.

If couples want to avoid expensive and protracted legal battles the best advice at the moment is that they should enter into a declaration of trust at the time that they buy a home together.  Alternatively they could make a cohabitation agreement.  Couples need to think through what they would want to happen if they decided to separate at some point in the future.  Like making a Will, this simple precaution can save thousands of pounds in legal fees.  Alison Mason of Ridley & Hall’s specialist property team recommends that couples should get good quality legal advice: “The benefit of seeing an expert in this area is that they can highlight all the options and possible scenarios so that couples can plan properly.  We can also help in advising how joint ownership fits into your estate and Will – there may also be tax implications that we can help with”.

Cohabitees should also think seriously about making a Will – it won’t prevent any possibility of post death disputes but it can certainly help to put your wishes in writing.  Sue Cash and Jill Waddington are members of Solicitors for the Elderly and are able to offer specialist advice in Wills, Trusts and tax planning.

The Law Commission published a consultation paper in 2006 detailing proposals for reform in the area of cohabitation.  It considered if legislation should be introduced that would allow cohabitants the similar entitlement to married couples at the end of their relationship.  The Government proposes to take no action at the moment to progress those proposals.  There are, of course, those who say that if a couple wants to be able to involve the Court and do what is fair then they can get married, because the divorce courts have a wide discretion.

The reality is that many couples who live together desperately need the protection of the Court and it is not always there for them because the law in this area needs urgent reform. What is incredibly worrying is that the myth of the common law spouse still seems to persuade many that they do not need to do anything to protect themselves.

For advice on the rights of cohabitees and on cohabitation agreements, contact Ridley and Hall partner Meena Kumari. Meena is an experienced family solicitor and a member of the Law Society’s Family Panel. The firm’s family law team has been accredited by the Legal 500 as a centre of excellence.