Most people have heard the phrase “common-law” marriage. However, this is a myth. For more information on this topic, please read my colleague’s article here.
If you and your partner are not married, you do not have the same financial protections which are given to married couples or couples in a civil partnership – and dealing with any property is no exception.
For most people, their home is a significant asset and the fear of not getting back what they put in, or having their contribution recognised, can be incredibly distressing.
Any dispute between an unmarried couple over the property is subject to trust, equity and land law principles.
The starting point is always to look at how the property is owned i.e. as Joint Tenants or as Tenants in Common, which can be determined from the property’s title register.
Where a couple, whether married or not, own a property as Joint Tenants they are considered to be joint and equal owners. The presumption is that they each own the property equally (i.e. 50:50) and therefore the whole of the property automatically passes to the survivor when one of the joint owners dies.
Tenants in Common
The other type of joint ownership is called 'tenancy in common'. Tenants in common are treated in law as if they owned distinct shares in the property. When a tenant in common dies, that person's share passes in accordance with the terms of his or her Will, or under the rules governing intestacy if there is no Will.
If the shares in the property are held unequally, this is normally evidenced by a Declaration of Trust.
Declaration of Trust
A Declaration of trust is a legally binding written document recording the terms of an agreement.
It can be drawn up at any time, in other words, not just at the time of purchase. It is always advisable to have a Declaration of Trust drawn up where, for example, one owner invests a substantial amount of their own money to renovate the property, or makes greater mortgage payments at a later date, or introduces more towards the purchase price.
In the absence of a Declaration of Trust, if you own the property as tenants in common, there is a risk that you will receive less than you might expect to receive i.e. an equal share of the net proceeds of sale.
If the property is being sold because of a breakdown in the relationship, then this only serves to make an already difficult time, much worse. You may even find yourself having to bear the significant financial burden of going to court to prove why your share has changed from that as documented.
What does the law say if my partner and I, having owned the property jointly, came to an agreement between us that our respective 50:50 shares would differ, but did not sign a Declaration of Trust setting this out?
This very situation was explored in the recent appeal case of Hudson v Hathway  EWHC 631 (QB),  All ER (D) 76 (Mar).
The legal position is set out in statute, under the Trusts of Land and Appointment of Trustees Act 1996 (ToLATA).
ToLATA court proceedings are very fact specific. Not only are the court’s powers narrow, so that judges have far less discretion than in family law proceedings between married couples, they also carry far greater costs consequences.
In this case, Ms Hathway and Mr Hudson bought a family home together in joint names in 2007. They did not have a Declaration of Trust. They had two children but never married.
In 2009, Mr Hudson and Ms Hathway separated. At the time of separation, Mr Hudson had substantially paid the mortgage on the family home. Ms Hathway continued to live in the family home with their two sons.
In 2011, the family home was affected by an oil spill which significantly reduced its value and made it difficult to sell. Mr Hudson described the property as a “bad asset” and agreed with Ms Hathway, by email, that she would get the whole of the property and its contents, whilst he would retain his shares and his pension.
Quite some time passed and relations between Mr Hudson and Ms Hathway deteriorated. In October 2019, Mr Hudson issued a claim for the sale of house and for the proceeds to be divided equally. Although, Ms Hathway agreed that the house should be sold she did not agree to split the proceeds equally, relying on the email exchanges in 2011. Ms Hathway said that she had relied on their agreement to her detriment.
The judge at trial found that Ms Hathway was entitled to the full proceeds of sale, despite the emails not satisfying the formalities required in ToLATA claims for transferring legal title or a declaration of trust. The judge also found that Ms Hathway had acted to her detriment by not making any claims against Mr Hudson’s shares and pensions.
Mr Hudson appealed the trial judge’s decision pointing out that Ms Hathway cannot have acted to her detriment by forgoing any claims to his other assets because they were not married and therefore she wasn’t entitled to make a claim against them. The appeal judge had to decide whether detriment was necessary in such a case.
The appeal judge referred heavily to existing case law and concluded that in a case involving a family home bought in the joint names of an unmarried couple, who are both responsible for any mortgage, but without any express declaration of their beneficial interests, there is no need to show detriment or a change of position in order to succeed.
However, the judge stressed that the burden is always on the person denying the other’s interest exists (i.e. Ms Hathway in this case) to persuade the court that it would otherwise be unconscionable not to find in their favour.
What can we learn from this?
Every case is going to be fact specific.
Whilst the case of Hudson v Hathway shows that it is possible to establish interests different to those recorded on paper (and in the absence of a Declaration of Trust), it does emphasise that there is no automatic right, and the burden of proof will be on the party trying to seek a different share in the property to that recorded at the Land Registry. The court will need to be persuaded that it would be unfair and unjust (unconscionable) not to find in favour of the party seeking the greater interest.
In the case of Hudson v Hathway, email exchanges clearly setting out Mr Hudson and Ms Hathway’s agreement that Ms Hathway would receive all of the interest in the family home was sufficient evidence to persuade the court.
If you are experiencing a similar situation, or you would like to take advice on ToLATA claims, please do not hesitate to get in contact with a member of our family team.