The importance of getting the paperwork right when it comes to jointly owning a property as cohabitees has been spelled out by another costly court battle.
In this case, a cohabiting couple – Jayne Hathway and Lee Hudson – bought a home in joint names without a declaration of trust confirming what share of the property they each owned.
When they parted, they agreed via email that Ms Hathway would keep their jointly owned home and Mr Hudson would keep his other assets.
However, some years later when the relationship between them deteriorated, Mr Hudson tried to go back on this agreement by seeking the sale of the house and half its proceeds.
On appeal, the judge awarded the entire beneficial ownership of the house to Ms Hathway.
What is the background to this cohabiting dispute?
Jayne Hathway and Lee Hudson separated in 2009, two years after purchasing a family home in joint names.
They had two sons but never married and although they both contributed to the mortgage, from their joint account, Mr Hudson’s contributions were far more than Ms Hathway’s contributions. They subsequently separated.
In 2011, the house was affected by an oil spill which significantly reduced its value. Mr Hudson then described it as a bad asset and the parties agreed some financial terms, via email, which included Ms Hathway keeping the house.
However, in October 2019, Mr Hudson issued a claim for the house to be sold and the proceeds divided equally.
Although Ms Hathway agreed to sell the house, she did not agree to split the proceeds equally. She contended that she was entitled to the whole proceeds of sale as she had relied on their email agreement to her detriment, including paying the mortgage in full from 2015.
What did the judge decide?
The judge dismissed Mr Hudson’s claim and declared Ms Hathway the sole equitable owner.
He found that Ms Hathway had acted to her detriment by foregoing a claim against Mr Hudson’s other assets. Mr Hudson appealed on the basis that Ms Hathway had no rights to his other assets as they were not married therefore she had not acted to her detriment.
Ms Hathway argued that there was no need to show detriment when there is proof of a contrary intention to alter the beneficial shares (the proof being the email where Mr Hudson said she could keep the house).
Judge Mr Justice Kerr found that the existence of an agreement is more than a promise and that an express agreement is evidence of the necessary common intention. In his judgment, he found that an express agreement as to beneficial shares can itself supply the necessary detriment.
Ms Hathway won the appeal and was entitled to the property as the sole beneficial owner.
Mr Hudson has been given permission to appeal to the Court of Appeal so we will have to wait to see the final outcome.
The resulting decision will hopefully answer the question: “Must a party claiming a subsequent increase in her equitable share necessarily have acted to her detriment? Or does a common intention alone suffice to alter the beneficial shares?”
How can I safely buy property with a cohabiting partner?
When it comes to buying a property together, cohabiting couples currently don’t have the same automatic legal rights as married couples.
In Ms Hathway’s and Mr Hudson’s case, a Declaration of Trust could have saved them a lot of time, stress and expense.
A Declaration of Trust is a legally binding written document which records things like what share of the property each cohabitee owns, how the proceeds of sale will be divided if the property is sold as well as things like who is going to pay the mortgage and in what proportions.
It can be drawn up at any time, and not just at the time of a property purchase. In Ms Hathway and Mr Hudson’s case, a subsequent separation agreement documenting the asset distribution at the time of the split could have negated the need for expensive litigation.
What does our Cohabitation Disputes specialist lawyer, Lucia Mills, say?
“Purchasing a property with a partner when you are not married can potentially give rise to certain problems which are often overlooked at the time.
“Speaking to a solicitor before you take this step will often give a much-needed sense of perspective and allow you to take the necessary steps to protect your interests.
“However, if you have not been able to seek advice before the relationship has ended, and a dispute has arisen, then we are also here to try and guide you through this difficult time and in most cases reach an agreement.”
Get in touch
For expert advice, please contact Wards Solicitors’ Cohabitation specialist, Lucia Mills, a recommended lawyer in the independent Legal 500 guide for 2023.
As well as providing advice on setting up a cohabitation agreement or declaration of trust, she can also help if things go wrong and these are not in place. In the event of a relationship breakdown, she will always do everything possible to help resolve differences by negotiation, mediation or as a last resort, going to court.
Email Lucia: firstname.lastname@example.org
Phone Lucia: 0117 929 2811