“It’s my house not yours”: separating unmarried couples, and the houses they own – the legal framework

Laura Tweedy examines how the law treats the ownership of property of unmarried couples who separate. This is a refresher guide for practitioners dealing with trusts of land and property fallout following unmarried couples’ relationship breakdown.

Couples who live together may legally co-own the property they live in, in which case the legal title at the Land Registry would show both of their names on the ownership register as joint tenants. However, their equitable interest may differ and be as joint tenants, or tenants in common. It may be set out expressly, or it may not. Alternatively, only one of them may own the property on the title, despite them both living there. In this article I shall consider these scenarios, what their ownership means and how it will likely be divided upon their break up.

Couples who own the property legally as joint tenants but the equitable ownership is not expressly set out

Common intention constructive trust

Stack v Dowden [2007] UKHL 17, is the key case setting out what happens to property which is legally jointly owned by couples who then separate. In Stack v Dowden an unmarried couple had lived together for many years, had both contributed financially to the purchase of the property and the couple were both legal owners. There was no express declaration of their beneficial interests in the property. The House of Lords decided, in such cases the unmarried couple held joint and equal shares as joint tenants in equity, unless a clear contrary intention could be shown.

The House of Lords established the following additional key principles:

• The property held in joint names legally results in both legal and beneficial joint tenancies. In order to prove that is not the case, the owner seeking to demonstrate that they hold the equitable interest as tenants in common has the burden of proving this intention.
• The court then looks at the parties’ shared intentions in relation to the whole course of dealings with the property and the following factors are relevant:
  • advice or discussions at the time of purchase
  • why they purchased jointly
  • why the house was purchased
  • the nature of their relationship
  • are there children and a responsibility to provide a home
  • how was the property purchase financed in regards to the deposit and subsequently
  • how did the parties arrange their finances, household expenses and outgoings

Stack v Dowden was followed up by the Supreme Court in Jones v Kernott [2011] UKSC 53, in which case an unmarried couple purchased a property held legally in joint names and both were responsible for the mortgage. There was no express declaration of their beneficial interests. As such, the starting point following Stack v Dowden was that they owned the property as joint tenants in both law and equity. However, the joint tenancy presumption could be displaced with evidence that, at the point of purchase, or later, their common intention was in fact different. Such common intention is to be found objectively from the parties’ conduct. Where it is absolutely clear that the parties have different intention to a 50-50 split at the outset, or subsequently, but it is not clear the actual percentage that they intended, the court will take account of the parties’ whole course of dealings and decide what each is entitled to as a fair share. In that case, the court inferred that one party would only get 10% of the beneficial interest after separation.

More recently, in Rowland v Blades [2021] EWHC 426 (Ch), the High Court considered and applied the principles of Stack v Dowden. In that case the unmarried couple, who are now separated, held a weekend property as legal joint tenants. There was no express declaration of trust as to the equitable ownership, so it followed that they held that as joint tenants too. Despite only one party contributing financially to the purchase, the court held that the parties were entitled to a 50/50 split upon separating. At purchase, the partner who has contributed all of the money had been given advice and had agreed that the property would be held as joint tenants. There was no declaration of trust, that they would hold as tenants in common, which could have divided and sorted their financial interests in the property. At separation the partner who purchased the property was not allowed to resile from that purchase intention.

This is a stark warning of the power of Stack v Dowden that where there are clear open eyes of the parties at purchase, even though one of the parties didn’t contribute financially, following sale, the proceeds will likely be split 50/50.

Resulting trusts

Following Stack, resulting trusts are now largely redundant in relation to the family home, however, where the property is purchased by those in a familial relationship/quasi-matrimonial cases, and for an investment, the situation is can be different.

From Marr v Colley [2017] UKPC 17, a privy council case, it appears that when the parties are dealing with an investment property purchased by a cohabiting couple in joint names (even though one party paid for most of it) the most important thing to understand will be what was the parties’ intention, both at the time of purchase, and subsequently, throughout their course of dealings in relation to the property? Whether a common intention constructive trust analysis or a resulting trust analysis should be adopted is likely to depend on the evidence these intentions. If it is the unambiguous mutual wish of the parties, contributing in unequal shares that their joint beneficial ownership should reflect joint legal ownership, then effect should be given to that. If on the other hand that is not their wish, or if they have not formed any intention as to beneficial ownership but, for instance, accepted advice that the property be acquired in joint names without really considering or being aware of the consequences of that, then a resulting trust may provide the correct answer.

