Property ownership of unmarried couples: KERNOTT V JONES - Dissertation Example

?PROPERTY OWNERSHIP OF UNMARRIED COUPLES: KERNOTT V JONES of Property Ownership ofUnmarried Couples, has KERNOTT V JONES Provided Clarity Property ownership is governed under property law. It is one of the very important aspects of law as it governs the ownership and usage of property. According to Berle (1995, p. 378) property refers to anything that can be owned by a entity or person. He explains that property can be divided into two major categories namely; personal property and real property. Personal property is moveable and can be moved from one place to another location. On the other hand, real property is any interest in land, real estate or the improvements thereon (p. 379). The area of law that governs ownership of property is property law and it covers both the personal and real property as defined within the common law legal system. Property law is entrenched in the constitutions and legislations of nearly if not all states of the world to provide concisely and broadly the right of people to own certain things in order to meet their needs, earn income, or make their lives better (Badenhorst, Pienaar, and Mostert, 2006, p. 9). Property rights provide people and entities with rights over things; the rights of which are enforceable against all other entities or persons. Usually, interest in property is acquired through consensual transaction with the person who owned property initially, for instance, through gift or sale. Consensual transactions also includes disposition by will because will intends to provide for distribution of the property of deceased person to the nominated persons (beneficiaries). Besides, interest of property may be obtained through a trust established for a person’s or entity’s benefit by the previous owner of the property (Goldstein and Thompson 2006, p. 55). Property can be passed form a person to another without the consent of the holder of the property. For example, in an event the owner goes bankrupt, property taken in execution of judgement of a court, or a person dies intestate. Property ownership can be common, collective or private. In law, determination of ownership of property involves determining the person(s) or entity that has particular duties and rights over a certain property. These duties and rights, however, can be separated and be held by parties that are different (Merrill and Smith 2007, p. 38). It is crucial to examine the common types of property ownership. There are five major forms of property ownership which include joint tenancy, sole ownership, community ownership, tenancy in the entirety, and tenants in common. Ellickson et al (2002, p. 12) describes joint tenancy as property owned by two or more persons at a given time in equal shares; the following four unities are typical in this form of ownership namely; unity of possession, title, interest, and time that is vested in each joint tenant, each tenant has right which is undivided to possess a proportionate and whole property right of equal ownership interest. In an event of the death of one joint tenant, the interest that belonged to him or her are automatically vested in the joint tenants who are surviving by operation of law. In regard to sole ownership, Merrill and Smith (2007, p. 22) explain that the property is owned by one person, entirely. In addition, community property is a form of ownership that acknowledges community property, a special kind between husband and wife where each of them owns one- half of the property. In case of death, the interest of the decedents passes in a similar manner to tenants in common (Badenhorst, Pienaar, and Mostert, 2006, p. 67). Moreover, tenancy in entirety is a form of property ownership which is a special type of joint ownership where the joint tenants of specifically husband and wife own one- half. Neither of the spouses can sell the property owned without getting the consent of the other spouse. Lastly, a tenant of common is also a form of property ownership. Ellickson et al (2002, p. 8) describes this form of ownership as property owned by two or more people at a particular time. However, the proportion of rights and interests to possess and enjoy the said property between the tenants in common may not necessarily be equal. There are laws that govern property ownership of married couples and couples who are cohabiting and are still unmarried. In most if not all cases, married couples own their valuable property together. Mostly, money, and other things that the couple acquire during their marriage is what is considered to be owned jointly (Hepburn, 2001, p. 30). However, the property that is owned by one spouse prior to marriage, property inherited by just one spouse, and property given to just one spouse is considered separate property from the property owned jointly. It should be noted, though, that married couples do not to necessarily have to agree to property rules that demands joint ownership of property by couples; they can sign an agreement that is in written form that makes some if not all of the property separate for either of the spouses (Goldstein and Thompson, 2006, p. 97). It should be noted that such an agreements and laws of joint tenancy relates to married couples who got married under marriage procedures that are recognisable by law of a particular country. Therefore, it may not apply to unmarried couples or persons that are cohabiting (Merrill and Smith, 2007, p.18). In order to gain deeper insight into property ownership, this discussion will focus on property ownership in particular reference to the unmarried couples. It will discuss KERNOTT V JONES case and whether the case provided clarity on property ownership of unmarried couples. The verdict of this argument will ascertain whether this case will provide appropriate precedence for the subsequent cases that relate to property ownership of unmarried couples. Jones v Kernott is a case of property ownership between unmarried couples heard in the United Kingdom Supreme Court (UKSC) in 2011. It is a decision by the UKSC