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Unmarried couples: how do you achieve financial fairness when a relationship breaks down?

When unmarried couples separate there can sometimes be a dispute over the house they owned and lived in.

Each may claim a share and usually, but not always, their percentage shares are agreed in advance when the house is bought. Where there is no such agreement, the law will look at the parties’ intentions and individual contributions towards the purchase of the house as a possible starting point. After separation it is not uncommon for one of the couple to remain in the house, with no change to the property’s legal ownership or the mortgage arrangements.

This can happen for a number of reasons. One, because it is a challenge to arrange a sale or move from the locality at short notice, and two (by far the most common) because it is problematic to arrange a re-mortgage to buy out the leaving party’s share on only the remaining person’s salary. In these circumstances the co-ownership of the property continues but the leaving party will often stop paying the mortgage. The remaining party will meet those payments and perhaps even “do up” the house as they continue to live there. The shelf life of this type of post separation arrangement varies couple to couple but inescapably ends with one person needing a release from the mortgage and off the title deeds.

If the former couple cannot agree on a sale of the house then either of them can apply to the court, who will order that it be sold. The question then arises who gets what share of the proceeds of sale. What happens about contributions, money towards the mortgage, or for alterations to the house that only one party has paid for after separation? How does the law determine a fair outcome between separated parties in these circumstances? Answer: by a process of what is known as “equitable accounting”. In using this process, the court makes fair adjustments to each party’s share to reflect post-separation contributions.

Three issues are usually considered during this accounting process: claims for occupational rent, mortgage payments and major improvements to a property.

Occupational Rent

Section 12 the Trusts of Land and Appointment of Trustees Act 1996 gives cohabiting couples a legal right to live in their co-owned property. If one of the owners is excluded from living at the property then the party who remains there may become liable to pay a market rent for his/her occupation of the other’s share of the property

The leaving party will need to show that he/she has been excluded from living at the property. Certain scenarios will count automatically, for instance, where one is forced to leave due to violence. However, even where someone has left for a reason which is not obvious, the court is clear that this does not prevent it from enquiring into whether there should be some accounting process to achieve fairness anyway. Importantly, it will consider the presence of children in the property when coming to a decision.

Mortgage payments made after the other party has left

A party who has made payments under a repayment mortgage will have increased the value of the house. The law deems that the non-contributing party should not be entitled to take advantage of those payments and, perhaps, the consequent rise in value of the property to which he/she has played no part.

How the court will deal with interest only mortgage payments has been more controversial, but it did not rule out that a claim for occupational rent could be counteracted by the claiming of interest by a mortgage paying co-owner.

The treatment of improvements  made to the property

Under this heading the law is looking at structural changes, such as extensions, loft conversions and major fittings or renovations. Case law is clear that valuing such claims is achieved by taking the lower of (a) the cost of doing the work; and (b) the increase in value of the property. The law will expect the non-paying owner to contribute to the lower of those two values in the same percentage as his/her share of the property. This will come from his share of the proceeds of sale.

When these equitable accounting rules apply is highly fact dependent. There is no hard and fast set of rules. Again, the aim of equitable accounting is to achieve financial fairness between co-owners. It is always worth investigating where the line of fairness should be drawn and pre-empting these issues. Always seek legal help to agree the orderly uncoupling of the relationship if the house cannot be sold immediately.


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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