Cases that involve unmarried couples and their home

For most of us, buying a home will be the most significant purchase of our lives. It would be nice to think that the law relating to property ownership is clear and straightforward. And, to an extent, it is. But there are often complicating factors which can make these cases difficult. Before we consider what these might be, a word of warning. When it comes to home ownership and the law, there is quite a bit of jargon.

Let’s start with the easy part: legal ownership. You become the legal owner of your home if you register your name against the property with the Land Registry. You might be a sole legal owner, or you may share legal ownership with your partner and/or someone else.

What can a legal owner do? In short, sign paperwork relating to the property and, when the time comes, sell it.

And when the property is sold, who gets the money? Surprisingly, it may not be the legal owner. It will instead be the beneficial owner. This is the person who benefits from the property.

In many cases the legal and beneficial owners are one and the same. When a couple buy a home they can agree to register themselves as joint legal owners and that they are joint beneficial owners.

There’s another important point to bear in mind:there are two types of beneficial ownership. It’s best to think about two scenarios:

1. First, a couple buys a house intending it to be a home for their young family. In this example they probably won’t be too worried about how much each of them paid towards the purchase price. The property is a home after all, not an investment. So the couple are happy to be joint tenants.

   This means that they own the property as, in effect, one and the same person. So if one of the owners dies, their share of the property simply passes to the surviving partner. If they fall out and separate, when the property is sold the proceeds will be split 50/50.

2. Now imagine a different scenario. Let’s say two friends want to buy a flat together as an investment property. They aren’t a couple and they have contributed different amounts to the purchase price.

   In this example, they don’t want to be treated as a single person. And they don’t want to hold the property in equal shares. So they decide to be beneficial owners as tenants in common. So they agree to hold the property in shares of, say 60/40.

   And, since they have separate shares in the property, if they want they can that pass those separate shares to family members in their will.

Establishing legal ownership is straightforward. Usually it’s simply a matter of checking the Land Registry records.

Problems can arise however when considering beneficial ownership. This ownership need not be recorded and thus there is room for argument about who has shares in the home, and how big those shares might be.

The court has two important powers:

1. It can decide who owns the property and in what shares
2. It can order that the property be sold and the proceeds divided between the owners

The court has to look at the following factors in particular:

• the intentions of the person or persons (if any) who were involved in purchasing the property
• the purposes for which the property is held
• the welfare of any minor who occupies or might reasonably be expected to occupy the property
• the interests of anyone who has a lent money to the owners, such loans being secured against the home

The starting point is that a sole legal owner is also the sole beneficial owner. And, conversely, joint legal owners are also joint beneficial owners in equal shares. Things may get more complicated however if, for example.

• There are two legal owners but one owners suggests that he paid more towards the purchase price than the other and is therefore entitled to a greater share
• There are two legal owners but one suggests that there was an unwritten agreement that they would not share the property 50/50
• There is one legal owner but the other cohabitant made a contribution to the purchase price and argues that she should have a beneficial share in the property
• The legal owners agreed their respective shares when the property was bought. Later on however one cohabitant says that they entitled to a bigger share because they paid for recent improvements to the property
• Grandparents or other family member helped with the purchase price and now want to recover their contribution
• After separation one partner stays in the home for many years – paying the mortgage, keeping the property in good repair – and asks for a greater share of the sale proceeds as a result

In these situations the court will carefully examine all the documents created when the property was purchased. The key aspect is to work out what the owners intended when they bought the property.

There is likely to be a first hearing when the judge will consider the issues in the case, and require both sides to provide further documents and make the case ready for a final hearing. This is called a directions hearing. The matter may then be listed for a final hearing.

Alternatively, if the case is complex, or if the issues are unclear, the judge may direct that there should be another directions hearing in a month or two’s time.

Final hearings vary in length but typically require at least a day.

It is very important to understand that the losing party may well be required to pay the legal costs of the successful party. The way to avoid a costs order of this sort is to make a sensible offer of settlement to the other side. That should be done as soon as is possible.