What every married person or co-habitant should know about Property ownership
When separated spouses are going through divorce the first thing they have to do during the process towards dividing assets is to disclose the value of joint assets; assets in their sole names; debts; pensions and income.
What happens if your husband or wife says ‘my name is on this rental property so it looks as though I own it on paper but I don’t actually own any of it’ or ‘ I don’t own all of it’ or ‘we may have purchased this property together but don’t you remember that my dad gave us £100,000 towards the property which wasn’t really a gift so he has an interest in it’. The good news for the owning party is that the person asserting the beneficial ownership is the one who will have to prove that the title deeds (the label on the tin) says one thing but means another.
‘Beneficial interest’ means that what is on the tin doesn’t match the label; someone has the benefit of a property or some of its value when their name is not on the deeds. This can be legitimate but in reality in divorce proceedings, it is often used as a devious way to reduce how much your assets are and therefore potentially the matrimonial pot for division. How convenient!
If you don’t remember that your spouse’s dad put money towards the deposit or their brother paid for the conservatory the chances are that no-one else apart from you and you spouse have an interest and don’t take your spouse’s word for it – your soon to be ex and dad or brother, or whoever it is, will have to prove that this is not just a sham way of reducing what you are entitled to.
You will need to get legal advice of course and an application will need to be made to the court including an application to ‘join’ the person who has an alleged interest to the proceedings. The proceedings will differ depending on whether the parties are married or not. If they are married the proceedings are matrimonial finance proceedings and the person with the alleged interest is joined as a ‘joinder’ or ‘ third party’.
In the case involving parties called Gourisariav 2010 there was a mum who apparently had beneficial interest in a property which was in the name of one of the divorcing parties. it was important to actually join the mum, with the alleged beneficial interest, to proceedings i.e. not just invite the mum to join.
There is a specific procedure for this and directions (list of things to do) are given at the first hearing in court proceedings giving the parties the opportunity to argue on either side for and against the interest of Mum or whoever it. It is important to include directions for how to respond to the claim by the person asserting beneficial interest and the opposing argument to that claim in the form of separate witness statements. There may be a need for a preliminary hearing before the Financial Dispute Resolution hearing (called ‘ FDR’) when the district judge having seen all the disclosure in the case between the parties will try and help the parties reach a settlement by indicating how he or she would decide the case if they were a final hearing judge. Many cases settle at this point but, when a beneficial interest of mum is being asserted it is important to have the case set down for a preliminary hearing before the FDR this is very important because if the FDR can’t be effective there will be an issue about who pays wasted costs. The onus will be on the party who is claiming 3rd party beneficial interest to prove it.
If you are the party to divorce trying to show that your Mum has a beneficial interest you will have to prove that there was what is known as a ‘common intention’. The rules for this are set down in the well known case from 2007 of a couple who weren’t actually married but the case demonstrates how ‘common intention’ is relevant.
Ms Dowden and Mr. Stack lived together for a long time and had 4 children but were not married. They bought a house together and there was no declaration in the legal documents to show that they didn’t own half each.
However, Ms Dowden not only put in over 65% of the purchase price from her savings but she also paid most towards the interest only mortgage and most of the bills. When they separated Mr. Stack naturally wanted the house to sell and to receive 50%. After all that is what the title deeds said. It was up to Ms. Dowden to prove that the title deeds did not reflect the true ownership. Fortunately for Ms. Dowden, the couple had kept their finances very separate during the long relationship. All the facts pointed to the common intention being proved by Ms. Dowden that the property should not be owned equally and that there was a common intention that the true ownership would be reflected in how much they had each put in. Ms. Dowden was able to prove how much she had separately put in to the downpayment and the mortgage payments and she was awarded 65%. She showed common intention and that she had relied on that intention.
This was fortunate but imagine if she had not been able to prove this. how unfair that would have been. It is advisable for those buying somewhere together to get a proper deed of trust drawn up to protect the funds put in by one party into the property. This deed of trust should be referred to in the purchase document which is called a ‘TR1’ which will say whether or not the property is owned as ‘tenants in common in equal shares’ or ‘tenants in common in unequal shares’.
What if your partner moves into a house you own? Or you move into a property owned by your partner?
If you own a property and your partner moves in with you, it is a very good idea to have a ‘co-habitation agreement’ drawn up by a legal professional the purpose of which is to make it clear at the outset that the non owning party will be paying towards bills but has no intention of claiming a beneficial interest in the property. It is advisable for the person who owns the property to keep finances separate including having two very separate accounts in their name; one where the mortgage is paid from and the other into which the non owning party pays towards bills.
There is another way a non owning partner can try and show that they have a beneficial interest apart from paying towards the mortgage or downpayment for a property and this is refurbishment of the property; either paying for it and/ or carrying out the work themselves. This is going to have to be a bit more than wallpapering and general cosmetic enhancements. You are talking here about something which will enhance the value of the property such as putting in central heating or a new kitchen, bathroom or new conservatory maybe. The non owning party may have paid a lump sum of pay off the mortgage or some of it or may have paid half towards mortgage payments. If you are the party that owns the property, don’t let your partner pay for anything like this or carry out work on the property unless you are happy for your partner to have a beneficial interest as a result.
If you are the non owning party and you pay off some of the mortgage, contribute to mortgage payments or carry out work on the property or pay off the mortgage, it is a good idea to get legal advice so there is a clear record of the ‘common intention’. Had you known you would not become a joint owner or have a beneficial interest you would never have paid that money. You acted therefore to your detriment and believed you would be a joint owner as a result of your contribution. If you are the non owning partner, it is important that you are both agreed in writing as to the effect of any contribution you make to the value of your partner’s property. Rule of thumb, be clear about common intention.
