Why are we still relying on property law to divide the assets of cohabiting couples on separation?

The division of property between cohabiting couples upon separation remains an area fraught with uncertainty and inconsistency.  Despite the increasing prevalence of cohabitation as an alternative to marriage, the law continues to rely on property law principles that were not designed to address the complexities of modern family relationships. 

The recent case of Nissan and another v Cynberg [2024] EWHC 2164 (Ch) provides valuable clarity on one aspect of this issue, namely how an express declaration of trust may be varied by subsequent agreement or affected by proprietary estoppel. This is very helpful for family lawyers advising cohabiting parties with regard to property division on the breakdown of their relationship, but we are still having to rely on property law principles when dealing with family relationships that do not always provide a fair outcome.

Case analysis: Nissan v Cynberg

The Nissan case concerned the family home of a formerly married couple. The property had been purchased in joint names and the box on the TR1 form was ticked to say that they held the property as joint tenants. When they separated, they orally agreed that the wife would retain the property, provided she left it to their children in her will. From that date, she took sole responsibility for all of the outgoings in respect of the property, including the mortgage repayments. The husband made no further contribution.

No divorce proceedings were started for some 9 years post-separation because of the expense. There was no transfer of the legal title.

The husband was subsequently declared bankrupt. The Trustee in Bankruptcy sought to claim that the husband’s 50% share of the property vested in them, based on the express declaration of trust in regard to the TR1 form.

As the parties had reached agreement verbally on separation, no other document was drawn up to expressly refer to the change in beneficial ownership. The parties did not enter into a consent order on divorce providing for a transfer of the property to the wife.

The wife argued a common intention constructive trust had arisen and/or proprietary estoppel and that she was the sole beneficial owner of the property on the basis of their verbal agreement and her acting to her detriment in reliance on the same.

The court held that an informal agreement could displace an express trust, provided there is clear evidence of common intention and detriment. The wife had acted to her detriment in paying the mortgage in reliance on her husband’s assurances, she had also invested in home improvements. The court also held that the wife had acted to her detriment in not pursuing a financial provision claim in the divorce proceedings.

Key legal principles

The court’s decision builds on the principle articulated in Stack v Dowden, where Baroness Hale stated that an express declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel. 

One of the questions for the appeal court in Nissan was whether ‘subsequent agreement’ means only a formal agreement that complies with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989, that is, it should be in writing and signed by the parties, or whether it could include a subsequent informal common intention constructive trust. The court found that the agreement could be informal and a verbal agreement.

This is significant for cohabiting couples, who often agree informally on changes to property arrangements, but do not document these arrangements in writing. It provides a pathway for individuals to assert their beneficial interests, but it also exposes them to the risks inherent to informal arrangements.

The need for reform

While the outcome in Nissan may offer reassurance to some, it underscores the broader issue: cohabiting couples remain reliant on property law principles that were not designed for family relationships. These principles can fail to provide fair outcomes, particularly where financial contributions or sacrifices are not easily quantifiable. 

Statutory reform is long overdue. Cohabiting couples need legal protections that reflect the reality of their relationships and financial arrangements. Until such reform occurs, cohabiting couples face significant uncertainty. For family lawyers, Nissan serves as a reminder of the importance of identifying and evidencing informal agreements and any reliance placed upon them.