Moving in to avoid escalating property prices - but what happens when you move on?

17 Sep 2014

Reports of escalating house prices have never been far from the headlines this year. The latest report from the Office of National Statistics (ONS) shows that property prices have leapt 11.7% this year across the country, with rental prices following close behind.

As property prices skyrocket, more couples are making the decision to pool their resources and move in together to increase their buying power. The ONS reports that cohabitation rates have risen by 22% in the past ten years, and are set to increase to 3.3 million families by 2033. But what many cohabiting couples don’t realise is that they have very little legal or financial protection relating to their property if the relationship breaks down.

Resolution chair Jo Edwards says:

“There are 2,859,000 cohabiting families in the UK, more than ever before. But many couples don’t know that cohabitation and property rights are not straight forward. Cohabiting couples don’t have the same legal protection as married couples, no matter how long you’ve been together. This becomes particularly important in the event the relationship ends or if one partner dies.”

“The terms ‘common-law’ and ‘de facto partner’ don’t exist in the eyes of English law, no matter how long the relationship. This is one of the biggest misconceptions about the rights of unmarried couples that live together – people think they have rights that in fact don’t exist in current law.”

For married couples or those in a civil partnership there is an established legal framework for dealing with matrimonial property rights, designed to ensure that each person has some right to a share in the property.

But for cohabiting couples, the situation is murkier. Ms Edwards explains:

“If an unmarried couple living together split up and the property is in one person’s name, the next step is to work out whether the other person has an interest in the property – for instance, by paying towards the mortgage, helping with repairs or even having contributed to the deposit. But if these contributions are not reflected in a form of written agreement setting out respective shares in the property, the partner who is not named on the title deed may find themselves fighting to establish the extent of their share if they separate and, in extreme cases, without any rights to the home they have shared with their former partner.”

“Drawing up a declaration of trust agreement should be an essential step for couples moving in together into a property owned by one of them, who are sharing responsibility for paying for and maintaining the property.”

If you’re buying a property in joint names, how you describe ownership on the title deeds can also play an important role in how the property is treated if one party passes away. Jo Edwards says:

“There are two main ways to draw up a contract for a couple purchasing a property – as joint tenants, or as tenants-in-common. If you opt for joint tenancy, the shares are undefined and if one of you dies, that share will pass automatically to the other partner. But if you choose tenancy in common, each partner owns a specific share in a defined amount, which can be left to whoever they choose.”

If you opt for this arrangement, Ms Edwards advises, you need to put other measures in place, such as a will, to ensure your share passes to the person you want it to. This is the more common form of co-ownership for unmarried cohabitants, but it’s important that the shares are defined and wills drawn up.

“Ultimately,” she says, “the law on cohabitation is in desperate need of reform to ensure cohabiting couples have the same legal protection as other relationships. In my practice, I have seen particular difficulties and often injustice, where the property is owned in the name of one person and the other has struggled to establish any interest – despite, in some cases, having cohabited for a long time and had children together. Resolution would like to see the next Government, regardless of its composition, address this issue urgently to bring English law into step with the modern world.”

A 2013 poll by Resolution shows that three quarters of MPs agree legal rights for unmarried cohabiting couples are unclear.

“Until there is change,” Ms Edwards adds, “unmarried couples moving in together to take advantage of the London housing boom need to take extra care when purchasing a property to ensure that their arrangements are fair and legally recognisable.”