Lessons on cohabitation from Love Island’s ‘Jani’

Love Island winners are sharing the £50k and moving in together, but have they considered the caveats of their unmarried status in law, asks Sophie Wettern

This summer the conversation has primarily focused on the weather – the sunshine, the rain, the sunshine again… However, it has also been a summer of television, not least the World Cup (although football, sadly, did not come home). Indeed, 4.1 million of us were glued to our screens to watch Dani Dyer and Jack Fincham win the final of ITV’s star show, Love Island. For many, the moment of drama came when Jack had to choose whether to share the £50,000 prize money with Dani or ‘steal’ it for himself. Would true love win through or would the temptation of filthy lucre steal the day?

In the event, love’s young dream overrode base considerations and Jack shared the prize money with Dani. But with the news that Jack and Dani are now planning to live together (and possibly even buy a house in the future), one wonders whether they have thought about what happens if love doesn’t last?

For most couples, thinking about what happens when it all goes wrong is the last thing that comes to mind when setting up home together. However, thinking about what the future could bring at the outset can significantly reduce problems down the line. Whereas married couples enjoy protection regarding property rights, ‘cohabitees’ do not have an automatic entitlement to financial support, nor are they able to register home rights.

Although it may not be as romantic as candlelit dinners in your newly-purchased garden or as much fun as planning the inevitable house-warming party, a key point to consider is the distinction between owning property as joint tenants or as tenants-in-common. Owning as joint tenants is a legal construct whereby both co-owners (or all of them, if there are more than two) own 100 per cent of the property. In contrast, if you own property as tenants-in-common, each of you owns a specific share, usually determined by a declaration of trust.

This could be 50/50, or the property could be split unequally, 30/70 for example if one partner puts in more cash at the outset. It is also worth considering whether to enter into a cohabitation agreement, which can cover day-to-day matters and set out how contributions and expenses will be split. This can be particularly relevant where the two parties are contributing unequally, in the 30/70 scenario or perhaps if one of a couple moves in and starts to contribute to the mortgage or to pay bills in the flat of the other.

Even for those who do co-habit happily ever after, such considerations are also relevant when one party passes away. Under a joint tenancy, a co-owner dies, the property automatically transfers to the survivor(s). In contrast, the property is owned as tenants-in-common, each co-owner can leave his or her respective share of the property to whomever they choose.

The importance of planning ahead was highlighted this week by the news that for 2017/2018, HMRC’s revenue from inheritance tax exceeded the £5 billion barrier for the first time. Planning ahead could mean full use is being made of the valuable tax allowances and exemptions, such as the spouse exemption (whereby assets pass between husbands and wives or civil partners free of inheritance tax). Particularly relevant in a real estate context is the residence nil rate band which has been around since 6 April 2017 and is increases the inheritance tax free band one has when leaving one’s residence to direct descendants. Whilst I love a good romance story as much as the next person the lawyer in me would remind Dani and Jack to not overlook what good planning now could help with in the future.