What options do I have if I separate from my partner and we own a property together?
21 April 2021 by Billy Smith
According to the Office of National Statistics, heterosexual and same-sex couples living together without being married are the fastest-growing types of families in the UK. It is therefore becoming increasingly common for situations to arise where cohabitees separate and later argue about what should happen to their property.
What is the Common-Law Marriage Myth?
There is a general misconception that cohabitees retain the same rights as a married couple and that matrimonial law principles, case law, and dicta apply. This is a misconception and the parties are in fact governed by the Civil Procedure Rules (“CPR”) and Section 14 of The Trusts of Land and the Appointment of Trustees Act 1996 (“TLATA 1996”).
Where land is owned by two or more people, they each have a simultaneous interest in the land and are known as “co-owners”. Where a couple acquire a property, they will hold title to it as either beneficial joint tenants or as tenants in common.
The legal owner holds the property on trust for the beneficial owner(s).
Under Section 1 TLATA 1996, the trust created when either the legal or equitable title to a property is co-owned is a trust of land. The terms of the trust are implied by the provisions of the TLATA 1996, although these may be added to or varied by express terms.
If beneficial joint tenants, then a couple will own the whole of their property together and their shares in it will be indivisible. On the death of one co-owner, that co-owner’s interest in the property will pass to the surviving co-owner(s) by law.
If co-owners hold the equitable title as tenants in common, they each have a distinct beneficial share in the property, although those shares have not yet been divided between them. As such, they are often referred to as “undivided shares” because the owners cannot say which piece of the land they own. The right of survivorship does not apply where the beneficial interests in a property are held as tenants in common. This means that when one of the co-owners dies their equitable interest in the property will pass under their will if one is made, or under the intestacy rules.
Generally, if a couple makes unequal contributions towards the purchase price of a property they should be advised to hold the equitable title to their property as tenants in common and would be encouraged to sign a declaration of trust; a document which is separate from the conveyance; which transferred the property to them. It is important that co-owners make an express declaration as to how they intend to hold the beneficial interests in a property to minimise the risk of a future dispute. Such a document typically sets out what shares the co-owners have in the property and guides what should happen to the net proceeds of the property in circumstances where it is later sold.
In circumstances where there has been an irretrievable breakdown of the relationship between co-owners and the cohabitees hold the title as beneficial joint tenants, it would be advisable for them to mutually sever their joint tenancy, or, alternatively, for one party to consider unilaterally severing the joint tenancy so that their respective shares can be alienated from each other.
The Breakdown in the Relationship
Following a breakdown of a relationship, it desirable that the parties should want to achieve a clean break.
Generally, a party will agree to buy out the other (and remortgage the property in order to release the other party from their mortgage payment obligations). If this cannot be achieved, then the parties will typically agree to market and sell their Property and apportion the net sale proceeds accordingly.
In some circumstances, a former partner may (a) be unwilling or unable to facilitate the buy-out of the other’s interest in their property; or (b) be unwilling to market and sell the property.
In either of the aforementioned situations, the proposed claimant would be advised to formally instruct Solicitors to send a letter before claim to the proposed defendant pursuant to the Practice Direction for Pre-Action Conduct and Protocols contained in the CPR.
The letter should discuss the factual circumstances surrounding the dispute, the basis of the prospective claim, and the possible implications that will arise in circumstances where the proposed defendant is unwilling to buy out or agree to the marketing and sale of the property. The same could include the claimant seeking an order for the sale of the property pursuant to Section 14 of TLATA.
The letter before the claim would also set out proposals for the utilisation of Alternative Dispute Resolution (“ADR”). ADR is encouraged by the Courts and may include the parties attending without prejudice meetings mediation or arbitration or engaging in without prejudice correspondence. There can be cost sanctions given in the litigation where parties unreasonably refuse to utilise ADR.
If pre-action steps have proven to be unsuccessful then a claim may be started.
