On 9 November 2011 the Supreme Court (the highest Court of England, Wales & Scotland) gave Judgment in a case concerning the contentious issue of joint owners’ entitlement to shares in the proceeds of a home where those owners are not married.
In the case of Jones –v- Kernott leading judgment was given by Lord Walker and Lady Hale who commented that earlier cases dealing with the joint ownership of property were less relevant where society has moved on and where we are living in a different generation.
Many couples now live together and pool resources to buy property but choose not to get married. On a separation the current law in England and Wales does not provide them with any automatic claims for financial settlement against each other that they might otherwise have been able to access through the divorce courts. If a property has been purchased jointly, however, a separation requires consideration of whether that property should be sold and whether there should be a division of the share of the proceeds in particular shares.
When a property is purchased in joint names it is possible to own that property in two ways. The common form of ownership is called “Joint Tenancy” and under a Joint Tenancy any property would be retained by the surviving owner on the death of the other. The case of Jones –v- Kernott also made it clear that the starting point on a separation is that the joint owners own the property equally and are entitled to equal shares.
The property can be owned as “Tenants in Common” where the owners set out quite clearly their individual shares. This would be particularly important where one person has put substantially more money into the property. Here the shares in the property can be left to somebody other than the surviving owner under a Will and the Courts will not generally go behind the stated shares set out in the Declaration of Trust.
In the case of Jones –v- Kernott the Court found that shares in the property would be altered, despite the fact that the property was owned as Joint Tenants. The Court highlighted that this departure from the starting point of equal division would only take place where a property had been purchased to provide a family home for joint occupation and where the objective evidence showed that the parties’ intention as to the ownership changed. Lord Walker and Lady Hale stated that this was not a task that should be embarked upon lightly. Having reached the Supreme Court this case had been heard before four different Tribunals and the legal costs and time involved would have been considerable.
The Court found that on the facts of this case, where the house had been purchased in May 1985, the couple had separated in October 1993 and where Mr Kernott had in fact purchased a separate property of his own in May 1996, that the parties’ intention of joint ownership changed in 1996 when a joint life policy was encashed to enable Mr Kernott to purchase his new property. Mr Kernott’s share of the property was crystallized at that point. In 1995 the house was worth between £60,000-£70,000 and the Court confirmed that Mr Kernott’s share, therefore, would amount to £30,000. By the time that the case came to Court in 2008, the property was worth £245,000. The Supreme Court found that the original decision of the first Judge hearing the matter, which provided Ms Jones with 90% of the value of the property and Mr Kernott with 10%, was appropriate and should be upheld on the basis that Mr Kernott’s share of the property crystallized in 1995 when their intentions as to ownership were held to have changed.
This case highlights the need to consider carefully the nature of joint ownership of property, particularly when it is purchased as a home and where the joint owners do not enter into marriage.
At the time that a property is purchased a transfer document is completed and consideration should be given at that time as to whether a property should be owned as Joint Tenants or Tenants in Common and, if Tenants in Common, what shares. It is also possible to alter the ownership of the property subsequently so, for example, Miss Jones and Mr Kernott could have entered into a Declaration of Trust in 1995 which confirmed their change of shares in the property at that stage. This would have avoided considerable stress and litigation costs.
The Supreme Court also found that in cases where the intention as to ownership could be found to have changed where the particular shares could not be identified that the Court would then have to consider what was fair and reasonable given the course of conduct in dealing with the property during its period of ownership. If this exercise has to be undertaken then there would have been a further increase in time and costs in determining the shares. Thankfully in the matter of Jones –v- Kernott this did not prove necessary as the Court were able to decide what the parties’ intention had been on the ownership of the property and, also, their shares being 50% of the value in 1995.
The Private Client Team at Gotelee Solicitors are able to advise you on the matters raised in this article, including ownership of property, Declaration of Trust documents and Cohabitation Agreements. Please contact family law partner Helen Stuart on 01473 298101 or email helen.stuart@gotelee.co.uk if you would like to consider these options further.