I am sure we have all heard someone utter the phrase “we’ve been living together for 7 years so we’re married by common law”. If you live in England and Wales (I can’t comment on the rest of the UK as I am not authorised to practice there), this could not be further from the truth. I have no idea where this myth perpetuates from, or why 7 years would make any difference, but it simply isn’t correct.
In day-to-day life, whether a couple is married or not doesn’t matter, and there are some practical reasons why people might not want to get married – the average cost of a wedding in the UK being nearly £20,000 is just one of them. However when it comes to matters such as inheritance, inheritance tax, and interests in property, whether a couple is married or not does make a significant difference.
What happens if an unmarried couple live in a house owned by one partner?
It is common in the case of unmarried couples that they might live in a property owned by one of them. Often one partner owned the house, and then the other has moved in. In many cases, people don’t actually discuss what this means in terms of property ownership. You might also assume that if you don’t put their name ‘on the deeds’, your partner has no interest in the home.
How can property be owned?
Before getting into the nitty gritty of this issue, it is important to understand how property in England and Wales is owned. For any property you have both legal and beneficial ownership. The legal ownership is the name on the title but often the beneficial ownership is different, for example:
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In England and Wales, it is only possible to list 4 legal owners on the title of a property – but sometimes there may be more than this. Consider houses owned by multiple family members. There may be, for example, 5 members of the family each contributing 20% of the purchase price. This means that the four legal owners hold the property ‘on trust’ for themselves and the fifth legal owner in equal shares e.g. 20% each. The fifth owner is a beneficial owner, but not a legal owner.
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Sometimes people hold property on trust for others and have no beneficial ownership themselves. For example, if a house is left on trust for minor children in a will, the trustees of the will (normally the executors but not always) are the legal owners of the property, but the beneficial owners are the children.
What does this mean for cohabitees?
If you move into your partner’s property and are not on the title you are not a legal owner. However there are some ways in which you might gain a beneficial interest:
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If there is an agreement that you should have a beneficial interest which is recorded in writing – this is known as an express declaration of trust;
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If there is an express or implied agreement that you should have a beneficial interest and you rely on that to your detriment. This normally requires something ‘significant’ such as a capital contribution to the purchase price or paying a significant sum off the mortgage. In some cases, paying to carry out works which add to the value of the property may suffice – this is known as a constructive trust; or
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If your partner assures you that you will have an interest and you act on this to your detriment – this is known as proprietary estoppel.
What if there is no express oral agreement?
I think it is unrealistic of the courts to expect cohabiting couples to sit down and discuss interests in property. These issues often only arise when relationships end after years of living together. At this stage many couples would not remember conversations – and the motivations of the parties are likely to be very different than at the start of a relationship.
If there is no express agreement that the parties can remember, the court may infer that an agreement was made based on the conduct of the parties. This would usually require the non-legal owner to suffer some financial detriment which they would not usually do if they did not believe that they had an interest in the property. As above, that normally requires a capital contribution to the mortgage.
The courts have never defined what detriment is ‘sufficient’ to establish that an agreement was made, but it needs to be something outside of the normal course. Let’s consider some examples:
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Paying the bills may not be sufficient – it would seem common sense that if one partner is paying the mortgage, the other take over the household bills to make ‘even contributions’. However in the absence of an agreement that you were doing this to free up money for your partner to pay the mortgage, the courts might say that paying bills is not enough. After all, tenants pay the bills for the property, that doesn’t mean that they own it.
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Contributing to the mortgage is probably enough – a large capital sum toward the mortgage e.g. to help repay it early, is normally sufficient. It is quite obvious to say that you would only invest a large sum if you thought you had an interest in the property. Making regular monthly contributions may also be enough over time. On the other hand, paying the mortgage for one month because your partner was out of work is unlikely to be sufficient to establish a beneficial interest.
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Carrying out improvements might be enough – improvements and renovations are a grey area. The case law talks about ‘substantial’ improvements, such as adding a storey to a property. If you, for example, moved in with your parent, bringing your children to live with you and painted bedrooms for them, the court is unlikely to say that you did this because you thought you had an interest in the property. If, however, you built an extension to house your blended family, that might be sufficient. The courts also seem to suggest that improvements are only enough if there has been a substantial impact on the value of the property - but again the courts neglect to define what a 'substantial' impact would be as there is surprisingly little case law in this area.
