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‘Cohabitation’ – “Law clear for cohabiting couples who own property or further confusion?”

Law clear for cohabiting couples who own property or further confusion

The mysterious case of Jones v. Kernott [2010 UKSC 53]
[Supreme Court decision on property rights of unmarried couples November 2011]

Introduction

Many people are unaware of the significant difference in the way the law treats couples who are married and those who are not. There is no such person as a ‘common law wife’ or ‘husband’ and this remains a myth. Married couples follow a distinct set of rules set down by Act of Parliament (the Matrimonial Causes Act 1973 – as amended) and negotiate under the veil of these provisions if their marriage breaks down.

 This covers all their financial affairs from property matters to income. In contrast an unmarried couple have no special provision and if their relationship breaks down they have to grapple with complex aspects of property, trust and contract law to sort out their affairs. There is no concept of long term financial support and maintenance does not exist.

 It can leave many people in an exceptionally vulnerable position and often the costs of taking legal proceedings are prohibitive and not assisted by the complexity of the sets of proceedings that potentially have to be brought.

So what a relief, everyone thought when the Supreme Court announced earlier this year that they intended to clarify the law for cohabiting couples who own property. This finally occurred on the 9th of November in the case of Jones v. Kernott. The result was not expected…

Facts of case

Ms Jones and Mr Kernott had bought a property in joint names in 1985 but, after Mr Kernott moved out in 1993, Ms Jones assumed responsibility for paying the mortgage. Mr Kernott bought his own property and to all intents and purposes made a separate life for himself. Ms Jones stayed in the jointly owned property and raised their children.

 Many years later Mr Kernott sought his half share in the property despite not having contributed to the mortgage for over 14 years. Many felt this was extremely unfair. If the couple had been married the courts would have had discretion to impose a fair result. However as the couple were not married they had to rely on inflexible trusts and property law to determine their dispute.

 This fundamentally states that where a property is bought in joint names (and there is no separate agreement or express Declaration of Trust, as set out below) there is a presumption that the owners own the legal and beneficial interest in the property in equal shares.

 This presumption can be displaced by showing the parties intended to own the property in different shares. So in this case could Ms Jones substantiate that the parties’ intentions had changed when Mr Kernott moved out and she took over the mortgage?

Outcome

Before the Supreme Court’s decision the court was confined to establishing what the parties’ actual common intention was to their respective shares. If they did not find any evidence that the parties intended to own this in unequal shares or that the parties’ intentions had changed the original 50/50 presumption would remain. However,

 in Jones and Kernott the Supreme Court decided that where there is no evidence of what a couple ‘intended’ the court can impute ‘an intention to achieve a result that the court considers fair’ (the court must still try and establish the parties’ intention first nevertheless).

The decision has generally been welcomed as ‘fair’ to Ms Jones; but despite the hope that it would clarify the law it seems as though it is likely to give rise to more litigation as cohabitants argue that their original intention to share 50/50 has changed due to new circumstances which are never discussed with their former partners. 

This is going to be a fast moving area of legal case law as the courts endeavour to establish exactly what circumstances they can impute a fair outcome. Uncertainty therefore continues despite the intentions of the Supreme Court.

Best advice

In the light of all of this what should an unmarried couple do now particularly if they own property together? The simple answer is that they enter into a formal agreement which clearly sets out their understanding of their intentions at the start of their relationship over any matter of ownership and this is altered as their circumstances change. If the agreement relates to shares in a property then this would be incorporated into a document known as a ‘Declaration of Trust’.

 If the agreement extends not only to property but to other issues including bank accounts, possessions, contributions and financial support for the children upon separation then this can be incorporated into a ‘cohabitation’ or ‘living together’ agreement. The difficulty is, is that many couples do not consider these matters at the start of their relationship and keep it updated if circumstances change. Often it is too late when a cohabitee realises there is lack of certainly in their arrangements.

 It is then extremely hard for them to negotiate especially with the new principles of fairness potentially being imputed. It makes everything highly uncertain.

Best process

In cases such as these, the collaborative family law process can be hugely advantageous. The couple who want to sort out their affairs in privacy and with a degree of civility can save themselves a huge amount of costs, time and uncertainty by opting for the collaborative process.

 Two collaborative lawyers will work together in such a case to explain legal concepts’ taking account of what fundamentally matters to the cohabitees in question in order to reach a fair settlement. This is all without the burden of having to set foot in a court or take any threatening steps towards litigation.

 It is worth a try at the very least and for those that are ahead of the ‘Jones v. Kernott’ scenarios and have not yet separated they can also use the collaborative process to draw up sensible agreements before entering into complex arrangements. Again collaborative lawyers can assist parties in working out potential issues going forward and secure a substantive agreement saving a lot of angst in future .

Conclusion

Despite the decision made in Jones v. Kernott it is probable that the collaborative family law process will be the first ‘port of call’ to resolve the complexities for a cohabiting couple that their relationship throws up and it is certainly a far more affordable course than the court process.

Fiona Read for the Collaborative Lawyer at Russell-Cooke LLP solicitors.

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