A ‘couple’ of must do’s
We are often told to make sure that we have our affairs in order.
This can include making a Will and an Enduring Power of Attorney.
It also involves regularizing your relationships, both business and personal. We regulate business relationships by having Shareholders’ Agreements or Partnership Agreements. We need to take the same precautions in personal relationships.
This means having Co-habitation Agreements when living with someone in an intimate and committed relationship. It also involves having a Co-ownership Agreement if you buy an asset with someone else. If you buy an asset with someone you live with in a relationship you ideally should have both, but certainly the Co-ownership Agreement.
If you wish to protect assets you own and may acquire, you should consider having a Pre-nuptial Agreement before getting married.
The reason for this is often very simple., While we are in a committed relationship, we have one set of rules which benefit the relationship; on separation the rules may change to benefit each individual.
A Co-ownership Agreement applies to any group of people who are buying an asset together.
However, for the purpose of this Blog, we limit our discussion to a couple in an intimate relationship who may or may not go on to live in the purchased property.
Buying Property as a Couple
It quite often is the case that such a couple would buy the property and place it in both their names.
They are asked by their solicitor whether or not they want to put the property in joint names as joint tenants or tenants in common.
This is a key question and needs consideration.
The effect of joint tenancy is that the survivor will take the property in its entirety. The effect of tenants in common is that both parties have their own share of the property.
However, they should not stop there. They should go on to deal with how a potential breakup of the relationship should be managed. This breakup can be on the death of one of the couple or on the breakdown of the relationship.
This is done by way of a Co-ownership Agreement.
What Can Go Wrong
The most recent High Court case of McGrane v. O’Foghlu, delivered on 1 April 2020, highlights the importance of putting a Co-ownership Agreement in place. It also shows the change of attitude after a breakup.
In that case the parties bought a house in joint names, made Wills leaving the property to each other, had joint bank accounts and made various lump-sum contributions to the purchase, upkeep and improvement of the house.
The argument by one of the parties was that they contributed more and therefore should have a larger share in the sale proceeds.
After what must have been considerable cost and emotional distress, the Judge decided that the intention of the parties at the date of purchase and throughout their relationship should prevail and that the property to be shared equally.
He disregarded the change of intention after separation.
This case highlights the importance of having an agreement and therefore avoiding any litigation with its resultant financial and emotional cost.
Lessons to be Learnt
This case shows the limits of protection provided by the law to co-habiting couples. If people are in a committed relationship that ends and have no financial dependency or have financial dependency but leave it for more than two years to take legal action, they are still left to deal with the issue of ownership of assets.
The lesson to be learnt is if you buy property with someone you should have a Co-ownership Agreement. If you are living with someone as a couple you should have a Co-habitation Agreement. If you are getting married, you should consider having a Pre-nuptial Agreement. Finally, everyone should have a Will and an Enduring Power of Attorney.
The case is also highlights why it is important to do an Co-ownership or Co-habitation Agreement . It is important because not everyone who is co-habiting can apply to a Court under the redress scheme under the Co-habitation Act 2010. If you don’t fulfill the time limits under the Act, are not financially dependent or fail to make a claim in time, you will not be able to get the benefits under the Act.
Postscript – Separation Agreements.
As a footnote, it is worth commenting on the present value of historical Separation Agreements.
Up until quite recently Separation Agreements were consistently revisited by courts when dealing with Judicial Separation or Divorce.
This trend is not as prevalent now because of the passage of time since the introduction of divorce and will become less relevant with the shortening of the divorce period to 2 years.
On the question of whether or not a court would revisit the Separation Agreement, the answer appears to be that they are less inclined to do so at this stage.
However, this is subject to the overriding principle that a court can always review a prior agreement.
The guideline for the court is to ensure that at the date of the divorce the parties are all properly provided for in accordance with their means.
This includes any form of agreements – negotiated, separation, co-habitation, co-ownership or pre-nuptial agreements.
So – why Bother ?
It is always worthwhile making these agreements.
They can prevent future difficulties by setting out in advance what will happen on death or breakup .
This will reduce the emotional and financial cost.
They also offer a couple an opportunity to agree in advance the terms of their relationship.
Where there is clarity there is a better chance of harmony.