For many people, the equity in their home is their largest asset. When a married couple or civil partners separate, dividing this asset can be one of the most difficult aspects of their financial settlement. However, when an unmarried couple separates, the question of how the equity in the home should be divided can be extremely complex and involve a great deal of legal argument. Let’s have a look at why.

A house in joint names

If a couple living together rent their property, then the position is usually quite simple. Most tenancies are short term in nature and can be brought to an end by the giving of notice. In cases involving tenancies granted by housing associations or local councils, there can be complexities around the termination of secured or assured tenancies but, for the most part, there are few legal issues and the only considerations will be practical: finding somewhere new for each party to live, retrieving the rental deposit and ensuring that rent and utilities are paid up to date.

For couples buying a home together then the position can be much more challenging. Many couples will simply buy a house in joint names and make no provision for each of them to receive other than 50% of any sale proceeds. However, if two people move in together and put very different amounts into the deposit, this type of arrangement may not reflect their wishes. In some unusual cases, it is possible to show – provided there is very strong evidence in support – that the party who put in a greater proportion of the deposit should get more out upon the sale of the property, even though the documentation states that the couple simply wished to be joint owners. However, such cases are not the norm, and for most, there is little option but to share the proceeds of sale equally, regardless of who contributed what.

A little forward thinking can solve this kind of problem. It is an extremely simple matter for a couple buying a house together to state how they wish the proceeds to be divided in the event of a sale. This could be anything from a straight percentage division (e.g. 65% to one and 35% to the other) to a more complex arrangement (e.g. the first £13,000 goes to person A with any surplus going divided between A and B 50/50). All couples considering this type of arrangement should discuss it with their conveyancing solicitors who will be able to direct them towards the necessary legal advice to ensure their intentions are reflected in the outcome.

A house in one party’s name

Here, the situation can be more uncertain and even more complex to resolve. It is not uncommon for a couple to live together in a property previously purchased by one party alone. While the couple are on good terms, this arrangement may seem satisfactory. However, if the relationship breaks down, the person who moved into the previously purchased home may have grounds to argue that they should receive some of the equity in the property, even though their name is not on the title.

There are lots of ways in which this can happen and there are many volumes of case law considering how certain types of family arrangement can give rise to a situation where a person whose name does not appear on the title can nevertheless acquire a financial interest in a property. For example, a person may have helped out with mortgage payments or funded an extension. Discussions may have taken place and understandings may have arisen at various times that, far from the property being the sole asset of one party, it was really a joint asset in all but name.

Achieving success in a legal dispute of this nature is far from straightforward. Good evidence of the intention to own the property in a different way from what the title documents state will be required. However, cohabitation cases do often come before the courts and they can be extremely costly, with the added risk that the unsuccessful party to any such court case will usually have to pay some or all of the successful party’s costs.

Again, there is way out of this with a bit of foresight. At the point of moving in together or, potentially, years down the line, couples can and should address head on how they want to share the equity in their home. Couples can opt for a cohabitation agreement, which sets out the comprehensive financial plan they would like to follow in the event they were to separate. Alternatively, the parties can simply deal with the property in isolation and either put the property in joint names with a 50/50 split of any equity or do something more subtle that reflects their own personal intentions.

The reality is that only a minority of couples will make these types of arrangements and, for most, things are only tested at the point of separation, which can be the absolute worst time to begin contemplating these kind of issues.

Cohabitants’ (lack of) rights

Successive governments have done little to provide protection for cohabiting couples whether in terms of inheritance or financial provision after separation. It is completely possible for a person not named on the title of a property to have to leave the home they have shared with their partner for decades after the end of the relationship and end up penniless. Unless that person can use the various legal precedents in existence to show that they have acquired a financial interest in the property or they are responsible for dependent children, there is very little they can do to obtain any financial redress after their relationship breaks down. Even in cases where a couple jointly own a home, it could be that there is little or no equity in the home and the “less well off” party will very likely have no entitlement whatsoever to a share of their ex’s assets.

It is a point of some controversy as to whether people should be able to choose to live together without any prospect of financial interdependence, provided they do not marry or enter into a civil partnership. Various schemes to redress the balance have been proposed, including ones where modest financial support is available to those exiting an unmarried relationship unless they have jointly opted out. However, none of these schemes have been carried forward, except in Scotland where there is limited financial support available for cohabitants without children.

Financial provision for children

The situation is different where there are dependent children. For most, child maintenance will be due for payment by one parent to the other after separation, whether by agreement or via the Child Maintenance Service in cases where liability for child maintenance or the amount due is in dispute, or if there are difficulties in enforcing payment. In cases where the income of one parent is very high – in excess of £156,000 before tax per year – additional maintenance can be claimed through the courts. The courts will also allow an unmarried parent to make a claim for housing and other financial provision if (and this is a big if) the other parent has the resources to make such provision.

Those buying a property together should tackle head on how they would like the property to be dealt with in the event they decide to split up and sell the property. Similarly a couple considering moving into a house that only one of them owns need to do so with their eyes open. There are affordable legal options out there to avoid difficulties from arising. The really important thing is that couples planning to live together without getting married or entering into a civil partnership educate themselves as to their rights or, in some cases, lack of rights.