concerning the cohabitants’ dispute on property regarding entitlement of benefits to a home which was under constructive trust (United Kingdom Supreme Court, 2011). In order to clearly prove whether Kernott v Jones provided clarity for property ownership of unmarried couples, the following outline will be followed regarding the case; background or facts of the appeal, judgement, reasons for judgement, and comment. Facts The parties, Ms Jones (Appellant) and Mr Kernott (Respondent) met in 1980. Mr Kernott worked as an ice- cream salesman in his own business during the summer and during winter he was claiming benefits if he did not find work. On the other hand, Ms Jones was a mobile hairdresser. So, during that time was very small disparity in their incomes. In 1981, Ms Jones bought a caravan (mobile home) in her sole name. In 1983, Mr Kernott moved in with her. Their first child was born in June 1984. Ms Jones sold her mobile home in May 1985. The couple, thereafter, bought 39 Badger Hall Avenue, Thundersley, Essex, in their joint names. It is this property that later became part of the court proceedings under question. The price of the property was ?30, 000. The cost of the house was relatively cheaper because the house was previously owned by the elderly of Ms Jones’ client. ?6,000 deposit was paid from the proceeds obtained from the sale of Ms Jones’ mobile home. The balance was raised through an endowment mortgage that was under their joint names. While living at the property, Mr Kernott was paying ?100 per week towards expenses of the household. Ms Jones paid other household bills and the mortgage out of the resources they owned jointly. They jointly took out a loan worth ?2,000 in March 1986 to build an extension. During the building of the extension, Mr Kernott did some labouring work but also paid relatives and friends to do the other work on the extension. The judge in the case found out that the extension done on the property had possibly enhanced the value of the property in question by about 50%, that is, the value of the property increased to ?44,000 from ?30,000. In September 1986, their second child was born. The couple separated in 1993. In October 1993, Mr Kernott moved out of the property. This was after eight years and five months that the couple had lived there and sharing the household expenses. After Mr Kernott moving out, Ms Jones continued living in the property with the children and she was paying all the household expenses by herself. If that is not enough, Mr Kernott stopped making any further contribution for the property they had acquired. Besides, the judge found out that after moving out, Mr Kernott contribution towards support and maintenance of their two children was very little which meant that a greater contribution was from their mother, Ms Jones. This situation continued for 14 and a half years until the hearing of this proceedings began before the judge. On a date not specified, the parties were core partners in a life insurance policy and the proceeds were divided between them. From his share of the proceeds Mr Kernott made a deposit for a home of his own. He bought 114 Stanley Road in May 1996 for ?57,000. According to the judge dealing with the case, he was able to afford this new home because he was no longer contributing towards the mortgage for the property they had acquired with Ms Jones in addition to not make any significant contribution towards the support and maintenance of their children. The judge also argued that “"whereas the intent the parties concerned may from the outset was to provide them as a couple with a home for themselves and their issues, those intentions have changed significantly over the years to the extent that [Mr Kernott] demonstrated lack of intent until recently of availing himself of the beneficial holding in this property, having ignored it completely by way of any investment in it or attempt to maintain or repair it whilst he had his own property on which he concentrated". As a matter of fact, this was the situation until 2006 when Mr Kernott suggested to Ms Jones that he wanted his share of badger Hall Property. On her part Ms Jones, in October 2007 applied for declaration under the Trusts of Land and Appointment of Trustees Act 1996 that she was entitled to the entire beneficial interest of the property. By this time, the property had appreciated in value and was worth ?245,000. She argued the history of events since 1993 indicated that their intention in regard to the property had changed from the initial intention to hold jointly the beneficial interest. In April 2008, the time the hearing began before the judge, 39 Badger Hall Avenue was valued at ?245,000. The outstanding mortgage debt for the property was ?26,664. The endowment policy that was supporting that mortgage was valued at ?25,209. On the basis that Mr Kernott and Ms Jones had contributed jointly to the endowment for eight years and five months and Ms Jones had made contribution thereafter for fourteen and a half years, it was calculated that the amount entitled to Mr Kernott was around ?4712 of the property value, while Ms Jones was left with ?20,497. The valuation of 114 Stanley Road stood at ?205,000, while it had the outstanding mortgage of ?37,968; this indicated that this amount was a repayment and not the endowment mortgage. If whole of the endowment policy was used to discharge the mortgage, it would mean that the net worth of 39 Badger Hall Avenue would be ? 243, 545. On the other hand, the net worth of 114 Stanley Road would be ?167, 032, if the property was an ordinary repayment mortgage. After considering the circumstances the parties and the case involving the property, the judge held that, indeed, their intentions had changed. In relying upon two decisions of the United Kingdom High Court; Oxley v Hiscock (2004) EWCA Civ 546 and Stack v Dowden (2007) 2 AC 432, the judge held that once there is a displacement of initial presumption regarding joint beneficial ownership and there is no further evidence which clearly shows division of shares in the property, it is upon the court to impute or infer an intention to the parties as to the property division that they, as fair and reasonable people, would have intended. Thus, he made a decision that Mr Kernott was entitled to 10% share only. Displeased with the decision, Mr Kernott appealed to the high court with the argument that it was wrong for the court to impute a alteration of common intent and additionally wrong for the judge to make unfair consideration between the parties. His appeal was dismissed by the high court. He then appealed to the Court of Appeal where his appeal was allowed as the majority of judges held that there was no evidence to show that the intentions of the parties had changed after they separated. Therefore, the Court of Appeal held that both Mr Kernott and Ms Jones were entitled to equal shares (Family Law Week, 2011). Judgement The United Kingdom Supreme Court overturned the Court of Appeal ruling regarding Kernott v Jones, and held that each parties holding of the shares of the house should reflect their contributions to the home; hence, the ratio of 10% to 90% for Kernott and Jones respectively. The Supreme Court unanimously held that the following approach or principles should be adopted in a case such as this; where a family home is bought by unmarried couples and in their joint names, are responsible for any mortgage, but have not declared their beneficial interest. i) The starting point for cases of joint names is that equity should follow the law and the parties involved are joint tenants both in equity and law. ii) The equality presumption can be displaced by showing a) the parties’ common intention at the time they were acquiring the home was different, or b) they formed the common intention later that there would be change to their respective shares. iii) In the absence of any formal agreement, the common intention of the parties can be objectively deduced from their conduct : "the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party" (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). iv) In cases where it is clear either a) that, from the outset, the parties did not have an intention that the beneficial and legal interests be held in equal shares, or b) the parties had altered their original intentions, but the possibility of ascertaining by inference or direct evidence what their actual intention was regarding the shares inj which they would have ownership to the property, "the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property": Chadwick LJ in Oxley v Hiscock [2005] FAm 211, para 69. In our judgment, "the whole course of dealing ... in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions.” v) A particular case would turn on its own facts. Even though financial contributions are relevant, there are several other factors that may enable the court to0 make a decision what shares were either fair or intended. While making their judgement, the judges made two major comments. They noted that the case at hand was not about a family home which is put into the name of one of the couples. The starting point was thus different and there were two issues involved. One, was it intended that the other party have any sort of beneficial interest in the property? Two, if there is, what interest was it? The second comment they made was that the assumptions relating to human motivation that had led the courts to impute specific intentions by way of the resulting trust were not appropriate for ascertaining beneficial interests in a family home. Whether the assumptions were appropriate in other contexts is not relevant to the case at hand (United Kingdom Supreme Court, 2011). Reasons for the Judgement In the case, Lady Hale and Lord Walker argued that the principle recognized in the case of Stack v Dowden is that in an event people bought a family home in their joint names it is presumed that they also intend to own the property jointly in equity (UKSC, para 15). However, the starting point is different the property is purchased in one person’s name only. Joint beneficial ownership presumption arises because of the following two reasons, a) buying property in joint names suggests an economic and emotional commitment to a joint enterprise, and b) it may prove practically difficult to analyze respective contributions to the property over cohabitations that take long periods (19-22). However, the presumptions may be rebutted if there is evidence that it ceased to be, or it was not the parties’ common intention to hold property jointly. Such evidence may be shown more in circumstances where the parties were not sharing their financial resources (25). But in cases where the evidence of intention is not clear, the question as to when the court can impute such an intention and when the court can, instead, infer an intention arises. Where an actual intention is deduced objectively from the dealings of the parties, an inference is drawn. An imputation is one attributed to both parties in the court (26-27)). The primary aim of the search is to ascertain the actual intentions of the parties, inferred or expressed, but in cases where it is clear that, indeed, the beneficial interests are shared but difficult to infer a common intention regarding the proportions in which these interests are shared, it will be the prerogative of the court to impute an intention to the parties which they had not had before (31). In regard to the case of Kernott v Jones, the county court judge had held that the intentions of the parties had changed about Thundersley property after they had separated. The judges of the Supreme Court argued that considering the facts of this case, it was impossible to infer the parties’ intentions and the court could only impute to the parties an intention that the house should be held in proportions that were fair along the lines of those that had been decided upon by the county court judge (89). Comment I consider that Kernott v Jones provided clarity in regard to property ownership of unmarried couples. In the previous case of similar nature of Stack v Dowden, some were clarity were provided to the cases that had preceded this. The case of Kernott v Jones in the Supreme Court has gone further to provide more clarity. As noted, the court held that it is possible that a common intention to depart from equality can be inferred or expressed in the parties’ conduct and can even be imputed to the parties. Even though the approach of imputing a common intention to the parties was rejected by the Court of Appeal, the Supreme Court overturned that ruling. It is a fact that there is no proper law regulating cohabitation (Ellickson, 2002, p. 49). In stark contrast to married couples, unmarried couples are not able to apply to the court for their financial affairs regulation. So why are the laws different between the two categories of people; married and unmarried couples? Smith (2009, p. 109) argues that married couples have made a decision to enter in a relationship that is legally binding and therefore if the relationship ends legal regulations must apply. However, unmarried couples have decided deliberately not to enter into legally binding relationships, hence making it difficult to apply express legal regulation in an event of separation It is evidently clear that, the case has set a precedence that the question of fairness will only arise where there is a presumption that the parties involved in a case share equally the beneficial interest. From the judgement, it can be deduced that, at the first stage, there is no scope to impute an intention. Based on the five stages and principles stipulated by judges guiding how to treat similar cases in the future, imputation of an intention should be based on sufficient evidence. Previously, there was no clarity to the legal principles that are applicable in cases of joint names. This case has brought about clarity to the legal principles that apply in cases of joint names especially to cases involving unmarried couples. Additionally, the case has provided clarity on presumptions relating to beneficial interests in the sense that it has provided grounds for displacement of such presumptions if there is proof that the common intention of the parties were different at the time they were acquiring the home, and secondly, if they formed a common intention later that they would change their respective shares. Moreover, the case provided basis upon which the parties’ actual intentions can be ascertained. Previously, there was no basis for such hence clarity was blurred regarding the same (Dukeminier et al, 2010, p. 361). Furthermore, the case laid down the principle to be applied for a family home in the joint names of unmarried couples, both responsible for any form of mortgage, but who have made no express declaration of their beneficial interests. The judges stated that each case will turn on its own case and that despite the fact that financial contributions are relevant and will be considered, other relevant factors relating to the case should be considered in enabling the court to decide what shares were fair or intended (Family Law Week, 2011). However, it may have brought about difficulty for legal practitioners and those persons they are advising to anticipate a certain level of certainty relating to a given litigation outcome. As such, the practitioners’ and their clients’ ability to enter into meaningful agreement or negotiation at an early stage is diminished hence minimizing the possibility to save expenses as well. This situation may become more problematic to family proceedings where evidence may be sufficiently available but legal practitioners may have to guess how a court will exercise its discretion in what it may perceive as absence of sufficient evidence to infer a proportionate share of the property’s beneficial interest. Therefore, to counter the unintended consequences of this ruling, it is important that there should be legislative intervention (The Law Commission, 2007, p. 17- 18). This will be very critical considering the fact that there is no substantial and proper law regarding unmarried or cohabiting couples. In conclusion, from the discussion above, it is clear that Kernott v Jones has provided clarity to property ownership of unmarried couples. The case shaded light on how the case such as that involving Mr Kernott and Ms Jones should be handled in the future. It also brought a different approach of imputation and inferring into perspective to cases of such nature, hence providing basis for courts to make decision in cases such as that of Mr Kernott and Ms Jones. Besides, the case emphasized the fact that financial contributions should not be the only factor to be considered in such cases but other relevant factors should be considered as well. However, as has been noted, the case may have brought difficulty to practitioners and how they handle cases from the first stage to the last. Without doubt, the case has provided clarity to cases of property ownership of unmarried couples but there is need for legislative intervention to contain unintended consequences of the precedence the case set. Reference List Badenhorst, P., Pienaar, J., and Mostert, H, 2006, Silberberg and Schoeman’s The Law of Property, Durban: Lexis Nexis/ Butterworths, p. 9. Berle, A, 1995, Property, Production and Revolution, 65 Columbia Law Review. Dukeminier, J et al, 2010, Property, Aspen Publishers, p. 361. Ellickson, R et al, 2002, Perspectives on Property Law, Aspen Publishers. Family Law Week, 2011, Jones v Kernott (2011)UKSC 53, Available: www.familyweek.co.uk (Accessed: 9 January, 2012). Goldstein, P., and Thompson, B, 2006, Property Law: Ownership, Use, and Conservation: Cases and Materials, Foundation Press. Hepburn, S, 2001, Principles of Property Law, Routledge, p. 30. Merrill, T., and Smith, H, 2007, Property: Principles and Policies, Foundation Press. Smith, R, 2009, Property Law Cases and Materials, Pearson Books, p. 109. The Law Commission, Cohabitation: The Financial Consequences of Relationship Breakdown, Available: www.justice.gov.uk (Accessed: 9 January, 2012) United Kingdom Supreme Court, 2011, Jones V Kernott, Available: www.bailii.org/uk/cases/UKSC/2011/53.html (Accessed: 9 January, 2012) Read More