Cohabitation Disputes

A ‘common law marriage’, where a couple have lived together but are not ‘legally’ married or haven’t gone through the legal requirements for a civil partnership, is notrecognised by the Courts of England and Wales.

Parties to such relationships are usually ‘cohabitants’ and they are treated very differently from married couples, in particular in their property rights, their rights in relation to children and their rights on death.

The Family Law Act 1996 defines a person’s right of occupation in the home in which they have lived with a partner, according to the nature of the relationship.

Unmarried couples who have not been engaged have to rely upon the rules of equity to establish their property rights. Engaged or formerly engaged couples can determine their property rights under the Married Women’s Property Act 1882 and subsequent legislation.

Parents have a financial responsibility to provide for their children, irrespective of the relationship between the parents.

Unmarried couples are treated less favourably than married couples for tax relief allowances but may benefit from additional CGT allowances if they have two separate residences.

A cohabitant may be able to claim against the estate of a deceased ‘partner’ pursuant to the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision. Section 1A entitles a cohabitant to claim as of right, if living in the same household as the deceased for two years before the death as husband or wife, the relationship being determined by the range of relationships, not necessarily requiring a sexual relationship. Alternatively, under s 1(1)(e), an applicant must show that they were being wholly or partly maintained by the deceased immediately before the death.

Definitions of cohabitation from decided Court cases

The various factors that show a couple were living together as husband and wife include:

• living together in the same household;
• the way in which financial issues are being handled;
• a sexual relationship; although,
• other matters may be taken into account by the court.

In determining whether there had been pre-marriage cohabitation, the definition is slightly widened so that it involves a mutual commitment by two parties to make their lives together in emotional and practical terms, for example there is often a ‘pooling’ of the finances. A similar approach is likely to be taken regarding pre-civil partnership cohabitation.

Cohabitation Contracts

Cohabitation contracts enable partners who live together to regulate their affairs. In the past, cohabitation contracts were held to be void for reasons of public policy. Nowadays, the courts recognise that many couples choose to cohabit outside of marriage or civil partnership. Such a contract is the best evidence of what was intended by the parties in the event of a subsequent breakdown in the relationship.

Terms and drafting

Drafting an agreement demands much care. To counter allegations of undue influence, it is important that:-

• the parties enter into the agreement freely and voluntarily;
• both have the benefit of independent, competent legal advice;
• full relevant financial disclosure is made.

The agreement should be formally recorded in writing to avoid disputes about the terms and to satisfy the requirements of the Law of Property Act 1925 if there is a declaration of property interest.

When a home is purchased, recording what was agreed in detail is very important. A clear definition in the agreement of the interest each paerson is to have in the property will usually determine the parties’ beneficial interests. Provision can be made for this to change if, for example, the parties have a child.

A deed should be used to avoid doubt about ‘consideration’ for the agreement, a requirement for a contract to be legally valid. Consideration is found by the exchange of mutual promises or by one party giving up something, e.g. a secure tenancy. The terms can be wide ranging to cover matters that are not legal obligations, e.g. how much time the partners spend with each other. However, the court will only enforce legal obligations, generally under the Laws of Property, Trusts and Contract. An important inclusion would be a provision that each paragraph of the agreement is ‘severable’ to ensure that any part of the agreement that is not enforceable does not void the entire agreement.

Variation

Parties are always able to vary their agreement. Any variation should similarly be recorded in writing and by Deed where appropriate.

Financial provision

The range of financial claims available to a spouse is not available to a cohabitant. However, an agreement to make payment of a capital sum or a periodic payment during the relationship, for example to meet the expense in running the home, or in the event that the relationship ends, can be included. A careful and clear definition is required for the amount to be paid, the method of calculation (i.e. a fixed amount of percentage of income); when payments end (e.g. on marriage); and what happens if, for example, one party has another child. An agreement providing for payment of maintenance whether during or after the relationship ends may succeed, as a contractual term, but may still be void for reasons of public policy.

