1 June 2016

The case of Powell v Thomas - a salient lesson for cohabitees

The recent County Court case of Gareth Powell and Chloe Thomas once again highlights the importance of cohabiting couples formally documenting their financial arrangements in the event of a separation.

Contrary to popular belief, there is no such thing as a "common law" wife or husband. Unlike married couples, the property rights of cohabitees are governed by real property and trust law. Where there are minor children some relief is afforded by statute. However the position is far from ideal.

The brief facts of the case are that in 2012 the couple purchased a dilapidated flat in Wandsworth. The property was purchased in Ms Thomas' sole name from her funds. However Mr Powell spent considerable time, effort and money on materials renovating the property. Mr Powell told the Court that in 2013 he and Ms Thomas signed an agreement confirming that in the event they separated he would be entitled to a third share of the increase in value of the property. Ms Thomas denied the existence of this agreement, and a copy of the agreement could not be found. However District Judge Heather Baucher believed Mr Powell, and ordered Ms Thomas to pay him nearly £50,000 (which equated to a third of the increase in value of the property since purchase, reimbursement of the funds he had spent on the work and interest) plus costs to the tune of £150,000.

Whilst Mr Powell was ultimately successful in his claim, had he insisted upon a formal declaration of trust registered at the Land Registry at the time of purchase of the flat (or at least prior to putting money, time and effort into the property) he could have avoided the uncertainty, delay and stress of litigation.

We always recommend that prior to living together all couples enter into a cohabitation agreement, setting out not only how they will divide the sale proceeds of any real property on separation, but also other assets such as savings and personal belongings. Doing so could save a great deal of heartache and acrimony down the line.

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