In the recent court decision of Oberman v Collins  EWHC 3533 Ch, the court held that Ms Oberman had a 50% interest in a number of investment properties despite them being held in the sole name of her former cohabitant, Mr Collins. This signals an important extension of the case law in this area.
Mr Collins and Ms Oberman lived together for twenty years and had two children. Had they been married, the court would have had, on their divorce, the authority to divide their assets fairly between them, taking all of the circumstances into account. However, because they were not married, the court had no authority to share their assets between them, only to determine their existing property interests.
The court has developed the doctrine of the “common intention constructive trust”, which has largely been used to determine the ownership of an unmarried couple’s family home. It provides that where one party in a cohabiting relationship owns property in their sole name, it will be presumed that the other party has no interest in it, but that this presumption can be displaced if the parties had a “common intention” that the other party would have an interest in it, if the non-owning party relied on that common intention to their detriment. In those circumstances, the party who owns the property will be considered to hold it on trust for both parties. The proportions in which they own the property will depend on their intention, but if they had no specific intention as to ownership proportions then the court can infer or impute their intention based on all the circumstances.
Whilst this approach has generally been applied in respect of the family home, the judge in Oberman v Collins accepted that it can be extended beyond that narrow ambit to also apply in a commercial context, particularly in “hybrid cases” such as family run businesses. This is in line with the approach taken by the Privy Council in Marr v Collie  UKPC 17, which concerned investment properties held by an unmarried couple in the Bahamas, where the court explained the application of the common intention doctrine to the investment properties on the basis that the venture was “associated with a mutual commitment to each other for the future”.
Mr Collins and Ms Oberman had started investing in property early on in their relationship; whilst Ms Oberman had contributed some funds the majority appeared to have been contributed by Mr Collins, who also ran a lettings agent business which serviced the properties. At the time of the hearing the parties owned 41 properties. Only one was held in Ms Oberman’s sole name whereas 12 were held in Mr Collins’ sole name; the remainder were held in joint names or through a jointly owned company. However, the parties treated the properties as one portfolio, and the accounts from which mortgage payments were made and into which rent was received did not always correspond with a property’s legal ownership.
Ms Oberman argued that she and Mr Collins had a common intention to own all of the properties equally and the legal ownership was dictated solely by financing considerations; Mr Collins argued that where a property had been purchased in his sole name that reflected an intention that Ms Oberman would have no interest in it. The judge accepted Ms Oberman’s case based on the treatment of the properties as a single portfolio as well as contemporaneous correspondence: one email Mr Collins had sent Ms Oberman during their relationship read “as far I am concerned this has all been purchased for the benefit of both of us irrespective of whether they have been purchased in my name, your name, joint names or in [the company’s name]”.
The judge also accepted that Ms Oberman had relied, to her detriment, on this common intention, as she had contributed funds to the portfolio without seeking an account for rents or profit, had assumed liabilities in relation to the properties and had helped manage them.
Mr Collins argued that the judge was required to find a specific common intention and detrimental reliance in respect of each of the 12 properties in his sole name. The judge rejected this, holding that it was possible for the common intention doctrine to apply to a property portfolio as a whole – even where the properties in the portfolio change from time to time. This appears to be the first case in which the doctrine has been applied in this way.
The case makes clear that where an unmarried couple are involved a joint business or investment venture, it is important that they have a clear agreement, in writing, about how they will own the assets, as this should then be binding. Such an agreement is wise even where one party is only tangentially involved, to make clear whether their limited involvement is intended to give rise to an interest in the assets – this will ensure both parties know where they stand.
Such an agreement can be part of a wider Cohabitation Agreement. Such agreements are increasingly seen as a sensible part of financial planning, and generally cover how a couple will arrange their finances during their relationship, as well as what should happen if the relationship ends. Although the discussions can initially be awkward, they provide an opportunity for an honest conversation about current and future financial arrangements and enable both parties to plan their financial futures.
If you would like advice on the topics raised in this blog or any other aspects of family law, you can contact Richard Kershaw on 020 7412 5048 or Richard.Kershaw@hunterslaw.com.