Binding verbal agreements for cohabiting couples

For unmarried couples who cohabit, care should be taken when entering discussions regarding their property and its ownership.

The recent case of Ely v Robson demonstrates this, in ruling that a verbal agreement made by an unmarried cohabiting couple was binding.

In a property owned solely by Mr Ely, Ms Robson and the couple’s children had lived together, with the relationship subsequently breaking down in 2005. The couple continued to live together at the property, along with Ms Robson’s aunt as well as her mother on occasion.

The Court proceedings were issued by Mr Ely. In an attempt to settle matters, the pair met in August 2007 before the listed trial date which was September of the same year. It was later asserted by Ms Robson that no settlement had been reached. In direct contrast to this, Mr Ely claimed that an agreement had actually been made when they met. This was as follows:

  • Mr Ely would hold the property on trust for himself for life. Upon his death, 80% would pass to his heirs and the remaining 20% would pass to Ms Robson
  • Whilst her aunt of mother were alive, Ms Robson could live at the property
  • Once Ms Robson’s right to live at the property ended, Mr Ely would be able to sell it
  • Mr Ely would relinquish any claims he had against Ms Robson’s properties

Due to this agreement, both parties asked for the trial to be postponed in order for a deal to be finalised. However, this was never formalised and no further trial date was scheduled.

Mr Ely applied to the Court once again after Ms Robson’s aunt and mother passed away. He asked for their respective shares to be declared as well as an order for sale.

It was held that subsequently to the couple meeting in August 2007, a common understanding had been formed, which Mr Ely had relied upon to his detriment. A verbal agreement had been made by both parties and the Judge stated that it would be unconscionable for Ms Robson to argue against this. As a result, it was found that it gave rise to a constructive trust. The Judge upheld this.

The need for unmarried couples to be clear about their property ownership intentions has been highlighted by this case. A Living Together Agreement, sometimes known as a Cohabitation Contract, can be put in place in order to avoid a dispute should the relationship break down.  This will outline what will happen in the event of the couple separating.

Today's Conveyancer