Equitable Accounting & Jointly-Owned Properties

Unmarried couples do not automatically enjoy the same legal rights as married couples where jointly-owned property is concerned. When a marriage has broken down, the usual starting point for a family Court is to divide the assets on a 50/50 basis, no matter whose name the matrimonial home might be in, and adjustments may be made depending on a wide variety of factors. Cohabitants, however, sometimes have a harder time seeking a share of a jointly owned property when a relationship has broken down.

More frequently, unmarried couples are buying property together. When the property is purchased jointly, it can be held by the couple on a “joint tenancy” (both of them owning it in equal shares, and inheriting from the other by way of the right of survivorship) or as “tenants in common” (both holding distinct shares which are apportioned 50/50 unless otherwise stated, as set out here). This is usually set out in the transfer deed both purchasers execute, although if the parties want to be more formal or set more terms, a deed of trust can be created.

When couples separate, the property may not be sold immediately. Sometimes there is a six to nine-month period for a typical house sale to take place, and in some cases, one of the two can remain in the property for many years – typically when there are children involved. However, the departure of one of the co-owners will inevitably result in an adjustment to how household finances are managed, and outgoings are paid.

Ordinarily, utility and council tax bills are paid by the person in occupation (sometimes with the help of child maintenance) and these payments don’t make any difference to the division of the equity. But if the mortgage payments are made exclusively by one party, particularly over a period of years, it may seem unfair if the equity remains divided as per the transfer deed. Similarly, if both have paid the mortgage but one party has had the benefit of sole occupancy, and the other is forced to rent somewhere else, the party remaining in occupation has had an advantage. There are also more complicated scenarios in which parties separate whilst extension work is being done at a property and the one who remains behind pays for the work to be concluded.

Equitable accounting

There is a solution that the Court can impose when an unmarried couple cannot agree on the division of the equity and this is known as equitable accounting. The Court will look at all contributions to the mortgage and any improvement works, and at the party who has benefited from sole occupancy since the date of separation and will allow adjustments to the division of the equity based on these contributions.

There are still many contentious points to consider when it comes to equitable accounting, however. Firstly, it is not always clear exactly when a couple has separated. Sometimes it simply happens formally when one party leaves the property, but it is not always clear when the departing co-owner has left. If, say, their possessions remain at the property or they stay there occasionally, this can delay the formal “separation” until later. Secondly, contributions to a mortgage don’t always begin and end with the name on the mortgage policy and the account from which the payments are made. Many couples have separate bank accounts and one may make random payments to the other, sometimes in cash, to contribute generally to all outgoings including a mortgage.

Finally, works on a property do not always have a material effect on its value. Adding a bedroom and bathroom might well do, but redecorating is generally seen as cosmetic and benefits only the people in occupation.