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Unmarried couples should keep their house in order

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There was judgment in the case of LEONARD KERNOTT v PATRICIA JONES [2010] EWCA Civ 578 in the Court of Appeal yesterday.
The Judgment highlights that you should take steps to deal with any property issues as soon as possible after your relationship ends. In the above case, the parties had purchased a property and agreed that it was to be held jointly. The parties’ relationship had ended and Ms Jones had remained in the property for over 12 years after the parties had split. Mr Kernott had moved on with his life purchasing another property but returned sometime later to claim his interest in the previous family home.
In the meantime, Ms Jones had paid all outgoings on the property with no assistance from Mr Kernott. He had not so much as provided any maintenance for the parties’ children and he had bought himself another property which he had been able to fund because of his lack of contribution towards the previous family home.
In the County Court and subsequently on appeal to the High Court it had been found that Ms Jones held a 90% interest and Mr Kernott 10%. It had been agreed that had Mr Kernott brought his claim immediately after the parties separated then he would be entitled to a 50% share. The argument was that due to the way that the property had been dealt with over the following 12 years the position had changed and Ms Jones was entitled to a greater share.
The previous findings were overturned by the Court of Appeal when Judgment was handed down yesterday. They found that there was nothing in the facts that meant the previous Judge could infer that the parties intentions had changed from an equal share. In the lead Judgment Lord Justice Wall commented that the mere passage of time and the fact that Ms Jones had since paid all outgoings would not displace the intention that they would have equal shares in the property.  All is not lost for Ms Jones as she can still claim what is known as an equitable account i.e. a deduction from Mr Kernott’s share to reflect the amount by which she has reduced the sum owing to the mortgage company and other outgoings but this will not in any way compensate her for the increase in equity which Mr Kernott will benefit from or the payments she has made over the years. Mr Kernott will be the clear winner.
A number of key points arise from this Judgment for those that are either thinking of purchasing a property with their partner or going through the very difficult process of a relationship breakdown. In both these situations I find that people’s thoughts are not properly focused where they should be.
When buying a property, little thought it given to whether the relationship will fail in the future. Some thought is given to what would happen if one of the parties passed away but insufficient thought it given to what would happen if the parties split, if they were then not on good terms and in bitter dispute. When buying a house this is often the last things on people’s minds but it should not. Detailed thought should be given to what you would like to happen to the property if the relationship ended. This can be easily regulated by a living together agreement or Cohabitation Agreement. If the agreement is straightforward then it can cost as little as £500 and avoid bitter disputes in the future and tens of thousands in legal costs. The £500 would be money well spent.
Similarly, when relationships come to an end, people do not give much thought to what should happen in terms of ownership of the property particularly where one party is going to pay all future outgoings on it. In the above case, had the parties either dealt with the ownership of the property immediately following the break up either through the Courts or agreement then Ms Jones would not have been in the position she now finds herself. If the parties had reached agreement they could have either put this into a separation agreement or Ms Jones could have sought to raise a lump sum to buy Mr Kernott’s share and have the property put into her sole name. A separation agreement can also cost as little as £500 and is very important if a property is to remain in joint names with one party paying all the outgoings so you don’t find yourself in Ms Jones’ position.
It should be noted that all the Judges in the Court of Appeal weren’t in agreement with this approach and it could be that it’s not the end of the story. We shall wait and see….
By consumer solicitor, Gareth Jones