Cohabiting couples who buy a property together may find themselves in the unfortunate situation where the relationship between them has ended, but they continue to share a property together.  

Unlike married couples, cohabitants do not benefit from the legal protections provided by matrimonial law. Instead, disputes about cohabiting parties’ interests in property are resolved under property law and trust law principles. 

Joint names  

In many cases, both parties will be recorded at the HM Land Registry as the registered owners of the property. When the property is registered in both parties’ names, they hold the property under a trust of land. The parties may hold the beneficial interest in the property as “joint tenants” or “tenants in common”. 

Joint tenancy means that neither party has a distinct share in the property – they each own the whole. On the death of one joint tenant, the property automatically passes to the surviving joint tenant. This is known as the right of survivorship. As a result, the property does not pass according to the deceased’s party’s will or under the Intestacy rules. 

If the property is held as tenants in common, each party has a distinct share in the property. The parties may hold the property as tenants in common in equal shares (i.e. 50/50) or unequal shares (i.e. 70/30). The right of survivorship does not apply, and each party’s beneficial interest in the property will pass according to their will or under the Intestacy rules. 

It is often the case that when property is purchased in joint names, the parties enter into an express declaration of trust in the transfer form (Form TR1) at box 10. It is also possible for the parties to enter into a separate declaration of trust setting out the terms agreed between them. Where there is an express declaration of trust, the parties will generally be bound by it in the absence of fraud or mistake. 

It is often the case that, upon separation, one of the parties will argue that they are entitled to a larger interest in the property based on larger financial contributions. However, where an express declaration of trust has been entered into, unequal contributions to the purchase price count for nothing.  

For example purposes only, where there is an express declaration of trust providing that the parties hold the property on trust for themselves as tenants in common in equal shares, but one party pays 80% of the deposit (which is common place in romantic relationships), the party paying 80% cannot, at the end of the relationship, claim an 80% interest in the property because they paid 80% of the deposit. They are stuck with what they agreed to at the time of purchase. 

It is possible for the parties to change the agreement over time. An express declaration of trust is conclusive as to the parties’ beneficial interests as at the date of completion, but it can later be varied by an agreement or a (so-called) proprietary estoppel. 

Where the property is transferred to or registered in both parties’ names, but there is no express declaration of trust, there is a presumption that the parties hold the property in equal shares. This presumption was established in the landmark case of Stack v Dowden [2007] UKHL 17. The presumption applies even where the parties have paid for the property in unequal shares. It is possible to rebut this presumption by evidence of a contrary intention. 

Sole names 

If only one party is registered as the legal proprietor of the property, there is a presumption that there is no trust of land and the registered owner is the sole beneficial owner. In such a case, the party not on the title (let’s call them ‘Party B’) must prove that they have a beneficial interest in the property. 

Most commonly, a beneficial interest will arise as a result of an agreement with the legal owner to share the beneficial ownership. It may be the case that Party B can provide evidence of an express agreement to share the beneficial ownership. If that is the case, Party B must also show that they have acted to their detriment, by carrying out renovation works, for example.  

If there is no evidence that an express agreement was reached between the parties, the court may rely on the conduct of the parties to infer a common intention to share the beneficial ownership of the property. For example, where party B’s contribution to the purchase price or payments of the mortgage can only be explained on the basis that the parties agreed to share the beneficial ownership, the court will infer a common intention. 

Remedies 

It is often the case that, on the breakdown of the relationship, one party will move out of the property while the other party remains in occupation of the property and pays the mortgage repayments. If the party remaining in occupation is able and willing to purchase the other party’s interest in the property (and the other party agrees to sell their interest in the property), then the parties will need to agree on the value of their respective interest in the property. Unfortunately, it is often the case that parties are unable to agree on their respective interest in the property and therefore, how much should be paid. 

Common areas of dispute include: 

• Unequal contributions to the purchase price, mortgage payments and household expenses 

• Claims for reimbursement of money spent on renovating the property and on home improvements (such as extensions and new bathrooms/kitchens) 

• The value that should be attributed to a party’s beneficial interest in the property 

Once the parties are in agreement as to their respective beneficial interests in the property, it may be necessary to obtain a valuation of the property in order to value those beneficial interests. It is important to take into account any mortgages or charges on the property when determining the value of the parties’ respective interests in the property.  

If the parties are unable to reach an agreement, either party can make an application to the court for a declaration as to the parties’ beneficial interest in the property. 

The court aims to achieve a fair outcome, but is limited by the evidence presented. Judges cannot “redistribute” property like they can in divorce cases. Instead, they apply strict legal principles to determine ownership and financial entitlements. If the court is able to determine what the parties agreed, the agreement overrides any consideration of what is fair. 

It is also possible for either of the parties to make an application to the court for an order that the property is sold and the proceeds of sale be shared in accordance with the parties’ beneficial interest (as determined by the court or as agreed between the parties). This may be necessary where neither party can afford to purchase the other’s interest in the property, but one of the parties is refusing to sell. 

Disputes regarding the beneficial ownership of property arise in a number of different contexts, including between family members and business associates who may have bought a property for investment purposes, rather than as a family home. There are different considerations that will apply in those cases. 

If you need any advice regarding a dispute in relation to your beneficial interest in a property, please contact Davis Blank Furniss LLP on 0161 832 3304 and ask to speak to a member of the Property Litigation Department.