Living Together and Living Apart

One of the most complicated areas of family law are for those couples who live together but decide not to marry. It was estimated in May 2006 that there were approximately 2 million cohabiting couples in this country and that nearly one sixth of these couples had a dependent child.  There has been an increasing need for the law regarding cohabitation to be reviewed. Some predict that in the next 25 years nearly one quarter of couples will be living together with no plans to marry.

There is a common belief that when cohabitees live together they are doing so "as common law spouses." This is a misconception - there is no such thing in this country. It is also a misconception that when couples live together, they will have automatically accrued some financial entitlement in a property or home.  This is not always the case.

If possible, it is recommended when purchasing a property together to clearly state the proportions in which the "profit" or "equity" is held. This is called a "Declaration of Trust" and can help alleviate the risk of future problems.

Where a property is purchased solely by one person and they then cohabit, if there is no written agreement the non-owning partner would have to establish an "implied trust" to make a successful claim. Matters are compounded further through the legal terminology given. There are three possible claims that could be made by the non-owning partner: -

• A resulting trust. This arises if more than one person makes a financial contribution towards the purchase price of a property. An example of this could be where one person contributes £20,000 into the property purchased in their sole name and their cohabitee contributes £10,000 and no formal agreement is prepared. The profit in the property could then be distributed through application of the proportions by which they each contributed to the purchase price pro rata.

• A constructive trust. This arises where the parties have a common intention that the property should be, or should have been, shared. If this is the case the party claiming an interest in the property must have acted to their detriment in reliance upon that intention. An example is where a couple agree to cohabit - one party sells their property and the parties use the sale proceeds for other joint purposes such as a holiday or furniture. If the parties separate, it would be unfair for the other party to benefit from all the money in their own property as their former partner would have acted to their detriment in reliance upon having a claim on that property.

• Proprietary estoppel. This is where an agreement has been reached and the non-owning partner has been mislead by the owning partner deliberately to their financial detriment. This is a complicated area and is very difficult to prove. An example is where an owner of a property makes a promise to the non-owner to give them a share in the property and the non-owner believes that they have a share albeit wrongly. The non-owner of the property must then rely on this promise to their financial detriment, which in itself must be considered unfair. This can arise in circumstances where the non-owning partner gave up their council tenancy, which they may have been able to purchase under a right to buy scheme. If successful the claimant can only claim a lump sum award as opposed to an actual share in the property itself.

The Trusts of Land and the Appointment of Trustees Act 1996 governs this area of law.

This Act provides a cohabitee with the right to apply to the Court for a declaration as to the extent of any interest they may have in the property itself. Under this legislation the court can also decide whether or not the property should be sold and, if so, when.

The best advice is always to seek independent legal advice from a qualified lawyer before a property is purchased and before you decide to live together as a couple. Although this could cost you a small fee in the short term it will often be money well spent and could save you not only thousands of pounds in future legal expenses upon separation but also save you the future emotional stress of any dipute.

Tim Weatherhogg, Dunn and Baker

Fellow of the Institute of Legal Expenses