Meredith Thompson, senior solicitor at the UK law firm Mills & Reeve, discusses the implications for cohabiting couples – including the high net worth – surrounding the Supreme Court case of Kernott v Jones.

Meredith Thompson, senior solicitor at the UK law firm Mills & Reeve, discusses the implications for cohabiting couples – including the high net worth – surrounding the Supreme Court case of Kernott v Jones.

Earlier this month the UK Supreme Court heard the case of Kernott v Jones.  The decision will have repercussions for all cohabiting couples (living together outside marriage or civil partnerships) and will affect how the equity in their home will be divided. 

The key question the Supreme Court will be considering is when the legal title is in the names of both cohabitants, how should the beneficial title(equity) be divided between them. Equally or unequally?  The Supreme Court’s decision will be of relevance to the UK’s estimated 2.2 million cohabiting couples, many of whom will fall into the high net worth segment. 

The current state of the law   

The concept of the common law spouse has not existed in English law for over 250 years.  Despite this, the myth persists and people frequently do nothing to protect their investment in property when cohabiting.  Break-ups can then lead to expensive litigation.  With more and more couples living together outside marriage the law relating to cohabitation is in a mess and in need of review.  The government has declined to do anything, so it is left to the courts. 

Cohabitants’ claims are limited to those relating to property – either jointly owned or where one of them can prove an interest in property owned by the other, or claims made on behalf of children of the couple. 

The last time the Supreme Court looked at the issue of co-ownership was in 2007.  Then the court said that the judge’s task in cohabitation cases was not to find a fair result, but rather to divide the equity to reflect what the parties must, in the light of their conduct, have intended.  Therefore it is possible, at present, for courts retrospectively to infer intention to co-owners as to how they wanted to split the equity in their property. They do so by looking at the parties’ conduct in relation to the property, such as financial contributions.  In reality the parties may never have given the matter much thought, however a court is presently able to examine their approaches to the property and, if it considers it just to do so, can move away from the presumption of an equal division of the beneficial estate.  This can lead to unfair results. 

Kernott v Jones – the case so far 

Leonard Kernott and Patricia Jones bought a house together in 1985.  When the relationship ended in 1993 Mr Kernott moved out.  After they separated Ms Jones paid the mortgage and bills and Mr Kernott provided no financial assistance, instead buying a house with his new partner.  This arrangement continued for over 14 years until Mr Kernott sought to claim his half share in the property.  Ms Jones took court proceedings and initially obtained a declaration that she owned 90 per cent of the equity in the property.  However the Court of Appeal reversed that decision and decided the property was held in equal shares i.e. that the beneficial estate followed the legal title.  This, despite Mr Kernott having made no contribution to the property or the mortgage for 14 years.  Ms Jones appealed to the Supreme Court whose decision is now awaited. 

What will the Supreme Court do?

Will the Supreme Court support the Court of Appeal’s view?  Namely, had the parties intended that Mr Kernott’s half share should reduce after separation; they should have acted accordingly at the time.  If the Supreme Court upholds the Court of Appeal’s decision then that is likely to put an end to the practice that has developed in recent years of retrospectively inferring an intention to the parties in order to remedy what can be seen as grossly unfair results.  Joint ownership will mean half.   

Alternatively, the Supreme Court may decide that where parties have not decided how the beneficial interest in the property should be held, then the concept of fairness should be relevant in determining their interests.  If the Supreme Court allows the idea of “fairness” or continues with the principal of inferring a common intention retrospectively, then this will leave former cohabitants facing the prospect of a judge raking over the ashes of their relationship to determine how to divide the equity.

An enforceable option

Either way it is possible to avoid costly battles by drawing up documentation (either a declaration of trust or a cohabitation agreement) to determine how the equity should be shared whilst the couple are together and if they separate.  Couples should seriously consider this, especially where unequal contributions to the purchase or upkeep of the property are made.  Unlike pre-nuptial agreements, cohabitation agreements and declarations of trust are enforceable, and an effective way of protecting investment in a shared home. 

Meredith Thompson is a senior solicitor at national law firm Mills & Reeve. She can be contacted at meredith.thompson@mills-reeve.com