Kernott v Jones: 50/50 becomes 90/10

On 9 November 2011, Supreme Court gave their long awaited judgment in the case of Kernott v Jones. In a groundbreaking judgment, the Supreme Court held that that where 2 parties own a property in joint names, it is not the case that the Court will always infer that the beneficial interest in the property will be held equally also, even when one of the parties may believe that they had a particular share in the property.

The background to the case

Mr Kernott and Ms Jones met in 1981 and separated in 1993, having two children in the course of their relationship. In 1985 they purchased a property in Essex ("the Essex Property") in their joint names for £30,000 with the deposit for the property paid from the proceeds of the sale of Ms Jones` previous property. Mr Kernott and Ms Jones shared the living expenses for the new property, including the mortgage, between them.

In 1993 Mr Kernott moved out of the property after the relationship with Ms Jones deteriorated. Ms Jones remained at the property with their 2 children, from that point on paying the household expenses on her own.

In 2006, Mr Jones, who had purchased his own property a few years after the deterioration in the relationship, stated that he wished to claim a beneficial share in the Essex Property. In 2007, Ms Jones applied to the Court for a declaration that she owned the entire beneficial interest in the Essex Property.

The Supreme Court held that Mr Kernott was only entitled to a 10% share of the beneficial interest in the Property. The Supreme Court confirmed that when determining the interests of the parties in a property where the property is in joint names, the beneficial interest is also presumed to be held jointly. However, the Supreme Court went on to say that this presumption can be displaced by evidence that the parties had a different intention at the time they acquired the property or by evidence that the parties had formed a common intention after they had purchased the property that the manner in which they held the beneficial interest had changed.

Where it is clear that the parties did not intend to hold the beneficial interest jointly or that they had changed their original intention, but it is not possible to deduce by evidence what the parties` actual intention was as to the shares in which they would hold the beneficial interest, the Supreme Court held that each party 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.

Relationships: an emotional business

When investing money in a business venture, almost everyone would ensure that a written agreement was entered into which clearly recorded what they were investing in, set out the terms of their investment and explained what happens to their investment should, for example, the business be sold or fail.

For most people, their home is the biggest financial investment that they will make in their life yet the vast majority of people would not entertain the thought of entering into a clear agreement with their partner that records the terms of their `investment`. Cynical and unromantic it may be, but entering into such an agreement could prevent a costly and stressful dispute should that relationship break down in future.

Two key lessons come out of the Supreme Court`s decision in Kernott v Jones:

1) Do not leave things to chance. Record the interest that each party has, if any, in the property, ideally in a Deed of Trust. If a party`s interest changes at any time, promptly record those changes.

2) Where a relationship breaks down and there is no prospect of reconciliation, take steps to agree the separation of the parties interest in the property as soon as possible. Things are unlikely to get better. Indeed, they are likely to get worse the more time that passes.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.