Cohabiting couples have always had to rely upon what can only be described, at best, as a “complicated” area of law when establishing their interest in property bought either jointly by them or in which they may claim to have an interest comments Paula Futer, Legal Executive at QualitySolicitors Wilson Browne.

There has been a plethora of cases dealing with this area, but they have not made the position any clearer and whilst cohabiting couples continue to wait for reform in this area of law, the recent case of Jones v Kernott has, it would appear, further “muddied the waters!”

In the leading case of Stack v Dowden the courts made it clear that they would take into account “the whole course of conduct of the parties…..to arrive at a conclusion that they intended something different from what seemed clear from the conveyance into joint names”
This had limited use because the conveyance was held to indicate both a legal and beneficial joint tenancy and proving anything else was very difficult.

There have been a large number of cases since dealing with interests in property but these have been dealt with in a wide range of ways and the inconsistency of the court has made it very hard to advise clients as to the likely outcome of any case.

Jones v Kernott focused on the correct approach the courts should take when calculating beneficial interests in property where the legal title of the property is held in joint names by an unmarried couple but there is NO express declaration on how it is to be shared. It is possible to hold a property in joint names but in unequal shares.

The judge in the county court had held the common interest of the couple, who split 18 years previously, had changed. He decided Mr Kernott was only entitled to a 10% share in the Essex house, owned jointly with Ms Jones, instead of 50%. Mr Kernott appealed, initially to the High Court and then to the Court of Appeal. His appeal was successful and the matter then went to the Supreme Court on the appeal of Ms Jones. The Supreme Court restored the order of the county court, saying it was the duty of the courts to decide what the intentions of the couple were during the course of their relationship and afterwards.

The Supreme court held that, where a co-habiting couple purchase a family home in joint names, the starting point is that they are joint tenants both in law and in equity. This is fairly straightforward BUT the court then went on to state that this presumption can be displaced by showing that
i) the parties had a different common intention at the date they acquired the home; or
ii) they later formed the common intention that their respective shares would change

This is very significant for people who bought property before the 1991 introduction of the form TR1, used to transfer property. Before then there was no specific facility to declare beneficial interest in property at the time of purchase without entering into a further legal document.

Where this applies, people need to review their situation and consider the way in which they hold the legal title to their property to make sure it accurately reflects their beneficial interest and the way in which they run their financial affairs.

Although the TR1 was updated in 1998 to include a specific section for parties to declare how they wish to hold the beneficial interests, people who have purchased using a TR1 should still review the way in which they hold the property, because if a joint tenancy was not what they intended, they can vary this by agreement and the preparation of a legal document.

Ideally some statutory guidance and legislation would clarify issues for cohabiting couples. Clarity of law in this area would allow parties to enter into arrangements safe in the knowledge they would be binding.

In the meantime, cohabiting couples do need to consider very carefully how they wish their beneficial interests to be reflected and to record that in a specific living together agreement or declaration of trust. This will need to be regularly reviewed in the same way that a will should be reviewed, particularly if circumstances change.