Cohabitees and property ownership

27 Jun 2005

When cohabitees, be they married, non-married or civil partners, decide to purchase a property together, it is in the interests of both parties to have a clear statement of their intentions as to the ownership of the property, rather than relying on the Court to determine the position in the event of their relationship breaking down. It must however, be borne in mind that the Family Court on divorce or dissolution of a civil partnership may run roughshod over any intention of the parties at the time of purchase.

Clearly if one party to the relationship is purchasing the property entirely out of their own resources it is likley to be appropriate for the property to be in that person's sole name. Again, this may still be no protection on divorce or dissolution.

Where property is to be held by joint owners it can be in one of two ways known, rather confusingly, as joint tenants and tenants in common.

Joint Tenants

Holding the property as joint tenants means that until the joint tenancy is ended by one of the joint owners, each of them has an equal and identical interest in the entire property or the net proceeds of any sale.

Tenants in Common

If the property is held as tenants in common, the interest of each owner will be expressly defined as a specific proportion. This means that each of them owns that specified share of the property and this can reflect their relative contribution to the purchase price or prospective contribution to the mortgage payments.

The pros and cons

The advantage to cohabitees, who are neither married nor in a civil partnership, of owning a property as joint tenants, is that in the event of the death of one of them the entire property will pass to the survivor - although it will still form part of the deceased's estate for Inheritance Tax purposes.

If a property is jointly owned as tenants in common, on death the deceased's share of the property forms part of their estate and will pass according to the terms of their Will or the rules of intestacy.

At the end of a relationship if the owners are not married or civil partners and if property is held as joint tenants each of the parties will be entitled to an interest in half of the property. This is the case whatever share they each contributed to the purchase price.

Clearly owning a property as joint tenants is unlikely to be appropriate in any case where the purchase price and mortgage payments are not paid equally. Where there are unequal contributions, it would be more suitable for the property to be owned as tenants in common in specified shares. Then, in the event of the relationship ending, each party gets back approximately what they have contributed to the purchase of the property.

For married couples or civil partners there is no certain way of protecting their respective shares in the property, although a pre-nuptial/pre-partnership agreement may offer some protection. Seemingly, the only certainty there is with the Family Court on divorce or dissolution is that there is a distinct possibility that they will ignore the parties' original intentions and relative contributions towards the purchase price.

The most important message for cohabitees planning to own property together is to think ahead to the possibility of relationship breakdown and agree beforehand what should happen to the property in such an event.

For further information, please contact Janet Armstrong-Fox 020 7468 7221

Additional information