In the proceedings, the Court has the discretion to grant relief by way of making an order for the sale of the property forming the subject matter of the dispute. When determining the application, the Court will have regard to the following factors as set out in Section 15 TLATA:
- The intentions of the person or persons who created the trust;
- The purposes for which the property subject to the trust is held;
- The welfare of any minor who occupies, or might reasonably be expected to occupy, any land subject to the trust as their home (i.e. you will be unable to successfully pursue an application where children under the age of 18 are residing at the property); and
- The interests of any secured creditor of any beneficiary.
The Court will also have discretion over the weight to be given to each of the aforementioned factors and will also consider any other relevant factors.
What is CPR?
Introduced in 1999, the Civil Procedure Rules are a single code of rules setting out how a case is to be conducted and disposed of in England and Wales.
The overriding objective of the rules is to cause parties and the court to dispose of cases justly and proportionately as to cost. This means preserving where possible equality of mechanisms to help the court determine the dispute, minimising expenses, dealing with cases proportionately by taking into account the nature and complexity of the issues in each case. The aim is also to dispose of cases fairly and expeditiously.
After fully exhausting the Pre-Action Protocol, the Proposed Claimant is expected to issue a claim via CPR 7 or CPR 8.
What is CPR 7?
CPR 7, which governs ‘How to Start Proceedings’ is used by litigants to commence an action where there are disputes over facts which lead to there needing to be triable issues.
A proposed claimant is required to file a claim form and a document know as a particulars of claim – which sets out contended for facts and pleads the case. After receipt of the claim, the defendant is obliged to file an acknowledgment of service within 14 days, failing which the claimant could apply for default judgment; an administrative way of achieving judgment by reason of the default of the defendant.
Where an acknowledgement of service is filed and the defendant intends to defend some or all of the claim, they will have a further 14 days in which to file their defence. The parties can agree to extend time to allow the defendant more time to file their defence, or an application to extend time can be made by the defendant if an extension cannot be agreed upon. If a prospective claim carries the potential to exceed £25,000 in the value of the damages being sought, the claim would be most likely be allocated to the multi-track, and a case management conference is usually listed by the Court.
During the course of this hearing, the Court will set out a procedural timetable and order the parties to comply with various directions up to trial. The Court continues to encourage the parties to engage in ADR in an effort to reach an amicable resolution.
What is CPR 8?
CPR 8 contains the alternative procedure for claims. It is utilised where a claim seeks the court’s decision over a matter which does not feature a substantial dispute of fact. A claim form and witness statement are filed with the claim. The defendant has 14 days to file a witness statement in reply but an extension of time can be agreed between the parties without needing to seek the Court’s permission.
The claim is usually automatically be allocated to the multi-track. A case management conference would be listed and a procedural timetable would be set by the Court with the parties obliged to comply with directions up to trial.
Directions up to Trial
Directions made in a claim under Section 14 of TLATA often include the following:
- Service by the parties of any request for further information;
- The appointment of a single joint expert to carry out a valuation of the property that forms the subject-matter of the dispute;
- The parties undertaking standard disclosure; and
- Filing and exchanging witness statements.
A losing party is usually obliged to pay the winning party’s costs in substantial proportion.
Order for Sale and Enforcement
The Court has powers of enforcement where it makes an order for sale pursuant to Section 14 of TLATA.
Where a party fails to comply with the terms of an Order, the Court has the power to do any of the following:
- Order a party remaining in occupation to vacate the Property within a specified timeframe (and potentially enforce the order by way of a writ or warrant for possession);
- Order that a particular party has sole conduct of the sale of the property forming the subject-matter of the dispute; or
- Sign the contract for sale in circumstances where a party refuses to do so and where a proposed buyer has been found and is willing to pay a reasonable price for the property forming the subject-matter of the dispute.
Generally, where there has been an irretrievable breakdown in a relationship between cohabitees, common sense should prevail and a compromise is always best to achieve.
However, where an amicable resolution cannot be found, it is prudent to obtain independent legal advice.
Our specialist team of Dispute Resolution Legal experts are very approachable and often help to find resolution for such disputes without the need for recourse to court action, call 01206 700113 or by email at [email protected].