All’s fair in love and separation

Sunday, 01 April 2012
The perils of owning a property jointly when not married in light of the Kernott v Jones case.

In May 2011, the Supreme Court heard an appeal in a case about the beneficial interests of an unmarried couple who had separated almost 20 years previously. The case had originally come to Court in April 2008, after Mr Kernott sought to claim his interest in the property he jointly owned with ex-partner Ms Jones. The parties had met in 1980 and both worked, earning a similar amount. Jones bought a mobile home in her name only in 1981 and Kernott moved in with her in 1983. Their first child was born in 1984 and a second child in 1986.

Jones sold her mobile home in May 1985 and the property in dispute, 39 Badger Hall Avenue, was purchased in the parties’ joint names. The purchase price was GBP30,000 and the deposit of GBP6,000 was paid from the sale proceeds of Jones’ mobile home. The balance of the purchase price was raised by a mortgage in the parties’ joint names. They each contributed to the mortgage and expenses, and subsequently took out a GBP2,000 loan to build an extension – some of the work being carried out by Kernott.

In October 1993, Kernott moved out of the property and Jones remained with their children and paid all of the household expenses herself. Kernott made no further contribution to the property and it was also found he had made very little contribution to the maintenance and support of the children. The property was put on the market in 1995 but did not sell. The parties then agreed to cash in a life insurance policy and the proceeds were divided between them, which enabled Kernott to put down a deposit on his own property.

Parties’ common intention is to be considered objectively from their conduct

First hearing

At the time of the first hearing, in 2008, 39 Badger Hall Avenue was valued at GBP245,000, the outstanding mortgage being GBP26,664 and the endowment policy being valued at GBP25,209. Kernott’s property, which he had purchased in his own name, was valued at GBP205,000 with an outstanding mortgage of GBP37,968. In the course of the original hearing, it was acknowledged that, when the couple separated in 1993, they owned 39 Badger Hall Avenue jointly – both legally and beneficially. However, the Judge agreed with Jones’ contention that, since their separation, their intentions had changed. The Judge said he had to consider what was fair and just, bearing in mind his findings on the dealings between the parties. Taking everything into consideration, he held that the value of the property should be split with 90 per cent of the proceeds going to Jones, and Kernott getting the remaining 10 per cent.

Kernott appealed but the High Court Judge upheld the initial Judge’s decision, concluding that the change in the parties’ intentions could be imputed or inferred from their conduct. He held that, in the absence of any words or conduct to establish how the shares should be allocated, the Court had to decide what was fair and just. Kernott appealed again, to the Court of Appeal, which held that the parties owned the property in equal shares on the basis that there was nothing to indicate that the parties’ intentions had changed after their separation.

Supreme Court

In its judgment on 9 November 2011, the Supreme Court (formerly the House of Lords) overturned the Court of Appeal’s decision, referring to the Trial Judge’s finding at the original hearing that the parties’ intentions had changed. The Court noted that Kernott could not have afforded to buy his own home if he was still contributing to the mortgage and other expenses of 39 Badger Hall Avenue. Accordingly, it could be inferred that, when Kernott bought his own property, the parties intended that he would have the sole benefit of any capital gain in the property in his sole name and Jones would have the sole benefit of any capital gain in 39 Badger Hall Avenue. The Court carried out a rough calculation of the amount each would have received based on that approach and concluded that it would have been almost the same as the 90/10 per cent split from the original claim.

The Supreme Court also pointed out that, if the parties were found to have retained the same beneficial interests throughout, other claims would have to be taken into account, such as Kernott’s claim for an occupation rent (because he was not living in the property) and Jones’ claim for Kernott’s share of the mortgage and other expenses. The Court did note, however, that a claim for occupation rent by Kernott was unlikely to succeed given that Jones occupied the property with their children.

While the Supreme Court Judges were unanimous in reinstating the decision made by the Trial Judge at the original hearing, they did not all agree how and when to impute an intention to the parties, if the parties’ intention could not be inferred from their conduct. One Judge commented that the Court would prefer to infer the parties’ intention rather than imposing its own solution, but pointed out this would not always be possible. However, if the evidence suggested that the parties intended their beneficial interest to be held in certain proportions, the Court would not impose a different solution, regardless of what it considered to be fair.

As a result of the Supreme Court’s decision, these basic principles will apply:

  • The starting point is that parties who hold property in their joint names are joint tenants both in law and equity.
  • That presumption can be challenged on the basis that:
    • the parties had a different common intention at the time when they acquired the property, or
    • they later formed a common intention that their respective shares would change.
  • The parties’ common intention is to be considered objectively from their conduct.
  • Where it is clear either:
    • that the parties did not intend to hold the property jointly both in law and in equity at the outset, or
    • that they had changed their original intention, but it is not possible to ascertain their actual intentions (whether by direct evidence or by inference)
  • Each will be entitled to the share the Court considers fair having regard to the whole course of dealing between them in relation to the property.
  • Each case will turn on its own facts and although financial contributions are relevant, there are many other factors that may enable the Court to decide what shares were either intended or fair.

Trust declaration

If the owners purchase a property jointly and do not specify their respective shares, there will be a heavy burden if one party later wishes to prove they do not have an equal share in the property. It is presumed that, in the context of something as important as purchasing a home together, owners will spell out their intentions if they do not each have an equal share. In addition, there is no presumption that the parties would have intended their beneficial interests to reflect the proportions in which they contributed financially to the acquisition of the property. The lesson is clear: if a property is purchased in joint names, the parties’ respective interests should be set out in a declaration of trust.

Owning a property jointly with someone when you are not married can cause other problems, as cricketer Geoffrey Boycott recently found out. He purchased a property in Sandbanks, Dorset, overlooking Poole Harbour, with Anne Wyatt, his business partner and lover, in 1996. Although Wyatt lived there alone, the property was held by them as joint tenants – meaning the survivor of the two would automatically have inherited the half-share belonging to the first to die.

However, in 2007, Wyatt severed the joint tenancy, which meant her half-share of the property instead formed part of her estate and passed to her niece according to the terms of her will. Boycott claimed he did not know the joint tenancy could be converted to ‘a tenancy in common’ by Wyatt unilaterally serving a notice of severance, but that was the legal effect of her actions.

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Tracy Harris

Tracy Harris is a Litigation Lawyer at Taylor Walton LLP in Luton.

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