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But an extension won’t always be enough – consider a case where you have a business (let’s say, dog grooming). You’re paying £12,000 per annum to rent a unit from which you conduct your business. You realise that you could build a summer house or outbuilding in your partner’s substantial garden for £12,000 and put your dog salon in there, saving yourself the cost of rent and your commute. In that case, you have spent a substantial sum on a structure in your partner’s home. That structure might have some impact on the value of the home, but it is not likely to be significant. In those circumstances, the court may well say that you haven’t done that because you thought you owned the property, you did it because you wanted to save your business money. It is not really evidence of any agreement that you should be a beneficial owner of the property.
How does marriage make a difference?
In cases of married couples, houses are usually held jointly, but that’s not always the case. Many married couples still have solely owned properties and it was not that long ago that it was typical for all property to be held in the husband's name. The difference for married couples is the ability of the family court to make financial orders. These orders affect the ‘marital property’ owned by either party to the marriage. The court can order a beneficial interest in property on behalf of one spouse, even if it is held in the other spouse’s sole name, and even if it were owned before the marriage. The family court can also order parties to transfer legal ownership of jointly or solely owned property.
However this power is unique to the family courts in divorce cases. Cohabitees do not have the same rights, and have to rely on the civil courts in cases under the Trusts of Land and Appointment of Trustees Act (TLATA). The powers here are far narrower in scope. The fact that you have children or lived like a married couple doesn’t give the family court carte blanche to treat you as a married couple.
What about on the death of one partner?
On the death of one partner, in cases where they were the sole owner of the property, what happens to that property will depend on whether they have left a will or not. Ideally the house will have been left to you (but there are inheritance tax differences and implications if you were not married) and can be transferred into your name.
If your partner did not leave the will or did not leave you the house, you have no right to remain there.
Would I have claims against my partner’s estate?
If you have been left in a position where you have no right to live in your home, you have a few options:
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If you and your partner did agree that you would have an interest in the property, you can bring a claim under TLATA. The difficulty with this is that without your partner around, unless you have a written agreement, any agreement may be difficult to prove. It is also unlikely to leave you with more than 50% of the house (at best) meaning it will still likely need to be sold. This may leave you in a position whereby you are unable to house yourself.
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If your partner promised you that you would get the house in their will, and you relied on this promise to your detriment, you may be able to bring a claim for estoppel.
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Finally, and possibly the most straightforward option, if you and your partner had been cohabiting as if you were married for more than two years, you may be able to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (1975 Act Claims).
Cohabitees and 1975 Act Claims
In a 1975 Act Claim, you can claim ‘reasonable provision’ from your partner’s estate. In the case of people who cohabited with the deceased for more than two years, the courts will order such provision from the estate as would be reasonable for their maintenance. This usually means providing the ability for you to house yourself, and to continue receiving any financial support from the estate which you received from your partner in their lifetime.
However even here a distinction is drawn between cohabitees and married couples or civil partners. A spouse or civil partner claiming under the 1975 Act would be entitled to reasonable provision from the estate whether or not it is required for their maintenance. This usually means a spouse or civil partner is entitled to maintain the same lifestyle as they were accustomed to during their spouse's lifetime. Take, for example, the case of a couple living in a substantial family home where the deceased spouse has left their entire estate to their adult, non-dependant, children.
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In the case of the married couple, it is likely that the surviving spouse bringing a 1975 Act Claim would be entitled to remain in the home, notwithstanding the fact that it is far too large for their needs and that the maintenance of that home is likely to deplete the estate in the surviving spouse's lifetime, leaving the children with very little.
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in the case of a cohabitee, there is a far higher chance that the court will determine that such a large home is not 'necessary' for the surviving cohabitee's maintance and needs and that the cost of maintaining such a house would be unnecessary. It is more likely in this case that the surviving partner will have to vacate the home and given just enough money to be able to purchase a small home which is more suitable.
Summary
Ideally couples would sit down and thrash out the details of property ownership at the point of moving in together. However if you haven’t done that, you have options and claims which might be available to you.
For more information on claims relating to estates, contact Charlotte Braham on 01494 893529 or by email.