It is only a short time ago since the House of Lords was asked to consider the issue of beneficial interests of an unmarried couple in Stack v Dowden. The recent decision of the Supreme Court in Jones v Kernott highlights again the ongoing problems that can arise when unmarried couples separate and there is no clear agreement as to the ownership of their property interests.
Mr K and Ms J purchased a property together in joint names. Ms J paid the deposit for the property while Mr K funded and built an extension. The couple shared the bills and mortgage payments.
The relationship ended and Mr K moved out of the property. He bought a house in his sole name.
Thereafter Ms J assumed sole responsibility for the property. Ms J had no legal or beneficial interest in Mr K’s house.
After 12 years separation, Mr K severed the joint tenancy and claimed a half share in the property.
The parties accepted that, at the time of their separation, they each had an equal beneficial interest in the property. The county court was asked to decide whether the couple’s beneficial interests changed after they separated. The county court found the original presumption that each party had an equal beneficial interest in the property changed after Mr K moved out of the property. Ms J was entitled to 90% of the value of the property on the basis this was just and fair.
Mr K appealed to the High Court, which dismissed the appeal on the basis that in the absence of any express declaration as to how the shares in the beneficial interest had changed, it was open to the court to decide what was fair and reasonable and in this case the parties’ conduct following their separation showed their intentions had changed.
Mr K appealed to the Court of Appeal. The Court of Appeal allowed the appeal, declaring that the parties held the property as tenants in common in equal shares as there was no evidence to displace the presumption of equality of beneficial shares.
Ms J appealed to the Supreme Court.
The Supreme Court unanimously reversed the Court of Appeal’s decision, and held that Mr K owned 10% of the beneficial interest.
In the majority judgment, it was held that the following approach should be adopted where a family home is bought in joint names by a cohabiting couple but without any express declaration of their beneficial interests:
- The starting point is that they own the property as joint tenants in law and equity (Stack v Dowden  UKHL 17)
- This presumption can be displaced by evidence that (a) the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change
- Their common intention is to be objectively construed from the parties’ conduct
- The relevant intention is that which the one party reasonably understood to be the other party’s intention because of their words and conduct. It is irrelevant whether or not the other party consciously formulated that intention in his/her own mind or that he/she had a different intention which he/she did not communicate to the other party (Gissing v Gissing  AC 886
- In those cases where it is clear that the parties had a different intention to equal shares at the outset or had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own their property, each is entitled to the share which the court considers fair.
- In deciding what is fair, the court will take account of the parties’ whole course of dealing in relation to the property. Each case will turn on its own facts and although financial contributions are relevant, there are many other factors which may enable the court to decide what shares were intended or fair.
The Law Commission recently made recommendations in its report [Law Commission No 307, Cohabitation: The Financial Consequences of Relationship Breakdown (2007)] to give the court the power to vary property rights in the family home when unmarried couples separate however there are no plans to implement these and therefore to avoid future disputes, clients should be advised to reach agreement about how the property is to be shared from the outset by either signing a declaration of trust, which formally records their respective beneficial shares or ensuring the Land Registry’s transform form states clearly how the property is to be held.
Article by Philippa Harris