ABG Property Newsletter - December 2011

Property jointly owned by unmarried couples

In the case of Jones -v- Kernott the Supreme Court has issued an important judgment about property which is jointly owned by co-habiting couples.

In this case an unmarried couple bought a property in their joint names. Subsequently the man moved out and bought a house in his own name. The woman remained in occupation and was solely responsible for the property. After 12 years separation the man claimed a half share in the property.

The Supreme Court said that where a home is bought in the joint names of a co-habiting couple, and both are responsible for the mortgage, the starting point is that they own the property as joint tenants and are each entitled to a half share. However, the joint tenancy presumption can be displaced by evidence that they had a different intention, either when the property was purchased or later. Their intention has to be objectively deduced from their conduct.

Where it is clear that the parties have changed their original intentions about joint ownership, but it is not possible to decide what their actual intentions were as to what their new shares in the property should be, each is entitled to a fair share decided by the Court. To decide what is fair the Court will take account of their whole course of dealing in relation to the property. This includes their financial contributions but the Supreme Court said there are many other factors which may affect what shares were either intended by the parties or are considered to be fair.

In this particular case the Court decided that, after the separation, the man should own only a 10% share of the house. This was either because that was the parties' intention or that it was fair that the man should own only 10%.

When unmarried couples buy a property in their joint names, it is important that they should fully understand the implications of doing so, including what is to happen in the event of a future separation. To avoid disputes like this arising, the couple should make it clear in writing what share each of them is intended to own. Their original intention can be changed in the event of separation and it is important that legal advice should be taken by both parties if this happens.

Dilapidations Litigation Protocol

The Property Litigation Association has published a revised version of its Pre-Action Protocol for terminal dilapidations claims for damages.

The object of the Protocol is to encourage the resolution of disputes over alleged breaches of tenant repair obligations without recourse to litigation. The Protocol is considered best practice in the property litigation industry, although currently it has no formal status under the Court rules.

However, it is likely that the Protocol will become part of the Court rules, perhaps in January 2012. As and when it does, failure to follow the Protocol before resorting to litigation is likely to have adverse consequences as regards legal costs.

Guarantee of lease unenforceable due to undue influence

In a recent case the High Court has ruled that a guarantee by a company employee contained in a lease could not be enforced against him because it had been entered into as a result of undue influence and the employee had also been misled when he signed the lease and was not aware that it contained a guarantee from him.

The employee had frequently been asked to witness legal documents. On this occasion one of the company directors, who was a guarantor on other properties and was anxious to avoid further personal financial exposure, put forward the employee's name as a guarantor under the lease. The director personally dealt with obtaining the employee's signature on the lease, but showed him only the last page when he signed it. The employee was completely unaware that he had signed the lease as a guarantor until the landlord sought to enforce the guarantee against him.

The Court held that the landlord had constructive knowledge of undue influence exercised by the director on the employee. This was because the landlord knew that the financial position of the company was precarious and it was therefore put on notice of the need to satisfy itself about the employee's willingness to provide the guarantee. The landlord should have asked the employee to provide written confirmation of his agreement to stand as guarantor and that he had been made aware of the risks associated with providing the guarantee. The Court also said that the employee should have been given the opportunity to take independent legal advice, paid for by the company.

The case highlights for landlords the importance of ensuring that guarantors fully understand and appreciate the nature of the obligations they are entering into and in appropriate cases they should be recommended to take independent legal advice. This often arises where family members join in the giving of guarantees.

Joint Venture Agreements

The recent case of Edmonds -v- Lawson Developments involved an oral joint venture agreement between the TV personality, Noel Edmonds, and property developers. They entered into a joint venture to develop a property for commercial gain. Both parties contributed to the purchase price and when a dispute subsequently arose, the claimant alleged that it had been agreed that his contribution to the purchase price would be repaid before the defendant's contribution.

However, there was no evidence to support the claimant's argument as nothing had been recorded in writing and it was a purely oral agreement for the joint venture. The claimant's case was therefore rejected.

This case highlights the dangers of proceeding with a development or any other project without formalising the agreement and recording the key terms in writing. This will avoid any misunderstandings arising and the risk of future disputes.

The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

ABG Property Newsletter - December 2011

Siobhan Goodacre	Wendy Shaw
sgoodacre@abg-law.com	wshaw@abg-law.com
+44 (0)115 934 3325	+44 (0)115 934 3306