Cohabitation Rights & Agreements – Part 2 of 3 – Understanding Property Ownership and Beneficial Interest

This is the second instalment of our blog series, aimed at guiding you through the legal intricacies of cohabitation. It’s important to note the information provided here is for general educational purposes only. For advice specific to your circumstances, we encourage direct consultation with a legal expert. Our family law specialists are on hand on 0333 344 6302 or via email at info@blanchardslaw.co.uk.

Understanding the significance of a cohabitation agreement requires some knowledge of the laws governing UK property ownership, which distinguishes between legal and beneficial ownership. Being listed on the property deeds indicates legal ownership, whereas beneficial ownership implies you have rights to the property’s income or sale proceeds despite not being on the deeds.

Property ownership for parties on the deeds can manifest in two forms:

• Joint Tenancysignifies a 50/50 ownership. Upon the death of one owner, their share automatically transfers to the surviving owner, a principle known as the Right of Survivorship.
• Tenancy in Common represents an ownership where shares are not necessarily equal. This arrangement allows for the property to be held in shares that reflect each party’s financial contribution. Unlike Joint Tenancy, there is no automatic transfer of shares upon death; instead, the deceased’s share is handled according to their will.

For many cohabitating couples, only one partner may be listed on the deeds. Nevertheless, it’s possible for the non-listed partner to possess a beneficial interest in the property, a concept crucial to understanding one’s rights. Beneficial interest is pivotal as it allows a party to have an economic stake in a property without being a legal owner or sharing the property as Joint Tenants or Tenants in Common. One aim of a cohabitation agreement is to set clear terms regarding beneficial interest.

Establishing beneficial interest can occur in two ways:

• Through significant contributions to the property, such as renovations that enhance its value or by covering a substantial portion of the mortgage. The key factor is the significance of the contribution, which must meet a certain threshold to be considered. After all, had the non-owning party not lived in the property, they would have been paying rent elsewhere, so simply contributing a small amount each month is no guarantee of securing beneficial interest.
• Alternatively, beneficial interest can be established through expressed intent. If the property’s legal owner clearly indicates a willingness to share ownership, supported by tangible evidence, the non-owning party may claim a beneficial interest. For example, if a non-owning partner opts not to purchase a separate property based on the other’s assurance that the current home is shared, and if this decision results in financial sacrifice, they may have a legitimate claim to a beneficial interest in the property.

The problem with intent is that it depends on supporting evidence, and this is one of the reasons cohabitation agreements that set out clear expectations are so important. For further information on cohabitation rights and agreements, be sure to explore parts 1 and 3 of this blog series.