There is a difference between cohabitation cases where the property is bought for living in i.e. Stack v Dowden and arm’s-length commercial cases of co-ownership when properties are bought for development and where resulting trust presumptions still apply. There is also a middle ground for example in Laskar v Laskar [2008] EWCA Civ 347, which was about a mother and daughter resulting trust, where Neuberger said where the purchase is in a commercial context, for example, for investment, rental income or capital appreciation, even when the relationship is a familiar one, the reasoning in Stack shouldn’t apply and resulting trusts can apply. Addition support for resulting trusts still having some use is from Lady Hale and Lord Walker in Jones v Kernott who indicated that when domestic partners were also business partners, a resulting trust analysis might be better, even in a domestic context.

Again, these cases give a stark warning for those advising to ensure that couples who purchase property in unequal shares in joint names, whether as investment or their home, that they should be clear as to their intentions for the division of the property or the court may well look at their conduct and decide something for them that neither of them particularly like.

Couples where the property is held legally as joint tenants and expressly in equity as tenants in common or joint tenants

Generally, an express declaration of trust is conclusive as to beneficial ownership (Goodman v Gallant [1986] Fam 106). Where co-owners hold equitable title as tenants in common, they each have a distinct beneficial share of the property which will then dictate the percentage of the proceeds taken by each couple on dissolution of their relationship and sale of the property. The more recent authority of Pankhania v Chandegra [2012] EWCA Civ 1438 re-confirmed that an express declaration as to how the equity is held– in that case as tenants in common in equal shares – and in the absence of the express declaration being set aside, varied or rectified – will trump any argument that the parties intended to hold the property on different terms based on a resulting or constructive trust.

However, note the conflicting dicta on whether or not an express declaration of trust can be varied by subsequent resulting or constructive trust or proprietary estoppel (Lady Hale in Stack v Dowden suggests there could be possible scope for proprietary estoppel, but Norris J in Arif v Anwar & Rehan [2015] EWHC 124 suggests not).

These cases highlight the importance of the role of the solicitor completing the declaration of trust form on the TR1, in particular that solicitor should advise the party contributing financially to take independent legal advice and highlight the consequences of holding the property legally and equitably as joint tenants.

Of course, those separating should also be advised that an equitable joint tenancy can be severed at any time without the other party’s agreement (and even by the parties conduct (see for example  Burgess v Rawnsley [1975] Ch 429 and Greenfield v Greenfield (1979) 38 P & CR 570)).

Situations where one party in the couple legally owns the property

Common intention constructive trust

Where only one of the parties legally owns the property on the title the presumption is that that party owns all the legal and beneficial interest, but that can be rebutted by the other party proving a beneficial interest in the property under a constructive trust (see Oxley v Hiscock [2004] EWCA Civ 546).

In Capehorn v Harris [2015] EWCA Civ 955, the Court of Appeal considered this scenario; one party held the property legally but the other claimed a beneficial interest in it. The court set out the two-stage analysis in order to determine whether a common intention constructive trust has arisen:

1. The party claiming the beneficial interest must show the agreement that there was a beneficial interest (either an express agreement (but the exact percentage doesn’t need to be set out) or conduct from which an agreement to share the beneficial interest can be inferred);
2. One that threshold stage is overcome the court must then quantify the parties interests. Where the court is satisfied that there was an intention to share but is unable to determine their respective shares by reference to the agreement between them (be that express or inferred from their conduct) it is open to the court to impute fair shares.

Resulting Trusts

Resulting trusts can still arise but only in limited circumstances (see above) and this is still the subject of some controversy. For resulting trusts generally see Curley v Parkes [2005] 1 P. & C.R. DG15 where the property was registered in one name and the resulting trust argument failed.

Proprietary estoppel

Proprietary estoppel often arises in family farming cases (for example Thorner v Major [2009] 1 WLR 776 and Davies v Davies [2014] EWCA Civ 568), but it can be applicable in cohabitation cases (Southwell v Blackburn [2014] EWCA Civ 1347). The core elements of the doctrine are: (a) a representation or assurance; (b) reliance thereon; and (c) detriment in consequence of the (reasonable) reliance.

Married or engaged?

In Dibble v Pfluger [2010] EWCA Civ 1005 we were reminded of the importance of section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 which provides that when a couple break off their engagement, property owned during the engagement is subject to the same rules as between husbands and wives, including section 37 of the Matrimonial Proceedings and Property Act 1970 . That provides that where a spouse contributes money or money’s worth to the improvement of real or personal property in which either spouse has a beneficial interest, the contributing spouse (subject to any contrary agreement) acquires a share or an enlarged share in the property.

Conclusion

Despite recommendations from the Law Commission and encouragement from the Supreme Court, Parliament remains reluctant to legislate to untangle the complex law of relationship breakdown and trusts and equity. As such, it is important for those advising couples as to their property interests upon separating to understand the different scenarios that arise depending on whether the property is owned legal in joint or sole names, whether there is an express declaration as to their beneficial interests and whether the property was their home or an investment.