We often use the phrase ‘my word is my bond’, but when it comes to legal agreements many people presume that if it is not set out in writing, it is not legally enforceable.
However a recent Court of Appeal hearing involving a co-habiting couple shows that the law also recognises informal verbal agreements.
In Ely v Robson  the Court of Appeal upheld a declaration that the claimant held property where he had lived with the respondent, on ‘constructive trust’ – or common intention – for them both.
The declaration was based on a constructive trust arising out of an oral agreement between both parties.
The couple’s relationship broke down in 2005 and for a while they continued to live together.
However, in 2007 matters changed when one of the cohabitees decided the arrangement was no longer acceptable. The claimant issued possession proceedings that were listed for trial in September 2007.
The parties met in August 2007 to try to settle matters. The respondent has since argued that during this meeting no agreement was reached. However, the claimant has claimed that at this meeting it was agreed that:
- The claimant would hold the property on trust for himself for life, with a remainder of 80% to his heirs and assigns and 20% to the respondent
- The respondent could occupy the property while either her aunt or mother were alive.
- The claimant would have the power to sell the property following the termination of the respondent’s right to occupy it.
- The claimant would relinquish any claims against properties owned by the respondent
The parties’ respective solicitors asked the court to re-list the trial to allow them time to finalise the settlement. However, the agreement was never formalised and the trial was never re-listed.
Following the death of the respondent’s aunt and mother, the claimant applied for a declaration of the parties’ beneficial interests and for the property to be sold.
Judge Blair’s decision, which has been upheld on appeal, is that the understanding reached by both parties’ during their informal meeting in August 2007, should stand.
Surjit Verdi an associate and family law expert with Palmers, said: “The decision illustrates how easily arguments can arise where there is no clear written record of the parties’ intentions. The cost of putting in place a written agreement – be it a trust deed or cohabitation agreement – at the time of purchasing the property and/or commencing the relationship, far outweighs the costs of having to resolve such disagreements through the court at a later stage.
“A written cohabitation agreement may be the last thing on your mind when you first decide to set up home with your partner, but a lot of heartache, not to mention costly and time consuming court battles, can be avoided by doing so.”
For more information on Palmers’ full range of family law services, including the drafting of cohabitation agreements, please contact us.