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Property Rights for Unmarried Cohabitants

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Property Rights for Unmarried Cohabitants PROPERTY RIGHTS FOR UNMARRIED COHABITANTS The Supreme Court of England & Wales recently affirmed in Jones v Kernott [2011] UKSC 53 the principles upon which the Courts in England & Wales may determine the beneficial interests of unmarried couples in their family home. THE FACTS Ms Jones and Mr Kernott were an unmarried couple. They purchased 39 Badger Hall Avenue in 1985, in joint names, with the benefit of an endowment mortgage, also in joint names. Ms Jones paid the deposit. Although the property was in joint names, it was not expressed what percentage share each should have. Mr Kernott paid the household expenses. Ms Jones paid the mortgage. They had two children. The couple separated in 1993. Mr Kernott moved out and thereafter made no financial contribution to the household and very little towards the maintenance of the children. The property was put on the market in 1995, but did not sell. Mr Kernott bought a new property in 1996 using half the proceeds of a joint life insurance policy. In 2006 Mr Kernott wanted to claim his half share of 39 Badger Hall Avenue. Ms Jones sought a declaration that she owned the whole beneficial interest in 39 Badger Hall Avenue and that she be registered as the sole proprietor. The Lower Court Decisions In the Southend County Court, it was decided that the value of 39 Badger Hall Avenue should be divided as to 90% to Ms Jones and 10% to Mr Kernott. The Court of Appeal allowed Mr Kernott’s appeal, holding the property was owned by them in equal shares at the time of purchase and there was nothing to indicate the parties’ intentions had changed after separation. The value of the property should therefore be split 50:50. THE SUPREME COURT DECISION The Supreme Court upheld the original finding of a 90:10 split of the property. In so finding the Supreme Court voiced its frustration that Parliament had failed to take legislative steps to deal with how property rights in a home should be adjusted when unmarried couples split. The Law Commission had recommended such legislation in relation to couples who have cohabited for a minimum of 2 years, or less if there are children, back in 2007, but Parliament had not responded (Law Com No.307, 2007). The Courts had therefore had to develop the law. THE TESTS • Where a family home is purchased in the joint names of a cohabiting couple, who are both responsible jointly for the mortgage, unless they expressly declare otherwise, it is presumed they share the property equally both at law and in equity (a so-called common intention constructive trust). That presumption will not be lightly displaced. If a married or unmarried couple decide to buy a property in which to live, normally with the help of a mortgage for which they are jointly liable, that is a strong indication of a joint enterprise. The concept that when each party makes an unequal contribution to the purchase price, that contribution is reflected in the share that each party holds (a resulting trust), does not hold good in relation to matrimonial or quasi-matrimonial homes. • The presumption of an equal share of the property can be displaced if it is shown that the parties had a common intention not to share the property 50:50 at the time of purchase or later. The Court can deduce whether there was a ‘common intention’ not to share the property 50:50 by looking objectively at the parties’ words or conduct. • If it was clear that the parties did not intend to share the property equally either at the outset or later, but it is not possible to deduce from their words or conduct what that share should actually be, the court will do what it considers fair having regard to the whole course of dealing between them in relation to the property. 1/2 - www.bakerandpartners.com A full list of Partners, Associates and Consultants can be viewed on our website. Where the family home is put into the name of only one party at the outset, different considerations apply. • First, was it even intended that the other party should have a beneficial interest in the property at all? • If so, what is that interest? There is no presumption that the property be shared equally (because it was only put in the name of one party in the first place). As above, however, the parties’ common intention may be deduced from their words/conduct and in the absence of such words/conduct evidencing what share each party should have in the property, the court will have to consider what is fair. MS JONES/MR KERNOTT In this case, the judge at first instance had made a finding that the parties’ intention in relation to the property had changed. Had the case been brought in 1993, when the parties separated, there would not have been enough evidence to displace the presumption that the property was to be shared equally both at law and in equity. However, when the house failed to sell in 1995, Mr Kernott had bought himself a new property. He would not have been able to do this if he had had to continue to contribute towards 39 Badger Hall Avenue. The logical inference is that it was intended that Mr Kernott’s interest in 39 Badger Hall Avenue should crystallise at that point in time. Ms Jones should therefore have the benefit of any capital gain after 1995/96. Giving Mr Jones half of the value of the property in 1993 and Ms Kernott the balance of the value of the property at the time of trial equated to a 12:88% split of the property. REPERCUSSIONS IN JERSEY Will this case have repercussions on unmarried couples in Jersey? The Royal Court is yet to consider a similar case. However, in Guernsey in the case of Pirito v Curth (2003), an unmarried couple with three children had registered the family home in joint names. When they separated, Mr Pirito sought 100% of the property on the grounds that he had supplied the entire purchase price and carried out extensive improvements to the property. The Court of Appeal rejected any importation of English land law into Guernsey land law. In particular, the Court rejected any reliance on the resulting trust concept in relation to unmarried couples, on the basis that English law had its own problems in relation to dealing fairly with the property rights of unmarried couples when relationships broke down. The Court of Appeal found the property had been registered in joint names and, on the facts of the case, should therefore be split 50:50. The Court found it would not be ‘fair’ for Ms Curth to leave the relationship without a penny. However, the Court of Appeal stated that when property is registered in joint names there is a rebuttable presumption that the parties intended the property to be shared 50:50. That presumption can be rebutted by evidence to the contrary, although the Court did not explore the circumstances which might be relevant to the rebuttal of this presumption. CONCLUSION Pirito v Curth was decided well before Jones v Kernott (and the case it followed of Stack v Dowden [2007] UKHL 17). However, both Courts now have the power to ‘redistribute’ an unmarried cohabitant’s share of the property when the relationship breaks down. The English Courts on the basis of the parties’ common intention or what is ‘fair’ having regard to the whole course of dealing between them in relation to the property; the Guernsey Court on the basis that evidence may rebut the presumption of a 50:50 split when the property is registered in joint names. It seems likely that unmarried cohabitants will not be left without a remedy in Jersey. It remains to be seen whether the Royal Court would follow the English or Guernsey route to reach a fair solution. Advocate Joanna Woods Senior Associate PO Box 842, 2 Mulcaster Street, St Helier, Jersey JE4 0US Tel: +44 (0)1534 766254 Fax: +44 (0)1534 737355 Email: [email protected] 2/2 - www.bakerandpartners.com A full list of Partners, Associates and Consultants can be viewed on our website. .
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