Provision for Children

Child maintenance payments may be agreed in the event of separation. This will not, however, prevent an application being made for child support. By written agreement, parents can ask the court to make an agreed order for child periodical payments but this will only prevent the involvement of the Child Support Agency for one year, two months and two days.

An agreement to sign a Parental Responsibility Agreement on the birth of any children or defining where the child lives after separation is not strictly enforceable but may be very relevant if there is a subsequent dispute.

Trusts of Land and Appointment of Trustees Act 1996

Where parties cohabit and their relationship breaks down, if they are unable to reach an agreement as to how the equity in a former family home should be divided they may bring an application under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996). Under s14 of that Act an application may be made by a trustee of land or a beneficiary with an interest in property subject to a trust of land. The court has a broad discretionary range of powers to make orders regarding the exercise of the trustees’ functions or to the nature and extent of beneficiaries’ interests, including requiring a sale within a certain period of time or the postponement of any sale.

Beneficial interests are determined and declared under established principles of trust law. In the case of Stack v Dowden the House of Lords issued guidance for cohabitant disputes, including:-

• check the documents of title: if they declare the legal and beneficial ownership of the property, they are usually determinative;
• establish first whether a property is in shared ownership, and then quantify the parties’ shares;
• find proof of any intention to share the beneficial ownership of the property that displaces the assumption that beneficial interests do follow the legal title;
• ascertain whether the parties’ intentions in relation to beneficial ownership are express, implied or imputed;
• TOLATA 1996, s 15 requires a court to consider a checklist under TOLATA 1996, s 14, to include:-
• the intention of the trust creator or creators;
• the purposes for which the property subject to the trust is held;
• the welfare of any minor;
• the interests of any secured creditor.

The current position in relation to beneficial and legal interests on separation (dependant on the facts of each case) should be clarified very soon once a decision is reached in a case that is currently on Appeal to the Supreme Court.

Proceedings are commenced in either:-

• the High Court (Chancery or Family Division)
• the County Court for the area in which the property is situated or where the defendant to the application resides.

The court has power under the Civil Procedure Rules 1998 (CPR 1998) Part 30 to transfer cases between courts and between divisions.

Legal or Beneficial interest?

The legal interest is the way in which the property is ‘held’ (owned), i.e. who’s name is on the Deeds (unregistered land) /who is the named proprietor (registered land). The Court will not usually ‘go behind’ the legal title, that is if a property is owned in one parties’ sole name then they are the legal and beneficial owner. If it is owned in the parties’ joint names then they each have a 50% interest. For property owned as ‘Tenants in Common’ i.e. where each party owns an identifiable share e.g. 30% (say the proportion of contribution made towards the purchase), then again the Court will rarely ‘go behind’ the legal title and will view the parties’ respective shares as 70/30.

A beneficial interest is acquired by virtue of a contribution made towards the property, be this payment of or towards a mortgage or a lump sum contribution – for example to install a new kitchen or to fund an extension. The payment of household bills or for food will not usually be taken into account, as these need to be paid regardless of the terms of occupation.

Occupation of the Family Home

Part 4 of the Family Law Act 1996 governs rights to apply for Occupation Orders. Beneficiaries have rights of occupation under TOLATA 1996. If a claimant establishes a beneficial interest in the property, the court may determine the occupational rights that result under the trust. The parties may have contractual or other equitable rights that confer a right of occupation. If an applicant fails to establish a beneficial interest in a property or a statutory right to occupy, they may demonstrate a contractual licence to remain there resulting from the property owner’s conduct.

Licences

Where the family home is owned/rented in the sole name of one party while they live together the owner/tenant gives the other a licence to occupy their home. If no consideration (money or money’s worth e.g. surrendering a secured tenancy) is given and the relationship breaks down, the owner may recover exclusive possession by giving the other ‘notice to quit’. If the licencee has given up a right or suffered detriment to live with the owner, a contractual licence may be established enabling the occupant to remain at the property:-

• for life or while the property is needed to care for children of the relationship; or
• subject to reasonable notice, so that immediate possession will not be provided.

