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SEPARATION FINANCES - THROUGH THE COURTS (Disputed property division)

Common Law Marriages do not exist. The wide options available to a Court under the Matrimonial Causes Act 1973 when considering the property of a married couple therefore offer no assistance to a cohabiting couple. Resolving disputes about ownership and occupation of the family home will therefore have to go through the Civil Courts rather than the Family Courts.

There are two very important consequences of this distinction. The first is costs. In the civil courts the rule is that 'costs follow the event'. What this means in normal words is that if you go to Court and you 'win' your case the other side can be ordered to pay your costs. Obviously the opposite also applies if you lose. However, in the Family Courts an order for one party to pay the other's costs is very rare.

The other distinction is that the Civil Court is not as concerned about 'fairness'. This is not to say that the Judge will care about fairness, but there are more constraints in the civil courts. The civil court rules are a lot stricter. This can be demonstrated by the method by which ownership and occupation of property disputes are decided by the Court.

This is not all doom and gloom; FAR FROM IT. In cohabitation disputes the way the court determines ownership of property is by applying 'trust principles'. The effect of strict rules and applying strict principles is that couples involved in cohabitation disputes have more certainty about the outcome of the court proceedings before starting it. Separating married couples don't have this luxury as there is a lot more fluidity and discretion in the family court.

Trust principles explained very briefly. In England you can own something in two ways; in law and in equity. In law speaks for itself: You own a property, your name is on the deeds, in law you own it. In equity is slightly different. The way equity usually works is that somebody else owns the thing in law BUT you have the benefit of it: You are the beneficiary, or as we would say in the legal profession, a 'beneficiary under a trust'.

So for an example, two people have fallen head over heals with each other, want to live with each other and have rented for a bit whilst saving a deposit for a mortgage. The mortgage company won't give a mortgage to both of them because only one of them works (or has an income large enough for the mortgage company to consider). The property deeds and the mortgage therefore go only in that persons name. The two people move in and both treat it as their home. A little while later they both get jobs that pay roughly the same and they both contribute to the mortgage equally for most of the period of the mortgage, say 20 years. The relationship runs its course and unfortunately the couple separate shortly after.

In law the property belongs to only one of them. The other, notwithstanding that they have paid almost as much towards the house as the other, is looking at nothing unless they can establish a beneficial interest. i.e. that the other holds part of that property 'on trust' (that's the jargon) for the both of them. You don't need much imagination to consider the added problems that arise when children are involved in this type of scenario or if the other person sells it before an agreement is reached.

Most people, whether cohabiting or married, wait for a relationship to be on the rocks before finding out how the law works and how it can benefit (or save) them. Some people don't like the idea of thinking about it until then. However, thinking about the financial consequences of a relationship breakdown is not tempting fate or unsavoury. Relationships do breakdown (food for thought: statistically most people will not be living with the first person they fell in love with). Thinking about the potential consequences early can save an awful lot of problems later. Additionally, separation agreements or cohabitation contracts, just like prenups, can provide peace of mind throughout the relationship.

Now, I could write reams on this topic; go on for page after boring page. However, most of it might not apply to your particular circumstances. Only parts would and in any event, applying those parts to court proceedings, can be tricky. I suggest that the best way to get a brief overview of how the law specifically applies to your circumstances is to call my clerk on 0113 227 0708 and arrange a conference.



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