Cohabitation and Jointly Owned Property

Jointly owned property

Contrary to popular belief, there’s no such thing as a ‘common law’ spouse, and few legal remedies are available to cohabitees on separation, even after living together for many years. Common disputes concern jointly owned property.

In part, cohabitees can address these limitations by agreeing and signing a cohabitation agreement. And if they intend to co-own property, a declaration of trust is strongly advisable. However, many couples have neither in place, and that’s where TOLATA can help.

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What is TOLATA?

The Trusts of Land and Appointment of Trustees Act 1996 (known as TOLATA) gives the court certain powers to resolve property ownership disputes, including:

• forcing a sale of a property.
• determining the party’s respective shares in a property.
• allowing a party to reoccupy the former family home if the other party refuses to leave.
• allowing a party’s parent or grandparent to recover their financial interest in a property.

Moreover, TOLATA claims are particularly useful if the property is in one party’s sole name. Typically, that arises when one partner purchases a property before the period of cohabitation. However, the non-owning partner can ask the court to determine whether they have acquired a beneficial interest (also known as an equitable interest) in the property. If the court agrees, the judge determines the parties’ respective shares.

How can a beneficial interest arise?

A beneficial interest in property arises in various ways:

Express declaration of interests

The sole owner and partner may have expressly declared in a document how they intend to share the property. For example, say the sole owner puts up all the deposit monies and makes all the mortgage payments but signs a trust deed stating that their partner has a one third share in the property. In that case, the court will always enforce this agreement in the absence of evidence of mistake or fraud.

Implied trusts

An implied trust is an umbrella term covering both constructive and resulting trusts.

Unfortunately, trusts law is highly complex (indeed even different judges use the terms constructive or resulting trusts differently and interchangeably) and whether you are an owning or non-owning partner, you should contact us for advice at a very early stage.

Constructive trust example

A cohabitee not registered as a legal owner of the property must show:

• a common intention to share ownership; and
• The non-owner relied upon that intention, and it would be inequitable for the legal owner to deny it. Often, the non-owner demonstrates this by evidence of financial contributions, but it does not have to be financial.

The financial contributions may consist of payments towards the mortgage if the cohabitee can show that it was the parties’ joint intention that in making those contributions, the cohabitee would receive a share of the property.

It may also be inequitable for the owner to rescind from the common intent because the cohabitee paid for or contributed to major home improvements. The time and physical effort expended in undertaking such works may be sufficient. If the cohabitee gave up their property to move in with the legal owner that may itself be sufficient.

In most cases, the cohabitee relies on the legal owner’s express words and conversations over a period of time – possibly years – to establish the common intent. The court may imply common intent, but that is usually reserved for cases where the financial dealings between the parties strongly indicate such intent.

Resulting trust example

A resulting trust arises where one cohabitee contributes towards purchasing the property but is not registered as a legal owner. A typical example is when one party contributes to the deposit (as long as it was not intended as a gift or loan).

The cohabitee’s contribution may have come from their parents. In that case, the parties must have a clear understanding at the time of purchase of how to treat this money should they separate.

See also: Bank of Mum and Dad: protecting gifted deposit monies

Proprietary estoppel

Proprietary estoppel is a legal remedy enforcing a broken promise. The person making the claim must prove:

• that a promise was made to them by another person; and
• they placed reliance upon that promise; and
• as a result, suffered loss when the promise was broken.

What constitutes each element of this test depends on the individual circumstances of the case.

Leading cases

Below are two leading and regularly cited cases concerning cohabitation and jointly owned property.

Stack v Dowden

The landmark case of Stack v Dowden [2007] concerned the issue of how to determine beneficial ownership where a couple holds legal title to a property jointly. In summary, the House of Lords held that the starting point is that they hold the beneficial interest in equal shares. However, that presumption is rebuttable if there is evidence of a different intention at the time of purchase.

Ms Dowden and Mr Stack purchased a property together. There was no evidence of an agreement regarding the extent of their respective interests. When they separated, Mr Stack moved out, while Ms Dowden continued living in the property with their children.

The issue before the court was whether there should be an equal division of the beneficial interest. After all, that is what you might ordinarily expect with a joint tenancy. Ms Dowden argued that her greater financial contributions towards purchase and maintenance entitled her to a greater share.

The court held that the parties’ common intention at the time of purchase was crucial in determining the beneficial ownership of jointly owned property. Determining intention is objectively based on the parties’ words, conduct, and other relevant circumstances.

Although Ms Dowden had contributed more towards purchasing the property, Mr Stack had undertaken significant renovation work. In addition, the court found that they had always conducted their financial affairs separately and never intended to share the property equally.

Considering all these factors, the court held that Ms Dowden was entitled to a 65% share, reflecting her greater financial contribution. Mr Stack’s contribution through the renovation work entitled him to a 35% share.

Jones v Kernott

In the subsequent case of Jones v Kernott [2011], the Supreme Court (the successor to the House of Lords) held that if the court finds that the parties’ intentions have changed since buying the property, they can imply a further alteration to their respective shares.