November 7, 2016The importance of having a cohabitation agreement

Cohabitation agreement

Nobody wants to think about what would happen if their relationship broke down but a recent case has highlighted the importance of couples drawing up a cohabitation agreement when moving in together.

The case, Liden v Burton [2016] EWCA Civ 275, involved the equitable remedy of ‘proprietary estoppel’. The remedy might be needed where, for example, a unmarried couple have lived together in a property that only one of them legally owns – but the other has made a financial contribution towards the cost of the property, believing that they would acquire a share of it. Although, on paper, only one of the parties owns the property, the Court can award a share of the property to the other party based on their contributions. This is exactly what happened in Liden v Burton.

The couple in question were Michael Burton, a British national, and Kristina Liden, a Swedish National. The couple met while Michael was working in Sweden and rented a property together for six years. Michael then returned to the UK and Kristina joined him in 2001. The two occupied a property – which, from November 2002, was held in his sole name as a result of a divorce settlement from his previous marriage.

Michael proposed to Kristina in 2003 and bought her an engagement ring – but the couple continued to cohabit without marrying. On splitting up, a dispute arose as to whether Kristina had acquired any rights in the property that was held in Michael’s sole name, based on the contributions she had made since living there.

Kristina’s evidence

If the Court wanted to use the remedy of proprietary estoppel to award Kristina a financial share of the property, they would have to establish that there was:

  • A representation or assurance;
  • An act of detrimental reliance; and
  • An unconscionable denial of the claimant’s right.

Kristina’s evidence included that:

  • Since joining Michael in the UK, she had paid £500 a month towards the running of the home and upkeep of the property (Michael alleged, unsuccessfully, that he had never received the payments).
  • Conversations had taken place where Michael had represented that he could not afford to keep the house without Kristina’s payments.
  • The payments were ‘towards the house’.

The decision

The first judge to hear the case accepted Kristina’s evidence and held that:

‘Mr Burton had induced, encouraged or allowed Ms Liden to believe she was obtaining an interest in the property, that the monthly payments were made in reliance thereon and that it would be unconscionable for Mr Burton to deny Ms Liden any interest in the property’.

Notably, there was no single identifiable representation, assurance or promise that Kristina would have a share of the house. Michael never said directly to Kristina “If you make these payments, you will acquire a share of my house.” Instead the court based its decision on a range of factors identified from her evidence. £200 of Kristina’s payments were regarded as relating directly to the property, and a rolling interest of 3% was applied, to reach the figure of £33,522 – the amount that the Court said Kristina would be entitled to.

The appeal

Michael appealed against the decision. The appeal focused on whether the assurances about the use of the monthly payments were sufficiently clear and related to some right or interest in the property. Although the payments had been described as ‘towards the house’, and Michael had signed a document acknowledging the payments, he refused to sign anything more than a confirmation of her paying ‘rent’. However, Michael had assured Kristina orally that she was more than a tenant, and the payments had always been described as ‘towards the house’. The appeal court therefore felt it necessary to look beyond that agreement at the surrounding circumstances.

These included that Kristina’s payments were necessary for the house to be retained for the couple – and Michael had reassured her, through their engagement, that they would always be together. The appeal court also rejected Michael’s assertion that £200 a month was insufficient to constitute a detrimental reliance. The payments, made between 2001 and 2013, amounted to a substantial sum. Michael’s appeal therefore failed and the award to Kristina of £33,522 was upheld.

The important of a cohabitation agreement

Although Kristina was fortunate in this instance that the court awarded in her favour, she could have avoided the time, cost, stress and uncertainty of going to court to get a financial settlement – and then having to deal with an appeal. Commenting on the case in the Legal Executive Journal, Senior Law Lecturers Natalie Gibson and Rebecca Kelly note:

“Former couples often disagree leading to the expense of initial litigation, and even after a ruling parties may be dissatisfied with the outcome”.

Nobody wants to think about breaking up when they start cohabiting, but it would be foolish to dismiss the idea as a complete impossibility. Although judges have a wide discretion in finding evidence to support the various requirements of proprietary estoppel, the outcome of such cases is by no means certain.

The solution is for cohabitating couples to make a cohabitation agreement, or a ‘living together’ agreement as it is sometimes called. This outlines the rights and obligations of each partner towards each other. Such agreements can be used in court as evidence of the couple’s original intentions.

You can make a series of legally enforceable agreements instead or as well as a cohabitation agreement, covering specific matters. For example, if you cohabit a property that your partner owns and there is an intention that you have a share, you can draw up a Deed of Trust setting out how the property is owned. You can protect your interest by entering a restriction at the Land Registry which appears on the title to the property. You should get legal advice before taking this step.

Speak to us

Get in touch for advice about the best way for you and your partner to protect your interests while cohabiting. We can offer free initial advice without any obligation.

April King’s headquarters are in Nottingham and we have 19 offices across the Midlands. We would be happy to see you at your local office or visit you in your home if this is more convenient – just give us a call on 08700 120 130 or email info@aprilking.co.uk.

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