When purchasing a property, unmarried couples (cohabitees) do not have the same protection as married couples because the unmarried relationship is not recognised or protected in law. This means that, in the event of a relationship breakup, the parties would have to rely on civil laws, such as contract and trusts, to find a remedy and could pay thousands of pounds in legal fees either to reach a settlement or by going through Court proceedings.
However, when purchasing a property with your partner or someone else (such as a family member or friend) there are various deeds and documents that can be used to protect yourselves against future disputes in the unfortunate event your relationship breaks down.
Below we detail some basic information to consider before making any decisions regarding the basis upon which you will own a property, and subsequently how to protect your financial assets and possessions.
Joint Tenants or Tenants in Common?
Joint Tenants hold the property together on a 50/50 basis and the property will automatically pass to the other in the event of death.
Tenants in Common specify how they hold the property, such as 50/50, unequal shares or stipulations and conditions, such as the reimbursement of a deposit to one party and the remainder being on a 50/50 or unequal basis. Tenants in Common own their share separately. In the event of death your respective shares will pass in accordance with your Will, so if your partner predeceased you, you could end up owning the property with your partner’s parents or some other family member and/or friend, depending on the provisions within the Will. There is no provision for either of you to directly inherit the other’s share, so the making of a Will is of utmost importance if you hold the property as Tenants in Common.
Trust Deed
You only need to enter into a Trust Deed (or Declaration of Trust) if you are holding the property as Tenants in Common because this document specifies and details your respective shares. The Trust Deed is then lodged at the Land Registry and acts to protect both parties’ interests and prevent either party from trying to sell or transfer their interest without the consent or knowledge of the other.
What Else?
Once you have decided how the property will be held, it is then time to consider the foundations of your relationship. Being open and honest with each from the outset and deciding together as a couple (or non-couple) what your expectations are provides you with the security and knowledge that you both agree from the beginning the parameters and/or limitations of your obligations and duties to each other. These principles can then be recorded in a Cohabitation Agreement.
If you are purchasing a property with a family member or friend, the same principles apply but the document detailing your duties and obligations will be contained within a Deed of Arrangements.
Cohabitation Agreement/Deed of Arrangements
This document details your duties and responsibilities regarding the property and your individual assets, such as:
- Who owns what fixtures and fittings (white goods, furniture etc)
- Who is responsible for which utilities and outgoings, in what sum/percentage and where these will be paid from (joint or single bank account)
- If there are additional property and/or assets, whether these are considered joint or singular assets
- In the event the relationship breaks down, you can specify how fixtures, fittings, personal assets and/or property is to be divided
- You can specify how debts accrued during the relationship are to be dealt with, i.e. sole or joint liability
- If you sell the property and purchase another, you can detail what is to happen when purchasing another property, for example, whether the same shares will be applied and/or a change from Tenants in Common to Joint Tenants or vice versa
- You can specify whether there is an intention to provide financial support during the relationship and/or following the breakdown of the relationship
- You can make contingent arrangements for children, so you could agree what child maintenance you would pay during the relationship and/or following the breakdown of the relationship (this can apply even though you do not have children at present)
- You can make pension provision as this is not an automatic right for cohabitees
The provisions contained within these documents are determined by you. You can include as much or as little information as you choose. The ultimate aim of these types of documents is to detail the agreed financial arrangements between you so as to prevent potential litigation in the event the relationship breaks down.
Why should I enter into a Cohabitation Agreement/Deed of Arrangements?
As mentioned before, unmarried couples are not recognised within law and as such fall under the remit of civil law, with the same principles applying to family members and/or friends purchasing a home together. Legal rights and protections are limited, and the following points should be considered:
If you are not named or documented as an owner (either as Joint Tenants or Tenants in Common):
o you do not have a legal right to occupy the property;
o if the relationship breaks down you will have to prove your interest in the property before acquiring your share and/or sale proceeds.
If you purchase the property as Tenants in Common:
o there is no automatic right of succession on the death of the other, meaning the other person can specify anyone they choose as the beneficiary of their share in the property without your agreement or consent;
o there are no automatic rights under the Intestacy Rules (when a person dies without a Will).
For unmarried couples, the above points apply and should be considered alongside the following:
o there is no duty to provide financial support following the breakdown of the relationship;
o you do not have defined rights or remedies in relation to financial issues, such as maintenance or pension shares;
o you do not have the right to financial compensation if you give up your career to stay home and raise children of the family;
o you have limited rights to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
As can be seen above, there is limited automatic protection for unmarried couples, family or friends when purchasing a property together. It is paramount that you adequately protect yourselves, your share in the property, your personal assets, and agree your duties and obligations to one another from the outset. Not only will this provide strength and steadiness to your relationship, but it will also alleviate the need for litigation in the unfortunate event of the breakdown of your relationship, regardless of the nature that takes.
When should we make these arrangements?
You can enter into these types of agreements at any time during your relationship. The benefit of doing it at the time of purchasing a property is that both you and your partner (of whatever nature) will have a clear understanding of the foundations upon which your relationship is built, including what duties and obligations you are expecting and/or agreeing to.
We cannot stress enough the importance of putting an agreement in place. The benefits to all parties of full and open disclosure from the outset regarding your respective expectations and financial obligations to each other, both now and in the future, can save you time, money and unnecessary emotional distress in the unfortunate event your relationship breaks down.
Should you require any further information regarding this article or the services provided by Lawcomm Solicitors, please do not hesitate to contact Bill Dhariwal (E: bill.dhariwal@lawcomm.co.uk) or Sarah Lightfoot-Webber (E: sarah.lightfoot-webber@lawcomm.co.uk).
