Breakups and property disputes
Written by Commercial Dispute Resolution Team | 23rd June 2023
When a relationship breaks down, how any joint property should be treated is often the last thing to come to mind. However, disputes as to how this property – which is usually the family home - should be treated can crop up in a variety of ways and it is important that both parties understand their rights and obligations.
This article looks at how common disputes arise, practical considerations to bear in mind and how to approach resolution.
How might property disputes arise?
It is increasingly common for cohabitees, unmarried couples, to choose to buy a property together.
Typically, such property is purchase in their joint names. When a couple split up and a party moves out, there may be disagreement between the parties as to what will happen to the property.
If both parties have paid towards a mortgage deposit, the party who no longer lives in the property, and no longer has the benefit of living there, may want their money back from their partner. The leaving party may also insist on their former partner ‘buying them out’ so as to enable them to realise their interest in the property which they are no longer living in. Of course, the remaining party may not have the means to buy them out, may not be able to raise a mortgage in their sole name or may simply not want to.
Alternatively, the property may only be in the name of one party. This may be because only one person contributed towards the deposit or because only one person could secure a mortgage. In this scenario, the property has only a single legal owner.
However, it is commonly the case that, although not a “legal owner” of the property, the other party has obtained a “beneficial interest” in it. This really means that the law recognizes the non-owning party has having a financial interest in the property that, effectively, the legal owner holds on trust for them. In considering whether the non-owning party has such an interest, two key questions should be considered: -
Whether or not the couple’s common intention was that they would own the property together; did they share payment of the mortgage payments, for example?
Has the non-owning party contributed to the value of the property by carrying out renovations and building extensions, effectively increasing or maintaining the property’s value?
The onus is always on the non-paying party to prove any common intention to own the property, that they relied on the common intention and that they took action to their detriment, usually by spending their own money.
What happens next?
If the parties are at an impasse, either party can make a formal claim against the other to resolve the issues. The courts do not like people just jumping the gun and issuing court proceedings, which lead to a lot of expense and time spent by both parties, so there are steps to be taken prior to that.
First of all, a letter of claim; a formal letter setting out the basis of the party’s claim and what remedy they are seeking, must be sent to the other party. The remedy may be in the form of money, or for the property to be sold, if the circumstances do not allow the other party to raise the money. It may be that the party is seeking a declaration from the court, recognising their beneficial interest as a percentage of the value of the property on a sale.
In an ideal world, any such dispute is resolved by agreement, usually involving the sale of the property so that both parties can realise their interest. There are a number of options available in seeking to reach agreement without involving the courts. These alternative forms of dispute resolution can be very informal, to include meetings, the exchange of information or phone calls, to the more formal involvement of trained mediators. We can advise on the most appropriates form of ADR in your case.
Court action
However, if no agreement can be reached, the best option is likely to be to ask the court to step in.
Once court papers setting out the details and the legal basis of the claim is set out, the court would issue proceedings and serve a copy on the other party, which commences the court action. How the court then approaches the claim really depends on the precise circumstances in your case.
If there is no dispute as to the ownership, the court can set directions relating to the sale of the property. This may involve one party being ordered to transfer their share to the other in return for a sum, based on the current valuation and the equity in the house after the expenses such as mortgage redemption fees, if any, estate agents’ fees and solicitors’ fees.
If there is a dispute as to the ownership, normally because one party argues that they have a beneficial interest in the property, the court’s focus will be on assessing whether this is the case. This will involve consideration of evidence, the court looking to establish whether there was ever a common intention and whether the non-legal owner has acted on this to their detriment, usually by spending either their money or their time on the property.
Successfully proving such a claim require a lot of evidence, so it is prudent to keep evidence of any written conversations as to the intention of the parties. This may include messages and emails and any contribution to the value of the property, such as photographs of the extension/renovation works, and related costs/receipts.
Court action is expensive, stressful and can be very time consuming. It is normally in the interests of both parties to a dispute to find a resolution without recourse to litigation. We can help with this, in advising you on your position at law and the options and approaches available to you in resolving your dispute.
Speak to our Commercial Dispute Resolution team
You can call Jamie Carr, Head of Commercial Disputes, on 01752 827014 or email him on jcarr@nash.co.uk
