In this blog Chris Maulkin highlights two different scenarios of couples separating, in scenario A they are unmarried (cohabiting) and in scenario B they are married.
Meet Jack (aged 50) and Jill (aged 55). Jack owns one property in his sole name which has equity of £600,000. Jack earns £100,000 and has a mortgage capacity of £300,000. Jill earns £20,000 and has no mortgage capacity. They have been living together for 25 years in the property.
Their relationship has broken down. The cost of a reasonable property in the area that they live in is £400,000.
The starting point is that Jill has no entitlement to the property or any share of it. There are potentially ways in which she may be able to demonstrate that she should have an entitlement to it. An example of this could be if Jill had invested a large sum of money into building works, e.g. adding an extension to the property.
However, the ways in which Jill is likely to have a claim against the property are very restricted and the burden of proof is upon her to establish that interest. In the absence of being able to establish a claim against the property (which in the majority of cases that we see is not possible), Jill will leave the relationship with nothing.
Although the property is in Jack’s sole name Jill can apply to register a home rights notice against the property with the Land Registry. Although this does not prevent Jack from selling the property, it is unlikely a purchaser is going to wish to buy the property until this has been removed. Therefore, this gives Jill some protection against the property being sold without her knowledge.
Although the property is owned in Jack’s sole name, the family home would be considered a matrimonial asset and the starting point for the family court would be an equal division. However, the cost of purchasing a home is £400,000. Therefore, it is likely that the family court would order that the property is sold and that Jill receives the sum of £400,000 to allow her to purchase a property and meet her housing needs. Jack would receive the remaining £200,000 and with his mortgage capacity would be able to meet his housing needs at a similar level.
The difference in outcomes is stark. In scenario A Jack retains all the capital and can comfortably house himself whilst Jill is unable to rehouse.
In scenario B, Jack and Jill are both able to rehouse and Jill has actually received more of the capital because this was what was needed to enable her to rehouse herself following the breakdown of the relationship.
Anna (50) and Kristoff (50) own a property jointly which has equity of £800,000. Anna earns £150,000 a year gross (£90,000 net or £7,500 per month). Kristoff has not worked since their children, Olaf (12), Elsa (14) and Hans (16), were born.
Anna intends to retire at 65 when her pension will provide her with an income of £2,000 per month. Kristoff’s pension will give him an income of £80 per month from age 65.
They have been living together in a relationship for 20 years.
The relationship has broken down and the cost for them to purchase a reasonable property is £400,000. They have agreed on a shared care arrangement for the children which means that they will spend an equal amount of time with each of them.
In this scenario, the equal division of property means that their housing needs are met and they can each purchase a property.
However, Kristoff’s income position is much bleaker. As they are not married he has no claim for maintenance. They have an equal shared care arrangement for the children so he has no claim for child maintenance.
Having been out of the working environment for 16 years, Kristoff is now in a position where he will have to find employment in order to meet his living costs. As he has been out of work for 16 years it is likely that the jobs he will be able to obtain will provide a limited income and he has no income provision for his retirement. He would not be able to claim any of Anna’s pension.
An equal division of property meets their housing needs and so there is no reason for the court to depart from this. However, Kristoff does not have an income.
The Family Court assesses his income needs at £2,500 per month. It assumes that Kristoff will be able to earn £500 per month. The Family Court, therefore, decides that Kristoff needs £2,000 per month and, after considering Anna’s needs, concludes that she has sufficient income to meet her own needs and pay Kristoff £2,000 per month.
Therefore, it orders that Anna pay Kristoff £2,000 per month as spousal maintenance until they reach 65.
Thereafter, the Family Court makes a pension sharing order to equalise income so that Anna and Kristoff will each receive the same income in retirement.
The difference in outcomes for Kristoff is stark. In scenario A Kristoff is likely to struggle to make ends meet and has no provision in his retirement. However, in scenario B Kristoff is able to meet his outgoing needs and will also have an income in his retirement.
Our team of Cohabitation specialists can advise you on all of your options. Please contact us to discuss your own unique situation.