A recent case involving a separated unmarried couple and their shares in the family home raised questions explains unmarried family finance solicitor Deborah Cahill.
Is an email enough to confirm agreement and meet statutory requirements? Must a party later claiming an increase in their equitable share have acted to their detriment? Does common intention alone suffice to alter the division of shares?’
It is generally understood by most people who own a house that they have signed a document or deed which is evidence of their interest in the property. Although nowadays there are usually no bundle of title deeds and a record of ownership is recorded at the Land Registry, a transfer deed or title document still has to be signed by the owners in order to transfer title to the new homeowners.
That deed also sets out how the new owners will share their property, either in undivided shares as joint tenants or in defined shares as tenants in common. The Law of property Act 1925 s2 states that contracts for sale of land must be in writing and signed and s53 states that declarations of trust or dispositions of equitable interest must be manifested in signed writing.
For unmarried couples, there is no set financial route to follow when separating, and no rules such as those that govern divorce settlements. A recent case highlights some of the issues which may arise if an agreement reached by the parties is not clearly recorded. Whilst the facts were niche there are some themes that are useful to consider such as whether an exchange of emails amounts to a legal agreement.
In a recent case Hudson v Hathway 2022 EWCA Civ 1648 the Court of Appeal judges have reconsidered whether it is necessary to show detrimental reliance on a change of position where a domestic home has been purchased in joint names with no declaration of divided shares.
The unmarried couple separated and negotiated the division of their assets by email. In summer 2013, they came to an agreement. Hudson would retain his pension and shares and Hathway would get the equity from the house, as well as the liquid cash, savings, physical property, and the house contents, so giving up any interest she had in Hudson’s assets. In fact, Hathway did not have any legal claim against Hudson’s assets, but neither party knew that. Perhaps they should have taken legal advice!
In 2019 Hudson sought the sale of the house and sought an order that the equity be divided equally between them. Hathway agreed to the sale but wanted to solely retain its equity as previously agreed by email, which she said she had relied to her detriment.
The biggest question at the appeal was whether a party who is claiming a subsequent increase in their equitable share, has to act to their detriment? Or was a common intention of the parties enough to alter the division of the shares? Having decided that it was not necessary to show detriment and that a common intention alone was necessary, the first appeal judge went on to say in case he was wrong that he found there was detriment anyway.
At the court of Appeal, LJ Lewison gave judgment that a person claiming a subsequent increase in their equitable share must show a detrimental reliance on a changed common intent and he also said that in this case such a detrimental reliance had taken place.
LJ Lewison went further and stated that an exchange of emails between the parties which expressed a change in the common intent did comply with the statutory formalities for a disposition of an equitable interest of trust, as it is in writing and signed by the party disposing of their interest. An email with an electronic signature was sufficient to meet the statutory requirement.
The decision is important for separated unmarried couples who jointly own their family home. It demonstrates the importance of taking legal advice on each party’s legal rights and the dangers of entering into correspondence without realising the legal consequences.
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