Michelle Buckle, Stuart Barton (Head of Department), Samantha Cole, Paula Fraser
Contrary to popular belief, there is no concept in English law of “common law marriage.” If a couple live together but do not marry, the breakdown of their relationship produces vastly different consequences to those of a married couple. This is the position regardless of the length of the relationship and whether there are any children. As a result, any dispute over the ownership and division of property must be settled using principles of property and trust law.
Property held in joint names
Where property is held in joint names, there is a presumption that the parties hold the equity in equal shares. If you are trying to overcome this presumption, it is necessary to show there was an agreement that the property would be held other than in equal shares. However, the court will require very firm evidence if they are to depart from the presumption of an equal division of the equity.
Property held in one sole name
Where just one party owns a property, the length of time that a non-owning party has lived there has no bearing on whether the non-owner has any interest in the property. For the non-owner to establish that they have an interest, they must prove that a trust exists as a result of the circumstances surrounding either the purchase of the property and/or events during their relationship. There are two types of trust:
1. A resulting trust occurs where the non-owner makes a direct contribution to the purchase of a property. For example, paying the deposit or making contributions towards the mortgage may establish that a trust has arisen. Simply making contributions towards household bills will not do.
2. A constructive trust occurs where there is an agreement between the parties that the property would be shared, and where it is established that the non-owner has ‘acted to their detriment’ in relying upon that agreement. In practice, showing that both of these elements have been met can be very difficult.
If you are the non-owning party, there is a risk that the owner of the property may seek to re-mortgage or sell the property in order to frustrate any possible claim you may have. It is therefore recommended that whenever possible, an application be made to the Land Registry for a restriction. A restriction can prevent a sale or other disposition of the property from taking place.
Restriction applications must be supported by a Statutory Declaration. This is a sworn statement, explaining how the alleged trust has arisen. If the Land Registry agrees that there may be a trust, they will send notice of the application to the owner. The owner can then choose to accept the restriction or, more likely, has the option to dispute it. If there is a dispute, the Land Registry will allow the parties to try and resolve it through negotiations. If the negotiations fail or do not take place, the dispute is referred to the Adjudicator. In most cases of dispute, the Adjudicator will direct the non-owner to start court proceedings.
Alternative Dispute Resolution (ADR)
It must be said that there are generally far better ways of resolving matters than making an application to the court. There are a variety of methods available to assist the parties in resolving matters without the need to apply at court:
• Direct discussion between the parties
• Negotiation between solicitors
• Round table meetings with the parties and their solicitors
• Collaborative Law
If ADR or the Land Registry procedure fails to resolve the dispute, an application must be made to the court for a declaration as to each party’s interest in the property. Any application must be supported by a statement, which provides as much detail as is possible, along with any documentary evidence available. The procedure is then as follows:
1. The court issues the application and sets a date for a first directions hearing. The documentation is served on the other party through the post.
2. Prior to the first directions hearing, the other party must indicate whether they wish to defend the application or not. If they wish to defend, they have the opportunity to file a defence, supported by a statement.
3. At the first directions hearing there will be an opportunity to try and settle the case. If this proves unsuccessful, the court will consider what further evidence and directions are required. The case will be listed for a further hearing, often known as a Case Management Conference (CMC), with a final hearing thereafter.
4. Before the CMC the directions ordered by the court must be complied with. At the CMC there will be a further opportunity to try and settle the case in light of the further evidence and a great many cases do settle at or before this stage. If there is no agreement, the court will make final directions in preparation for the final hearing.
5. At the final hearing both parties will provide evidence and can be cross-examined. The Judge will then make a declaration as to each party’s interest in the property. Further orders can then be made over when/if the property should be sold and how the proceeds should be divided.
Costs and timescale
If a case proceeds to a final hearing, it will usually be 9 months or more before the case is resolved. Legal costs will continue to escalate throughout that period and the costs involved in a final hearing itself are very substantial. At all times it is vital to weigh the likely outcome of the case against the anticipated equity contained in the property.
At any stage of the case, the court has the discretion to make an order that one party should pay part or all of the other party’s legal costs. In making any costs orders, the court will consider both the conduct of the parties (whether they have complied with directions and assisted the court) and at the end of the case, whether any settlement offers were made but ignored by the other party.