What happens to a gift when a cohabiting relationship breaks down?

Research carried out by Zoopla found that 79% of first-time buyers in the past five years have had assistance funding their deposit with 75% of that group getting that help from their parents. They give an average of £32,440.  The Bank of Mum and Dad also continue helping with mortgage payments. This reflects the shocking change in the housing market in this generation of home buyers.

The Office of National Statistics (ONS) reports a large proportion of this group will be buying with a partner and intending to cohabit rather than marry.  Many of the couples giving the gift will not have given any consideration to the position of the gift in the event of a breakdown of that relationship. Statistically 48% of those relationships will break down so what happens to the gift intended for the adult child?

How do courts treat a gift from a third party in a cohabiting relationship?

The position in law is very different between a married couple and a cohabiting couple. Cohabitants do not have the same rights to make property claims as married couples or civil partners.

The starting point for the courts on the breakdown of a cohabiting relationship is what is recorded at the land registry. If the intention is made clear by an agreement or declaration of trust the position is clear on the face of the Land registry.

If there is no agreement or declaration and the couple do not agree on separation how the gift was intended to be treated, they would need to argue that their beneficial interest (how they intended to hold the property and treat the gift) is different to the legal title.

How do you protect the Gift?

Put simply you need to make everyone’s intention clear. This can be done with a cohabitation agreement or a declaration of trust but ideally both.

The agreement should be formally recorded in writing to avoid disputes about its terms and to satisfy the requirements of the Law of Property Act 1925.

Generally executing the agreement as a deed will avoid the problem of evidencing consideration. Care should also be taken to consider and counter potential allegations of undue influence, such as ensuring both parties have independent legal advice and enter into the agreement freely and voluntarily.

When a home is purchased, recording in detail what was agreed is very important. A clear definition of the agreed property entitlements in the agreement will usually determine the parties’ beneficial interests. Provision can be made for this to change in certain circumstances, eg if the parties have a child.

Conclusion

By far the easiest time for one to state clearly their intent is at the time that a payment is made and whilst there is trust and good faith in that relationship.  This can be made easy by way of a trust deed, a cohabitation agreement or a pre-nup for everyone to set out clearly at the time that a payment is made what everyone’s intent in relation to that gift is.

Why Anthony Gold?

Anthony Gold Solicitors LLP have a number of collaboratively qualified lawyers who can assist you through the process. Our family team are leaders in all types of dispute resolution and can guide you towards the right process. Please contact us on 020 7940 4060 or email us at mail@anthonygold.co.uk.

In addition, if you wish to discuss further any of the issues raised in this article our experienced Family Law solicitors are always here to help. Book your 1-hour fixed-fee consultation now: