The law surrounding people living together can be extremely complex. It seems that more and more people are purchasing property and later moving in ‘lodgers’ or ‘tenants’ to help cover the mortgage and bills.
In the current economic climate a lot of first time buyers are unable to afford to purchase a property without help. Most of the time these lodgers are friends, family members or even their current partners. Most people believe that if the property was purchased by them alone then they are protected from claims as they believe that the people residing with them are merely living in ‘their house’. However, what most people don’t realise is that they may be giving their ‘lodger’ opportunity to claim an interest in their house.
There are various ways that an intended ‘lodger’ could try and show that they have an interest in a property:
Firstly, it can be argued that the sole owner of the property intended that the lodger should have an interest when the property was purchased or when the lodger moved into the property. This can be ‘express’ and requires specific discussions, however imperfectly remembered that the property would be jointly owned and any equity divided between the parties.
It could also be ‘implied’ if the other party has contributed towards the purchase price usually by the way of contributions towards the mortgage. This is when difficulties can arise for the owner when the ‘rent’ is paid into an account they pay the mortgage from. It can appear that finances are simply pooled.
It’s difficult to prove that the lodger is paying rent and not a financial contribution to the property without evidence. It will be the ‘owner’s’ word against the lodgers if their rent is paid into the same bank account the mortgage and household bills come out of and is likely to come down to whose version of events the Court believes.
Another method of claiming an interest is if the lodger has provided a substantial contribution to the value of the property for example by paying for a home improvement. Care should therefore be taken when allowing your ‘lodger’ to pay for improvements, household bills and even how they pay your rent to you.
Disputes are likely to arise between ‘lodgers’ and owners in the breakdown of relationships as the ‘lodger’ may believe that they should be entitled to something from the time, effort and financial means contributed to the relationship and or the property.
Owners can protect themselves from these disputes arising by having lodgers, tenants or even partners sign a cohabitation agreement. Whether you are about to move someone in with you or you are already in cohabitation our team can advise you of your options and the type of items you should include in the agreement. Most agreements are drafted in a specific way which confirms the intention that your lodger or partner is not to have an interest in your property regardless of contribution and that they merely are just tenants residing in YOUR property.
By litigation executive, Gillian Lavelle