The risk of Cohabiting

Unmarried couples in the UK are defined as cohabitants.  It is estimated by the Office National Statistics (2011) that 2.9 million couples live in the UK as cohabitants and by 2021 the number is expected to double.  English courts deal with three different matrimonial aspects; divorce, children and finance.

Divorce – As cohabitation relationship is informal, no legal procedure is required in order to formally bring the relationship to an end.

Children – As applications under the Children Act are governed by parental responsibility and/or contact/care of the child, being unmarried has no effect on such applications.

Finance – In terms of finance, the position is totally different.

Married couples can determine their financial affairs in court where decisions are governed by the Matrimonial Causes Act 1973, and in particular section 25 factors.

The courts have power to award:

• Spousal maintenance/maintenance pending suit
• Periodical payments order
• Secured provision order
• Lump sum order
• Property adjustment order
• Pension sharing/attachment orders

In contrast, the legal financial position of informal cohabitants is dealt with by reference to distinct statutory means depending on the issues concerning.  Cohabitants rarely enjoy the same rights married couples have.  Instead they must rely upon equitable doctrines such as proprietary estoppel,  and in particular TOLATA (Trusts of Land and Appointment of Trustees Act 1996).

Eligibility to apply under TOLATA 1996

As cohabitants do not have the same rights to make property claims as married couples or civil partners; disputes between cohabitants regarding their beneficial interests are determined in accordance with the law of trusts. There are two main ways in which cohabitants may have an interest in property: as a joint owner or, where the property is in the sole ownership of the other cohabitant, under a trust, whether express or otherwise.

Joint ownership

Joint owners may own property as either:

•             joint tenants, or
•             tenants in common

There are significant differences as to the implications of the way in which a jointly owned property is held. Between themselves, joint tenants have separate rights and interests, but in relation to third parties they have the characteristics of a single owner. A joint tenancy is created when no words are used which indicate that the tenants are to hold the property in separate or distinct shares. A significant characteristic of a joint tenancy is the right of survivorship: the interest of one joint tenant will pass automatically to the surviving joint tenant on death. Where cohabitants hold property as tenants in common, they will hold their interests in distinct shares. A tenancy in common may arise on the original transfer or conveyance of the property or where an existing joint tenancy is severed. The main difference between a joint tenant and a tenant in common is that the latter may dispose of their interest either on death or during their lifetime without affecting the interests of the other co-owners. A tenancy in common cannot exist in law, only in equity. It is prudent for joint tenants to enter into a declaration of trust.

Sole ownership

Disputes regarding interests in property are most likely to arise where a property is solely owned by one cohabitant. The other cohabitant may have an interest where the cohabitant who owns the property in their sole name may make a valid express declaration of trust in writing declaring that they hold the property beneficially in trust for themselves and their cohabitant, and declaring their respective shares. This is an express trust. If there is no express trust, and a non-legal owner wishes to claim a beneficial interest, they must establish one of the following:

a resulting trust arises where the non-legal owner contributed in money or money’s worth to the purchase, when there is a (rebuttable) equitable presumption that it was the cohabitants’ common intention to hold the beneficial interests in proportion to their contributions

a constructive trust may be established if a cohabitant can show a common intention that they should have a beneficial interest and, crucially, that they have acted to their detriment on this basis—the Court of Appeal has emphasised the need for claimants to produce evidence that is capable of establishing detrimental reliance

a non-legal owner cohabitant may be able to establish proprietary estoppel if the cohabitant legal owner has led the non-legal owner cohabitant, either by words or conduct, to believe they have a beneficial interest, as a consequence of which the non-legal owner cohabitant has acted to their detriment, making it unconscionable (in equity) for the legal owner to insist that they have total beneficial ownership of the property in question

Eligibility to apply

A cohabitant who is a trustee of land or who has an interest in a property subject to a trust of land may make an application to the court under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996). Under TOLATA 1996, s 14 the court may make orders:

•             regarding the exercise of the functions of the trustees, which may include relieving them of an obligation to obtain the consent of, or consult, any person in connection with the exercise of their functions, or
•             declaring the nature or extent of a person’s interest in property subject to the trust

Wills

 Unless cohabitees are specifically provided for in a Will, they will have no legal rights after their spouse passed away.  The only possible legal remedy they may have is an entitlement to a claim against their spouse’s estate under the Inheritance (Provision for Family and Dependants) Act 1975.  In essence, they must show they have been financially depended on the deceased in order to claim against the deceased estate.

By Raanan Berlad, Solicitor and the co-founder of Berlad Graham LLP. Specialises in Family law and Litigation.