Guide to finances upon breakdown of cohabitation
When meeting new, unmarried clients who are facing relationship difficulties we will generally discuss two main issues: the children and the financial arrangements. The uncertainty of your future financial security or protection adds a significant additional stress to an already difficult time. Unmarried couples in other jurisdictions, such as Scotland, can expect financial compensation at the end of a relationship where they have suffered a financial disadvantage as a result of the relationship. However, the law in England and Wales puts very limited financial obligations on unmarried couples. The starting position for any separating, unmarried couple is that they each retain assets in their own name. Wherever the couple have a child together the non-resident parent has an obligation to make financial provision for the child. This issue is dealt with in our guide on child financial provision on relationship breakdown – unmarried couples.
The parties will also have to consider how to best deal with any property that they own jointly. It is important to do so especially where the property is subject to a mortgage as remaining as a named party on that mortgage carries risks and can make it difficult to obtain a new one in your own name. The parties should always try to come to an agreement regarding what happens to the property. Often, one party will want to remain in the property. In such circumstances it is important that the vacating party is released from all obligations under the mortgage and receives a fair consideration for their interest. If both parties wish to purchase the other’s interest, difficulties can arise. If they cannot come to an agreement in such circumstances, the property will often have to be sold.
Where one party wishes to release their interest but the other is unable to raise sufficient funds to purchase it and is unwilling to sell the property, the vacating spouse may have to make an application to the court for an order for sale. The court does not have the power to force one party to sell to the other, only to order that the property be sold.
In some cases, even when a property is in joint names, the parties may disagree on their shares. In such cases, and in the absence of an express declaration as to their respective beneficial interests in the form of a trust deed, the starting point will be that where there is joint legal ownership of the property, there will also be (an equal) beneficial ownership. It will then be for the party seeking greater than the half share to prove otherwise, and in looking at that issue the court will seek to ascertain the party’s shared intentions, either actual (based upon evidence of what they said or did at the time of purchase) or in the absence of that inferred from their conduct or imputed.
The fact that a property is in one party’s sole name does not necessarily mean that a claim by the other party cannot be made against it. It may be possible for a party to show that, notwithstanding that the property is held in the sole name of the other, their common intention was that he/she was to have a share. This situation most commonly arises where there is evidence of express discussions to that effect, and the non-earning party has acted upon those discussions to their detriment, or where such a common intention is inferred from the party’s conduct, namely where the non-earning party has contributed directly towards the purchase price of the property or subsequently towards the mortgage.
Alternatively, a party may be able to show that both parties’ intentions changed, subsequent to purchase, as a result of an indirect contribution, for example funding an extension that has added to the value of the property. The party making such a claim must, however, be able to show that the contribution in question was based upon a mutual agreement between the parties that it would result in them acquiring a share in the property.
Recent developments in case law have meant that the law governing property interests between unmarried couples is uncertain. It is therefore strongly recommended that all unmarried couples who live together, or intend to, consider entering into a cohabitation agreement.
If you are interested in discussing finances upon breakdown of cohabitation please see How Vardags can help with finances upon breakdown of cohabitation.