Court of Appeal case demonstrates uncertainty and complexity for unmarried separating couples

The recent Court of Appeal case of Hudson v Hathway [2022] EWHC 631 (QB), [2022] 2 FLR 1323 is another example of how difficult cases involving separating, unmarried, partners can become.

Case summary

Mr Hudson and Ms Hathway were a cohabiting couple who jointly owned their family home in equal shares. After their separation, the couple agreed via email to amend their equal beneficial interests to reflect Ms Hathway as sole beneficiary.

However, sometime later, Mr Hudson asked for the house to be sold in order for him to receive an equal share of the proceeds of sale.

This was dismissed by the court at first instance due to the fact that the couple had agreed that Ms Hathway owned the entire equity in the property.

Mr Hudson then took the case to the High Court on appeal, arguing that she could not be the sole owner of the house as there had been no detrimental reliance (i.e. she did not have proof of possible detriment or prejudice if Mr Hudson reverted to his original promise). As the house was originally held in joint names and there was no Declaration of Trust, Ms Hathway argued that there was no need to show detriment. The judge agreed with Ms Hathway, once more ruling against Mr Hudson.

The basis for this decision was controversial, and it was widely considered that the agreement between the parties varying the ownership of the property lacked the requisite formality.

When the case reached the Court of Appeal, it held that detrimental reliance was required, although the judges ultimately upheld the High Court’s judgment that Ms Hathway was the sole owner. The court determined that there had been detrimental reliance on the part of Ms Hathway, and that the agreement in email did in fact meet the requisite formalities for the purposes of s.53(1) LPA 1925 [the Law of Property Act 1925].

The legal regime

Many still mistakenly believe that there is a legal concept of the “common law spouse”. One party to a couple often holds the erroneous belief that after a long relationship, they have some rights or security in the property they may have lived in for many years. It is then only when the relationship breaks down that they realise that they may have no right to a share in the property they believed to be partly theirs.

The ownership of homes for unmarried couples is generally decided in accordance with trusts and land law, unless there are children involved or the parties were engaged. Claims under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) are often complex and accordingly can be expensive.

Each case is determined on its own facts, which is why it is vital to take legal advice as early on as possible. For example, there are certain protections available for children of unmarried couples when their parents separate under Schedule 1 Children Act 1989. The parent who is the primary carer of a minor child and has no legal interest in the property can apply to the court to make an order allowing them to stay in the property until the child is no longer dependent. There are several other orders which can be made under this law.

Avoiding a dispute

Although each court came to the same conclusion in Hudson v Hathway, the fact that the basis for the decision was not consistent evidences how complex and uncertain cohabitation cases can be. It is essential that you seek early legal advice in order to ensure that you know your rights and options.

A solicitor will advise you on ways to make your intentions clear with a view to avoiding a future divorce if the relationship ends. A cohabitation agreement and a declaration of trust help to reflect your intentions, so it is advisable to look at having both drawn up at the outset of buying a property.

A Cohabitation Agreement sets out your respective financial positions and how your assets should be divided if your relationship comes to an end, including your rights and responsibilities towards one another and any children you might have. These are generally upheld by the courts if properly entered into.

A Declaration of Trust also clearly sets out your respective shares in the property and what you will both receive in the event of a sale, and this is reflected at the Land Registry.

Summary

We highly recommend that early advice is sought at the outset of moving in with a partner, or if you are considering separation.

The measures put in place at the outset of a relationship could save vast amounts of expense and discord, both during a relationship or on relationship breakdown.

If there is a dispute, considering non-court options, such as family mediation, can also help reduce costs and endeavour to preserve goodwill in the relationship.