Co-habiting couples must protect their assets

Unmarried couples who buy a house together should not assume they would be entitled to an equal share of its sale value should their relationship break down. Catherine Wenborn explains how a House of Lords ruling should make co-habiting couples think twice about protecting their assets.

There are more than two million unmarried couples living together in the UK. Many of them have bought houses in their joint names and assume that they will be entitled to a half share of it should their relationship come to an end.

That is not necessarily the case as a ruling by the House of Lords has just illustrated. Barry Stack had lived with his partner Dehra Dowden for 27 years. They had four children and their house was in joint names but they had never married. When the couple separated Stack assumed he was entitled to 50% of the value of the house and the County Court agreed.

However, Dowden refused to accept this. She claimed the house should be split 65 – 35 in her favour because she had contributed far more in paying for the property. The Court of Appeal and the House of Lords ruled in her favour.

In giving the ruling, Lord Hope laid out some basic principles. If a property is bought in the name of just one of the co-habiting couple then the court will start from the position that it belongs to that person alone. Unlike with married couples, the other co-habiting partner would have to show why they were entitled to a share.

If the house is bought in both of their names then the court presumes that it belongs to them jointly. A partner who wanted more than 50% would have to provide a good argument as to why they were entitled to more.

That is exactly what Dehra Dowden was able to do. She was an electrical engineer and earned more than her partner who was a self-employed builder and decorator. Their first home together was bought in her name and she contributed more to the purchase price.

Their second home was bought in joint names using the proceeds from the sale of the first house. Dowden again contributed more than Stack in paying off the loan.

The Law Lords said this was an unusual case and that was why they were prepared to overlook the normal presumption that the proceeds from houses bought jointly should be divided equally.

This was partly because Dowden had contributed far more to paying for the property but also because of the way the couple had kept their finances separate throughout their relationship.
Lady Hale said: "There cannot be many unmarried couples who have lived together for as long as this, who have had four children together, and whose affairs have been kept as rigidly separate as this couple's affairs were kept. This is all strongly indicative that they did not intend their shares, even in the property which was put into both their names, to be equal."

The case has implications for all co-habiting couples who buy a house together. Unless there are exceptional circumstances, as in this case, the proceeds are likely to split 50-50. Couples who feel such a split would be unfair because one is contributing more than the other should agree in advance how the money should be divided and formalise that agreement with a declaration of trust. That would save any misunderstandings later, which may be particularly difficult to deal with amid the emotion of the relationship breaking up. It would also be wise to draw up a co-habitation or living together agreement covering all the couple’s financial arrangements and setting out what should happen in the event of a break-up.

If disagreements do occur once a relationship breaks down then it may prove expensive to pursue the matter through the courts. Dowden won her case but as Lady Hale pointed out, the “costs of pursuing the argument to this House will have been quite disproportionate”.

Catherine Wenborn is head of family law at Andersons Solicitors in Nottingham and can be contacted on 0115 988 6717.