Separating as a result of coronavirus; who gets the equity?

02 Apr

Whilst the government guidance remains in place and the vast majority of the population stay at home, it is not unsurprising that many relationships are likely being placed under considerable strain.


What is the position if covid-19 causes the breakdown of an un-married couple’s relationship but only one of them is the legal owner of the property in which they reside? Do they both have an entitlement to a share of the equity? It is the age-old question but at its foundation, it is important to remember that there is no such thing as a “common law wife” or a “common law husband”.


For unmarried couples, the current status of the law is that a party, who is non-legal owner of a property but who is seeking a share of a property must prove the existence of either an express or an implied agreement to share (i.e. an express or implied trust) and, importantly, that they relied on that agreement to their detriment.


In relation to an express agreement, a Court will look for, per Lord Bridge in Lloyds Bank v Rosset [1991] 1 A.C 107 (“Rosset”) an “arrangement to share … based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been”. Of course, the non-legal owner must also show that he “has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel…”


Lord Bridge in Rosset continued, in relation to implied trusts:


“where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.


Since 1991, it is largely accepted that the law has moved on; contributions other than “direct payments of the mortgage instalments” may be sufficient to acquire an interest in property under an implied trust.


In the recent decision of Pillmoor v Miah [2019] EWHC 3696 (Ch) HHJ Kramer (sitting as a High Court Judge) summarised the current state of the law and considered some of the authorities since Rosset and what is now referred to as the “modified approach” to determining whether an implied trust can be found.


The cases to which HHJ Kramer was referred highlight that contributions to a family business and/or provision of labour in respect of improvements to a property are insufficient conduct to demonstrate the necessary implied common intention. Similarly, it has also been said that looking after the family, the existence of a long relationship and DIY will not meet the threshold.


HHJ Kramer’s judgment is interesting in its entirety but he, at various points, notes the threshold and burden on a Claimant remains high “what comes out of these cases is that in sole name cases the circumstances which can lead to the inference that there was to be an agreement as to the sharing of the beneficial interest need to be exceptional before one can draw that inference…”


It was also noted at paragraph 41 that “payment, for instance, of the domestic council tax and the general running cost on the house would not be payments which justified an inference that there was the requisite intention. Unless he [the Judge at first instance] could make a finding, which he certainly didn’t, as to precisely what was being paid out of what he said was pooled money, he wasn’t in a position to find that there was a financial contribution which could give rise to the inference which he subsequently drew …”


HHJ Kramer continued at paragraph 42 “the Judge, faced with limited and contradictory evidence, should not make an evidential leap between that which he has been told and the information he would require in order to come to a conclusion. If the position is that the evidence is unclear, the court should not adopt the approach […] of the court doing the best it can on the evidence available to it, however inadequate”.


Fundamentally, a Court must be concerned with the parties intentions with regards to a property and, often, as was noted in James v Thomas and as referred to by HHJ Kramer, “it is a mistake to think that the motives which lead parties in such a relationship to act as they do are necessarily attributable to pecuniary self-interest” and similarly, from Morris v Morris “[…] it has been said in a number of cases that the court should be cautious before finding that activities of a wife or cohabitant can only be explained on the footing that she believes she was acquiring an interest in land”


So, what will be sufficient for the necessary inference to be drawn?


Each case will turn on its own merits and factual matrix however, the inference of a common intention to share has been found in cases such as Le Foe v Le Foe [2001] All ER (D) 325 (Jun) where contributions to household expenditure by a cohabiting non-legal owner meant that the legal owner was able to afford to make the mortgage payments i.e. they contributed indirectly to the mortgage.


The law may have moved on since Rosset but, as HHJ Kramer’s judgment highlights, the extent of the movement is limited. In time, the Cohabitation Rights Bill may offer, if it is passed (the merits of which are for a different article), some basic protection to long-term cohabitants. Otherwise, cohabitants may wish to consider better protecting their legal position with the drafting of a cohabitation agreement.


Article by Stuart Snow – Nothing in this article is intended to be legal advice. Readers may contact should they wish formal legal advice on their particular circumstances.

This set comes recommended for its members' expertise in children and matrimonial finance matters. The children cases range across both public and private law work, and include those concerning non-accidental injury, sexual abuse and fabricated illness. On the financial side, the set's barristers demonstrate the ability to act in substantial financial remedies cases as well as Schedule 1 and TOLATA matters.

~ Chambers UK Bar Guide 2020

Specialising in matrimonial finance and children matters. Members appear in the regional courts as well as the High Court and the Court of Appeal. They often act in financial remedy proceedings relating to farms, companies, properties and other assets. In addition they are adept at dealing with serious child care allegations including physical abuse and death.

~ Chambers UK Bar Guide 2019

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