When a married couple separate, complex and well established principles of law come into operation. The legislation and case law relating to divorce makes comprehensive provision for the division of the assets (including the matrimonial home) of a couple who are getting divorced.
The position in respect of a couple who are unmarried and who have together purchased their own home is not so well established or regulated by the either the Royal Court or local legislation.
With an unmarried couple buying a home in the island where both have Housing Qualifications there are few difficulties. The home, whether it is a freehold or share transfer property, can be purchased in their joint names. Each will have the security of actually owning their home jointly with the other. In respect of such couples where they are contributing significantly different amounts to the purchase there might sometimes be a desire to record in a short agreement arrangements providing that if the couple split up the sale proceeds are divided between the couple other than strictly equally.
With anunmarried couple who both own their home there is no need to make provision in any agreement stipulating how one party or the other can bring about a sale of their home if the other refuses to participate. This is because Jersey law knows the procedure of "Licitation" which enables any co-owner of a property to obtain an order of the Royal Court forcing a sale of a jointly owned freehold property in the face of the other owner’s refusal to sell. The procedure is even available as between husband and wife but almost inevitably is over-ridden by the jurisdiction of the matrimonial division of the Royal Court which will in respect of a matter before it determine how the matrimonial assets and the matrimonial home are to be divided between the couple.
The position with an unmarried couple where only one has Housing Qualifications is more difficult. In respect of the purchase of a freehold property (whether a freehold house, or a flying freehold or long leasehold flat) only the partner who has the Housing qualifications can actually own the property. The unqualified partner cannot have the comfort of actually having title to the property in their name.
The Housing (Jersey) Law, 1949 in addition makes it a criminal offence for parties to enter into arrangements which effectively enable individuals who do not have Housing Qualifications to effectively enjoy the benefits of owning freehold property, notwithstanding they are not entitled to hold such in their own name. Additionally, Jersey law prohibits the holding of freehold property by one individual in trust for another. In the view of this firm, any arrangement whereby the partner who has Housing Qualifications undertakes to hold a local freehold property for the benefit of himself and his unqualified partner is unenforceable and at least potentially a criminal arrangement.
Whilst it is not possible to enter into an arrangement whereby the unqualified partner can enjoy the benefits of the increase in value of the couple’s home in the island it is important that they at least consider entering into an "equity agreement" to protect their position so far as is possible. Firstly, it is perfectly proper for the couple to enter into an agreement which provides that if the couple do separate either can force the other to sell the property. The agreement can provide that the unqualified partner be repaid their contribution towards the initial deposit and legal fees, stamp duty and other such payments and contributions. Effectively providing for the repayment of such sums and treating them almost as if they were a loan is perfectly legitimate. What such an agreement cannot do is provide that the unqualified partner can share in any profit or increase in value that has occurred whilst the couple have owned the property.
The sort of agreement we are now considering is also very important in that it provides that the unqualified partner can force the qualified partner either to sell the property and thereby effect repayment of any mortgage which has been taken out in the joint names of the couple, or compel the qualified partner to re-finance and thereby remove the unqualified partner’s name from the mortgage. If the unqualified partner cannot somehow effect the removal of their name from the mortgage clearly they remain legally liable to repay the mortgage jointly with their former partner and additionally will find it almost totally impossible to obtain another mortgage or significant loan whilst the first mortgage remains outstanding in their name.
The agreement between the qualified and unqualified partners can also make provision to the effect that upon the un-qualified partner gaining Housing Qualifications or upon the marriage of the couple the home be conveyed into their joint names.
One thing which should always be done in any event (even if the couple do not wish to enter into any form of equity agreement or other form of agreement) is for the qualified partner to sign a properly drawn up will before title to the property is vested in his or her sole name making provision for the property to be left to the unqualified partner. This is a simple but essential step which can be taken to protect the interests of the unqualified partner. It is important to discuss the preparation of such a will with your lawyer because certain formalities must be observed for it to be effective. A home made will is likely to be invalid.
The position set out above is simplified somewhat if the qualified and unqualified partner jointly acquire a share-transfer property. Whilst Housing Consent is still required to occupy such accommodation the Housing Law does not prevent unqualified individuals acquiring shares in companies which own property in the island. Accordingly, with a share transfer property it is possible for the unqualified partner to actually from the outset have title to the couple’s home vested in the joint names of themselves and their qualified partner. Additionally, with a share transfer property it is possible in an agreement to make provision enabling one partner to compel the sale of the property and for them to divide the value in the property (if it is sold) in whatever manner they decide.
Finally, it is perhaps worth going back to the point at which this article started (being the position of a married couple) and noting that although the Royal Court might have regard to the terms of an agreement entered into by the couple before they married, in the exercise of its jurisdiction in matrimonial matters the court has an unfettered discretion and will divide the married couple’s assets in accordance with the well established provisions of matrimonial law.
For detailed advice concerning equity agreements in Jersey, please contact Peter Bertram.
The information and expressions of opinion contained in this article are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.