Buying a house – advice for unmarried couples

You may be aware of the recent news coverage of Court cases involving unmarried couples and their shares of jointly owned houses.  When buying a house as an unmarried couple it is important to decide and agree how it will be owned.  There are two ways to own a house in joint names:

Beneficial joint tenants:  Both owners own the entire house together and upon the death of one owner the surviving owner will automatically own the entire house. If the couple separate the starting point is that they own in equal shares but this can be subject to legal challenge. 

Tenants in common:  Each owns a specific share of the house, if one owner dies this does not change the remaining owner's share.  If the house is owned as tenants in common the shares will be 50-50 unless a Declaration of Trust is prepared or the Land Register specifies a different arrangement for example 70-30, 60-40 etc.

Whilst many couples think about what should happen to their house if they were to die, and provide for this in a Will, they do not consider what should happen to their share in the house if their relationship relationship breaks up.  This is the time a dispute can and frequently does arise particularly if one member of the couple paid the larger share of the mortgage payments or the deposit for the property either from their own money or gifts from other family members.

When a relationship breaks down if the couple are married the Court follows the principles of the Matrimonial Causes Act 1973 and has a wide discretion to decide how the house is shared.  The Court can look at factors such as contribution, sharing and fairness.  However for unmarried couples the principles of the Matrimonial Causes Act 1973 do not apply.  The Court is governed by land law and the Trusts of Land and Appointment of Trustees Act 1996.  This can lead to results which one party may feel is unfair.

If you are planning to buy a property with your unmarried partner you should first consider how you would both wish the property to be shared if at some point in the future the relationship breaks down. You should then consider entering into a Declaration of Trust to reflect those agreed shares. This is particularly important if you are contributing more than your partner in terms of a deposit or mortgage payments.   Without a Deed of Trust your greater contribution could subsequently be ignored and the Court could decide that the property is to be shared equally.

Many young couples will find that their parents help them with the purchase of their first home by providing some or all of the deposit or indeed helping out with mortgage payments, and this is another aspect to consider.  If you are lucky enough to receive such financial assistance it is advisable to consider how your parents will be repaid over time, if at all, or what would happen if you and your unmarried partner split up.  Once you have done this you should have the arrangement with your parents recorded in a Declaration of Trust confirming whether the money is a gift or whether it is to be repaid and if so, how much and on what conditions.  Without such a document if there is any dispute when the house is sold or if you separate from your partner your parents may not be able to recover their money and this can lead to additional family difficulties, uncertainty and expensive litigation.

We know it is not romantic to ask your loved one to enter into a contract about your home but by doing so it will minimise the potential difficulties should the relationship end and the shares of the house need to be divided between you.  You can always revisit the agreement and change if it you wish in the future as your relationship and other circumstances change but a Declaration of Trust will protect you in the meantime.

If a dispute over the ownership of the house does arise it is important to consider dealing with this as soon as possible so there is clarity about all the issues and you know where you stand.  The values of the house and available money will change over time and your share will be affected by this as well as any mortgage payments or other contributions made until the matter is concluded.  This will in turn effect the amount of money you may have to pay to the other owner. 

If you would like to obtain detailed advice specific to your personal situation please do contact this firm's family department.