There is a danger amongst unmarried partners of a party relying on the myth of “common law partner” and a false belief that they have the same financial rights as married couples should the relationship come to an end. This belief in the myth can result in devastating financial consequences especially for those who may be the financially weaker party in long term cohabiting relationship.
The reality is that unmarried partners do not have the same legal protections or rights in England and Wales as a married couple when it comes to dividing finances in the event of a separation regardless of the duration of the relationship.
When seeking a financial settlement following a divorce, married couples can make an application under the Matrimonial Causes Act (MCA)1973 to the Family court. Judges in the Family courts have wide discretion when splitting matrimonial assets with needs, equality and fairness being the overriding principles behind any settlement. Importantly, assets in joint and sole names of the parties can be considered matrimonial assets and can be factored into any agreement. This can allow married couples to claim against all matrimonial assets of the marriage, including pensions, properties and savings even if they are held in the name if one party.
As cohabiting relationships fall under “civil law” the law that guides judges in these cases are found in old land law acts such as Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). Unmarried partners will discover that they are only able to claim against assets that are held in joint names. This can be problematic, for example when the family home is registered in the sole name of one party. In civil matters equity follows the law and therefore the presumption is that the property is held how it is recorded, often in the TR1 or within a declaration of trust. If it is recorded that the property is held as joint tenants, this can be a relatively straight forward case as both parties will hold a 50% share in the property, irrelevant of contributions. However, when the family home is registered in the sole name of the party, then the other party would need to be able to evidence that the intention of the parties on how the property was to be held is different to how it has been recorded. In the absence of a declaration of trust setting out the ownership of a property, there are two mains ways that a party can establish ownership in a property; evidencing beneficial interest or via a cohabitation agreement.
Beneficial / equitable interest
A party can seek to establish that they have a beneficial interest in the property by way of an implied trust. A trust can arise through the financial contributions of one party towards the property, for example towards the purchase price or contributions towards the mortgage payments. There are two types of implied trust; Resulting and Constructive trusts.
Resulting trusts
A resulting trust is created and established through a party financially contributing to the properties purchase price, or mortgage.
Constructive trust
In order to establish that a constructive trust exists, the party must be able to demonstrate and evidence that the parties had a common intention to share ownership of the property, and that the party has acted in their detriment based on this intention.
Cohabitation agreements
A cohabitation agreement is a legal document which sets out the arrangements for financial and children matters in the event that the relationship breaks down. Whilst this may not be the most romantic conversation to have with your partner having an agreement in place can help avoid conflict should the relationship breakdown. Cohabitation agreements can include terms covering a wide range of issues that can arise after a break-up including how to share rent or mortgage payments, how to deal with bank accounts, property and pets.
Horwood & James LLP offers advice on all areas of Family Law. For more information or to make an appointment contact 01296 487361 or enquiries@horwoodjames.co.uk.
