Unmarried couples frequently buy property to be their joint home. However, the Housing Regulations are such where only one of the couple is residentially qualified, only he or she can actually purchase the property if it is a freehold house or flying freehold apartment. The position is different if the parties are married: in that case, the non-qualified spouse can join in the purchase with the qualified spouse.
This article will look at the case of Reid v. Flynn, which recently came before the Royal Court, concerning the break-up of the long-term relationship between unmarried partners and the dispute between them as to the division of the net proceeds of sale of the property which had been bought in the sole name of the qualified partner, Mr Reid, and subsequently sold by him. The court's judgment in this case provides a clear indication of the approach to be adopted in this kind of dispute, where there the Court does not have the wide statutory powers available under the Matrimonial Causes Law in the case of the division of matrimonial assets on divorce. As the court said:
"The difficulty with which the Court is having to grapple in this case is one which has exercised the courts of the United Kingdom increasingly over the last 20 years - how to reach a fair result in circumstances where a couple choose to live their lives together outside the institution of marriage, which the law recognises, and nonetheless seek the resolution of the law in relation to their financial matters when they have separated."
After a consideration of various legal principles, the court settled on the principle of 'unjust enrichment' as the basis for achieving a fair result between the parties, and summarised the task for the court as follows:
"The starting point is the legal interest. The Court then looks at whether there has been enrichment which benefits the legal owner or owners or perhaps some of them, at the expense of the claimant in a way that is unjustifiable."
Applying this principle, the court considered the parties' original intentions, the parties' respective contributions, both monetary and in kind (bringing up the couple's children), and the overall justice of the case, and ordered that the net proceeds be apportioned according to a particular formula.
The case is also noteworthy for the court's approach to an agreement which had been entered into between the parties at the time of the purchase of the property. This agreement covered matters such as the servicing of the mortgage (taken out in the parties' joint names), the payment of outgoings relating to the property, the maintenance and upkeep of the property and the division of the sale proceeds if the property were to be sold.
One might have thought that the court would simply have enforced this agreement, which would have made it unnecessary to apply unjust enrichment principles. However, the court took the view that the agreement was meaningless in that it sought to deal with the property in a vacuum, away from all the other arrangements which the parties made with each other for the running of their home and for payment of their other outgoings. The evidence was that the agreement was drafted by the lawyers acting in the purchase of the property without any detailed consideration by the parties of its content and that from the very beginning the parties paid no attention to it. The court was particularly scathing of the way the agreement referred to Miss Flynn as occupying the property as Mr Reid's "guest".
The Reid v. Flynn judgment contains much for lawyers to pore over and ponder. For present purposes, though, there are two important lessons. First, the court has made it clear that it has a wide and flexible discretion in cases such as this to ensure that the sale proceeds of property are apportioned in a fair way between previously co-habiting couples. The court made clear that the principle which it applied in this case could apply to "heterosexual and homosexual partnerships in circumstances falling short of those partnerships which the law formally recognises such as marriage or civil partnership; de facto business arrangements not formally recorded in a partnership; and platonic cohabitation arrangements which might be made, whether by members of the same gender or not, and whether as a result of family ties or friendship".
Secondly, it is clear that 'off the shelf' agreements entered into by co-habiting couples will be viewed with extreme scepticism by the courts. That is not to say that it is not right for co-habiting couples to record their intentions in writing or that no documents of this nature will be given effect to by the courts. But anything which smacks of artificiality will be given short shrift.
Co-habiting couples who have entered into agreements of this nature would be well advised to review their agreement to make sure that they reflect their current circumstances and intentions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.