Promises not forgotten

The Court of Appeal has ruled that a cohabitee was entitled to a slice of the equity in a property owned in her partner’s sole name and to which she made no financial contribution.

The case of Southwell v Blackburn has served as a reminder to property owners to be careful not to make any assurances to cohabitees about the long term security of their living arrangements unless a cohabitation agreement is in place. 

Any assurances that you give, even if given off the cuff and within the context of a blossoming romantic relationship, may come back to haunt you and cause serious financial pain at a later date, as in the case of Mr Southwell.

The simple facts of this Court of Appeal case were that Mr Southwell and Mrs Blackburn had formed a relationship in 2000.  At the time, Mrs Blackburn was renting a house from a Housing Association in Manchester. Although of modest means, over the years she had spent approximately £20,000 fitting out and furnishing her rented property. 

Mr Southwell was a 41 year old Claims Manager living in Portsmouth with more substantial financial resources.  In 2002, the parties set up home together in Droitwich.  The property was purchased in Mr Southwell’s sole name and was financed solely by Mr Southwell with a mortgage of £100,000 and with equity of £140,000 from his previous home.

Mrs Blackburn lived at this new property rent free. Mr Southwell was solely responsible for the mortgage repayments.

Over the years, the property increased in value from £240,000 to £320,000.

In 2009, the relationship broke down and Mrs Blackburn became homeless following Mr Southwell’s decision to change the locks at the property.  Mrs Blackburn applied to the County Court for an equal share of the property on the basis that she had given up her established home in Manchester to live with Mr Southwell and that she had been promised that the Droitwich property was to be her new long term home. Her argument was that she had relied upon this promise from Mr Southwell when choosing to start a new life with him in Droitwich.

Mr Southwell’s argument was, in essence, that Mrs Blackburn had not made any significant contribution to the purchase price or to the outgoings. He referred to the fact that she had lived at the property rent free and that she had benefitted from this property at his sole expense. He argued that she could have no claim on the property in these circumstances. 

The County Court Judge dismissed Mrs Blackburn’s claim for a joint share of the property but he did rule that she was entitled to a share of the equity in the property and ordered Mr Southwell to pay her the sum of £28,500.

This decision was appealed by Mr Southwell to the Court of Appeal. The Court of Appeal rejected the appeal and upheld the original Judge’s decision. 

The case is a warning to property owners about the potential liability they face when a relationship with a cohabitee breaks down and they have not previously entered into a cohabitation agreement or declaration of trust defining the cohabitee’s interest, if any, in the property. 

Signing a declaration of trust or a cohabitation agreement is likely to be the last thing on your mind when a partner moves in with you. Discussing such legal niceties has about as much appeal as an ice cold shower. But there are risks to be aware of and one of these is the risk of making any kind of assurance about the security of your partner’s living arrangements. If your relationship hits the buffers, any assurances that you may have made previously, can potentially be used to support a claim on your property.

If you have any questions about the issues arising in this article please contact Andrew Turner on 01242 574 244 or by email at aet@hughes-paddison.co.uk.