Property Law encapsulates the creation and protection of property estates and interests over land. Estates in land comprise of permanent and temporary ownerships of estates.
Temporary ownership is where owners enjoy possession of their land for a limited time, which is also known as leases. Interest in land also includes property rights given to a third party, who would enjoy certain privileges on the land, via an option to purchase land or mortgages.
When it comes to the actual ownership of estates in land, more than one person is able to own a piece of land at the same time. The chapter governing the ownership of land by multiple owners is known as co-ownership. Co-ownership is when two or more people enjoy concurrent ownership of a piece of land. Owners may be related to each other or can be total strangers. For example, a property may be owned by siblings, friends, married couples, cohabiting couples, business partners, or even by investors. The current issue concerning this area of law deals with cohabiting couples: when the relationship breaks down, what happens if a cohabitee is sharing a property without having contributed towards the purchase of the said property or without having spoken about any respective ownership in that property? It is crucial to have a brief understanding of the existence of a trust before diving into such a cohabitation. Ownership of property generally involves ownership at law and ownership in equity. Accordingly, ownership of property comprises of ownership of the legal estate and equitable estate. The legal title is subject to a trust of land, which may be held by two or more people for themselves and/or any number of others on the equitable estate. This means that while the legal owner is the owner in equity, the owner in equity may not necessarily be the legal owner. This is a unique position in the UK.
Consequently, if cohabiting partners do not make any declaration as to their entitlement in a property and only one of the partners were to be named on the legal title, the challenge would then be how to determine each partner's share in that property, especially since there is no statute governing such distribution in the event of a breakdown of a cohabitation. There are currently two methods to assist cohabiting parties in determining their share in such situations. Firstly, the cohabiting couple may expressly declare their beneficial interest in a written document. This is done by complying with the requirements set out in section 53(1)(b) of the Law of Property Act 1925, which is where the couple states how much of a share or interest each partner owns in the property. Once such declaration is made, it will be recorded in the title of the property and registered at the Land Registry. It is this declaration that the courts will refer to in the event the court is required to decide on the share each partner in the relationship is entitled to.
The second method deals with the problem when no written or express declaration is made on the share of each partner, leading to a dispute as to who owns how much of the property. This is because there is no statutory protection afforded to assist the couple in determining the amount of shares each of them will be entitled to when their relationship ends. It becomes more of a challenge for the partner who is not on the legal title, especially if they had spent money and effort in the said property, such as using their savings to renovate the property, spending money on landscaping, or even taking the time to look after the property and children from the relationship. On record, these partners are not registered as owners and therefore have no entitlement to any percentage of a share in the property.
In comparison, couples in a legal marriage do not have to concern themselves with expressly declaring their shares in the property, even in writing. In the event of a relationship breakdown, their shares will be distributed according to the Matrimonial Causes Act 1973. Each spouse has automatic spouse' matrimonial home rights and will be entitled to a share in the property regardless of whether they had directly contributed towards the purchase of the property or indirectly contributed by maintaining the property and looking after their children's expenses. This entitlement is not afforded to couples who choose to cohabitate. The only recourse available for cohabiting couples in the UK is to seek the assistance of the courts to determine their shares through a concept known as implied trust. As explained earlier, the ownership of property comprises of legal ownership and equitable ownership. The implied trust concept is where the courts award a certain amount of share in the equitable title to the partner who is not on the legal title of the property. Since the true owner of a property is the equitable owner, the legal owner will then be bound to hold the property on trust on behalf of themselves and their partner. This means that their co-ownership will consist of one legal title owner and two equitable title owners.
Over the years, courts have devised a mechanism to award equitable shares through implied trust, which consists of resulting trust and constructive trust. Constructive trust has become the most popular method for an aggrieved partner to claim a share in a property, and the courts have been fine-tuning the relevant guidelines and tests in effort to achieve justice for these aggrieved partners. Through constructive trust, courts may consider the parties’ whole course of dealings throughout their relationship in order to determine a fair share.
More recently, the decision of the Supreme Court in the case of Jones v Kernott (2011) has resulted in a new controversy as to the court’s application of this consideration. In that case, the Justices agreed that in the event there are no dealings between parties available for consideration, the courts themselves may determine a fair share on behalf of the claimant.
A Cohabitation Rights Bill was introduced in Parliament in 2020, while former Prime Minister David Cameron had proposed it twice. The Cohabitation Rights Bill aims to improve this situation by proposing changes in the law which will allow couples with children, or couples without children who have lived together for two or more years, the right to apply for a financial settlement. However, there have been no developments since.
This may be because there is recognition that it is difficult to replace the courts’ flexible mechanism of awarding a beneficial interest with a statutory scheme, especially in a situation where “one size does not fit all.” At the moment, it may be prudent for parties of a cohabiting relationship to take the time to write and re-write their intentions in black and white, as this will guarantee some form of certainty with regard to their ownership in a property.