A licence by estoppel may also arise if the property owner leads the other to believe that the right of exclusive possession will not be enforced and the other person acts to their detriment in reliance on such a promise.

Rights of occupation against third parties

If the contractual licence gives rise to an interest under a constructive trust, it will be enforceable against a purchaser of the family home provided the purchaser has notice of the licence or if it constitutes an overriding interest.

A non-tenant cohabitant who is deserted, or where their partner defaults on rent payment, is not entitled to remain in possession of the family home and should enquire whether the landlord is prepared to accept rent.

If the mortgage is in the name of one cohabitant only, the other cohabitant has no contractual obligation to the mortgagee. Where the cohabitant borrower defaults on mortgage payments the other cohabitant could ask the court to adjourn possession proceedings - to enable them to find alternative accommodation, or to offer payment to the lender.

Engaged Couples

Under s17 of the Married Women's Property Act 1882, which applies to formerly engaged couples (and separated but not divorced couples or those who divorce and remarry quickly) the Court can declare ownership of property and personal possessions (such as cars, jewellery etc) and Order or postpone a sale. Also, under the same Act, injunctions can be obtained to preserve or retain property. However the Courts discourage applications under s 17 and it does not apply to property disputes between cohabitants.

Rights on Death

Cohabitants may have rights on the death of their partner to reasonable financial provision against the deceased’s estate but must prove their entitlement.

A cohabitant may claim against a deceased’s estate pursuant to the Inheritance (Provision for Family and Dependants) Act 1975 (I(PFD)A 1975), s 1A on the grounds that the disposition of the deceased’s estate effected by their Will or the law relating to intestacy, does not make ‘reasonable financial provision’ for them. I(PFD)A 1975, s 1(1) defines ‘reasonable financial provision’ for the different classes of applicants who can claim, that is limited in relation to cohabitants to that which would be reasonable for that applicant to receive for their maintenance. The level of maintenance is determined in the context of the lifestyle the applicant had with the deceased rather than their lifestyle prior to meeting them.

I(PFD)A 1975, s 1 provides a checklist which a court must have regard to for all applicants, which includes:-

• the applicant's financial resources and needs;
• the size and nature of the net estate of the deceased.

Under I(PFD)A 1975, s 2 the court may make a range of orders for payment out of the deceased’s net estate (the amount left after deduction of funeral expenses, legal costs and (if applicable) inheritance tax), including:-

• periodical payments order (maintenance);
• lump sum order;
• transfer of property order.

In practice, the courts apply similar considerations to those in relation to a financial claim upon divorce or civil partnership dissolution and many claims are settled out of court by payment of an agreed lump sum.

Eligibility to Apply

If the cohabitants were, during the whole of the period of two years ending immediately before the date when the deceased died, living as husband and wife in the household, they may make a claim as of right. ‘Living as husband and wife’ is determined by reference to the range of marital relationships and does not necessarily require there to have been any sexual relationship.

When determining the award for this class of applicant, the Court must have regard to the age of the applicant, the length of time the applicant lived with the deceased as husband or wife and the contribution made to the welfare of the deceased’s family, including looking after the home or caring for the family.

If they were not living as husband and wife for two years in the household, the applicant must show that immediately before the death of the deceased they were being maintained, either wholly or partly, by the deceased. The deceased must have made a substantial contribution in money or money’s worth towards the reasonable needs of the applicant, otherwise than for valuable ‘consideration’. The contribution of the deceased is balanced against the contribution of the applicant and an application for reasonable financial provision should only be rejected if there is no doubt that the applicant made the greater contribution or that the contributions were equal. When determining the award for this class of applicant the court must have regard to the extent to and basis upon which the deceased assumed responsibility for the applicant’s maintenance and the length of time for which they discharged that responsibility.

There are strict time limits within which a claim must be brought. The application must be made no later than six months after the date when representation to the deceased's estate is first taken out, unless the permission of the court is obtained. Obtaining that permission can be very difficult.