Take a chance on me

Julie Man, Partner in the Russell-Cooke Solicitors, private client team.
Julie Man
6 min Read

Falling in love is exciting and intoxicating. Thinking about your finances, how to manage them in life and death perhaps less so. But, just as the sun rises in the East and sets in the West life too has a certain inevitability which we should try and cater for.

Relationships come but also, sadly, they go…

Sometimes they end in cliché: “It's not you, it's me …"

Sometimes they end with a bang: "I'm booked onto a six month yoga retreat in Thailand leaving tomorrow – I think it might be best if we take a break while I find myself…" 

Sometimes they end with a whimper: “Sorry, just missed what you said there…” 

As family and private client lawyers it becomes clear early on that, just as no relationship is ever the same, no relationship ends in the same way either. When the garden is rosy everything is co-operative and easy. However much we would like though, not everyone can have Julia Robert’s and Hugh Grant’s Notting Hill ending. At the end of relationships emotions can often  run high and that can have a negative effect on the practicalities of bringing things to an end both emotionally and financially.

Knowing me knowing you

When relationships are going well it's amazing. Everything seems to be going in the same and right direction; you are going forward into the future hand in hand. Sometimes that means getting married or entering a civil partnership but often big financial steps are taken before either person thinks about popping the question. 

This can take many forms. Sometimes it is all about moving in together into a property that one of you owns. Sometimes it is about pooling resources to purchase a property together. Sometimes it might not be about your relationship at all but a son or daughter’s where you have given them some of their inheritance early or provided some of your own money to help them onto the first rung of the property ladder and want to ensure that that gift or investment is properly protected.

In any event, as relationships develop over time there is a natural tendency to move from talking about “yours” and “mine” to “ours” often this is not something we even think about yet sometimes the lines surrounding this change come in many shades of grey and lead to different legal outcomes depending on what each person means and intends.

Money, money, money

At the other end of the telescope, when a relationship stops working people haven't always thought about how they might extricate themselves from their financial entanglement. When it comes to property you may think that this is relatively simple. If your name is on a property and your partner just lives with you then surely your now ex-partner will move out and life will go on? If your partner's moved into your property and invested some money in it then surely you will pay that money back, your now ex-partner will move out and things will go back to how they were before? If you bought a property together then surely you just sell it and split the proceeds? So far, so apparently simple. But when it comes to relationship breakdown emotion can override good sense and logic or it becomes clear quite quickly that what you think is the obvious outcome isn’t shared by the other person. It may also not be the outcome if matters were to go to Court.

Why mention Court? Well, if you can’t sort it out between you then you may have to spend money on instructing solicitors or engage in a voluntary legal process (such as mediation) to try and resolve issues between you. If that doesn’t work then you might be forced to go to Court and have a judge impose an outcome on you both that maybe one or other (or even neither) of you actually want. Resolving such disputes is not a quick or cheap option and tens of thousands of pounds can be spent on fighting about who spent what on the house and who intended for a particular outcome to take place in the eventuality that you split up even though neither of you ever thought it would happen.

Waterloo: avoiding future conflict

Shouldn’t there be a simpler way? 

Well, there actually is. It all comes down to thinking about what your respective intentions are at the start. You then confirm this in writing. Except in rare circumstances the document that you've produced is going to be binding on both you and your partner (although equally valid, there are other considerations if you overlay the impact of getting married or having children but that's something for another article on another day). This type of document is called a deed or declaration of trust. It confirms the ownership of the property and can even go on to cover lots of other things like who pays the mortgage, who receives what in terms of rent, who meets the outgoings, what impact payments on any mortgage or for renovations or large repairs to the property might have on your interests in the property, what happens if the property goes into negative equity etc, etc. (sometimes such agreements are called co-habitation agreement). Deeds of trust can even be used to provide protection against the person moving in getting (or later asserting) a share of the property by way of financial or other contribution (known as a declaration of no interest) or a greater interest in a property than their original contribution would suggest.

Having such a document is not only great for peace of mind when you are taking those first tentative steps to become more committed in your relationship but also means that you actually discuss things like finances and make sure you are on the same page from the start. Peace of mind can also extend to a parent who has helped a child purchase a property when their son or daughter’s significant other is about to move in and the new addition to the family signs such a document. 

Declarations of trust are flexible documents that allow parties to have sensible conversations about property ownership at the start rather than arguments at the end of the relationship where emotions are running high. Such documents offer protection to both partners by ensuring that everybody knows exactly what is to happen with the property in any specific circumstance. Good declarations of trust should have fall-back provisions to ensure that at the end of the day, you are not stuck having to go to court to sort things out. 

The winner takes it all

Court proceedings in relation to property ownership are time and therefore cost intensive because the whole course of dealings between the parties needs to be looked at by the court to establish what the common intentions of the parties are. This can mean going into every message and communication between the parties since the start of their relationship and, when you're talking about long term property ownership, can obviously amount to a considerable volume of documentation. Legal costs can run into tens and sometimes even hundreds of thousands of pounds for each person and, given the rules about costs in the civil courts, if you are unsuccessful you can end up paying a vast proportion of the other person's costs as well as your own. When you put this against spending a few thousand pounds on a declaration of trust (often less if you keep them simple) then, although it might seem a bit of a squeeze financially at a time when there is a lot of money already being spent on purchasing a property, having certainty as to what might happen in the future should things not work out seems a sensible step to take. After all, property purchases are often the biggest investment a person will make in their lifetime. 

Take a chance on us

Relationships come and also, sadly, they go…if that were to happen to you (or someone you know) make sure that you take steps to make sure that the end of the relationship isn’t the start of something a whole lot worse!

These can be delicate matters but the family and private client teams at Russell-Cooke can help you navigate the choppy waters.

Briefings Individuals & families