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Guidance for Unmarried couples and Beneficial Interest in land (22 March 2013)

Date: 22/03/2013
Duncan Lewis, Housing Solicitors, Guidance for Unmarried couples and Beneficial Interest in land

The law for cohabiting partners is altogether different to the law that applies on dissolution of a marriage or civil partnership. As Baroness Hale pointed out in Stack v Dowden [2007] UKHL 17 at [43]-[44] the adjustment of shares or ownership in jointly owned family property for married or civil partnership couples have been:

“…addressed (if not solved) by the comprehensive redistributive powers of the Matrimonial Causes Act 1973, if the couple divorced and in the Inheritance (Provision for Family and Dependants) Act 1975 if one of them dies.”



For the cohabiting couple there are no redistributive powers vested in the courts, save to a very limited extent, and where the couple have children, under the Children Act 1989, s15 and Sch 1. There is no such thing as a ‘common law marriage’ or a ‘common law’ civil partnership, for that matter. In clear contrast with the position of the married couple, as Baroness Hale stressed: ‘Inter vivos disputes between unmarried cohabiting couples are still governed by the ordinary law.’ Inter vivos simply means between the living – a Latin term referring to a transfer or gift made during one’s lifetime, as opposed to a testamentary transfer which is a gift that takes effect on death.

Concepts related to land ownership might not be easy for the layman to follow. However, in terms of ownership and beneficial entitlements, the following basic points are important to note:

  • If you are the absolute owner of an asset you have both a legal and a beneficial interest in it. You are not only the registered owner of the asset (e.g. in the case of land, your name is on the title deeds), but you can also benefit from any gain it produces. The absolute interest (the combined legal and beneficial interest) can be split. So while you retain the legal interest, you can let someone else have any benefit gained from the property. Alternatively, you can pass the legal interest to one person and the beneficial interest to another. If you wish to make this division, whether during your lifetime or under your will when you die, you create a trust. You create an interest in the property for the benefit of a person, or people, without giving them the legal interest.

  • Where joint owners hold property it will be assumed that the beneficial ownership follows legal ownership unless there is evidence of some contrary intention (e.g. in a declaration of trust).

  • In the case of joint tenants parties own the whole of the property jointly and when one party dies the property automatically passes to the survivor (a process called “survivorship”) and the deceased’s share of the property does not form part of their estate. This is different to tenants in Common where each party owns their separate shares and on death the deceased’s share passes into their estate. The shares can be equal or unequal e.g. 60:40, 70:30. This form of ownership is often used where the parties are making unequal contributions to the purchase of a property.

  • The presumption of beneficial joint ownership cannot be rebutted simply because one party made a larger financial contribution to the acquisition of the property than the other. The court’s task is to search for the result that the parties must, in light of their conduct, be taken to have intended. The burden will be on the parties to establish that there was a common intention that the beneficial interests would be different from their legal interests. In this regard, the reasons why the property was acquired in joint names, how the acquisition was financed, the nature of the parties’ relationship and the way in which household expenses were discharged are all relevant factors to be taken into account.



In Gallarotti v Sebastianelli [2012] EWCA Civ 865 the Court of Appeal had to decide whether the parties, an unmarried couple (male friends) who bought a flat together in unequal shares, were beneficially entitled to the flat in equal shares. Miss Recorder Michaels QC sitting in the Central London Court found that the parties were beneficially entitled to the flat in equal shares but the Court of Appeal disagreed and divided the shares 75:25 in Mr Sebastianelli’s favour.

In 1997 the parties decided to buy a flat with the help of a mortgage and with each of them making cash contribution. Mr Sebastianelli paid the larger share. The transfer was into Mr Sebastianelli’s sole name, and he took out the mortgage for the balance of the price and proceeded to pay the mortgage repayments. Recorder Michaels found that Mr Gallarotti had a good claim to a half-share in the Flat, finding on the balance of probabilities that the express agreement between the parties was that they would each have a 50% interest in the Flat, despite the unequal amounts contributed by each of them. The recorder accepted Mr Gallarotti’s evidence that when the parties realised that they were contributing an unequal amount of capital, they agreed that he would make up for that by paying more of the mortgage repayments. The fact that Mr Gallarotti may not have contributed exactly 50% of the cost of acquiring and renovating the Flat did not detract from the effect of the express oral agreement, which they made, in the light of the detriment to Mr Gallarotti. In the Recorder’s view, although the flat was purchased in the sole name of Mr Sebastianelli, he held it on trust for the parties in equal shares.

The Court of Appeal noted that neither party fussed over minor differences in payments made by them. Since they had no formal system of accounting, there was no system for equalising contributions. They did not place much store on that consideration. The Recorder put this down to the strength of their friendship. But, according to the Appeal Court, the fact that they were strong friends simply meant that one party would not chase each other for money, which the other did not have. It did not mean that they gave up any chance of substantial equality at the end of the day. The express agreement put forward by Mr Gallarotti, and accepted by the Recorder, showed that the parties were concerned that their ultimate shares in the flat should, broadly speaking, represent their contributions to it. Accordingly, the inference to be made from the parties’ course of conduct was that they intended that their financial contributions should be taken into account but not that there should be any precise accounting.

The Recorder had found that at the date of the acquisition the parties recognised that there was some slight disparity between their contributions. However, in the event, she found that the disparity was much greater than the parties had expected at the date of their agreement. She found that Mr Gallarotti agreed that if he paid less towards the purchase price he would make that up by paying more towards the mortgage. If that was the agreement then she should have looked at the amount of the mortgage payments Mr Gallarotti had paid. He palpably had not made a substantial contribution on her findings. The logical result of the agreement, therefore, was that the agreement for 50/50 sharing was at an end. The Recorder should have held that this was the case when the parties agreed to go their separate ways and Mr Gallarotti left the Flat. By that point in time, the only inference that could be drawn was that the parties intended the beneficial ownership should, in substance, reflect their financial contributions. It was wholly implausible that Mr Sebastianelli should make a substantial gift to Mr Gallarotti. Here were two flat sharers who were not in a family unit. They were people who for convenience lived together until they established their own homes.

In those circumstances, the Recorder’s holding that there was a 50/50 share in the flat was set aside. The court of appeal substituted a finding that Mr Sebastianelli has a 75 % share and that Mr Gallarotti has a 25% share.

Omur Clayton of Duncan Lewis is a Senior Solicitor & Housing Law Specialist.


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