Breaking up is hard to do with a home

Mortgages before marriage are now increasingly common in the Republic as the boom in property prices has pushed couples into climbing the property ladder together before they even start thinking about exchanging rings and vows.

But what happens when joint property owners and mortgage holders go their separate ways? And in cases where just one cohabiting partner has their name on the deeds and a mortgage solely in their name, what rights does the other partner have?

"Splitting up is never easy and it gets messier if there is a jointly-shared property involved," says Mr Ronan Mackey, a mortgage adviser at NC Mortgage Brokers.

"Let's assume that both parties took out a joint mortgage to finance the purchase of the property. Let's also assume that both parties in their euphoria when buying together never put in place a cohabitation agreement to protect their legal entitlements or give clarity in the event of the relationship turning sour.

"If both parties own the property and both appear on the title deeds as joint tenants, then the determination will be that both parties have an equal right to a 50 per cent share of the property."

Breaking up causes major financial upheaval for cohabiting couples, with the question of what happens to the family home topping the list of issues to be resolved.

"Some couples simply sell everything and split the proceeds or one will buy out the other, but this will obviously depend on the remaining partner having sufficient income to cover the increased mortgage," says Ms Sarah Wellband, mortgage adviser at REA.

"From experience, the latter is more common than the former, especially if there are children involved."

If both partners contributed equally to the mortgage repayments and put up an identical share of the deposit when it was bought, then working out how much it will cost to buy out the estranged partner is fairly straightforward, according to Mr Mackey. For example, if the property is valued at €300,000 and the outstanding mortgage is €100,000, the equity in the property is €200,000.

It will cost one partner €100,000 to buy out the other partner's 50 per cent share. In other words, they will have to be creditworthy enough for a lender to allow them to increase the mortgage to €200,000 and have it in their sole name.

But not all couples contribute equally to a mortgage, Mr Mackey points out. "It may be that one partner earns more than the other, put up a greater share of the deposit and contributes a greater amount to the monthly mortgage repayments," he says.

"In theory, both parties are entitled to a 50 per cent share of the property. In practice, there may have to be negotiations between both sides to reach an equitable settlement."

If the dispute goes to court, the court is likely to take a pragmatic view and try to reach an equitable settlement, but the outcome is never certain, Mr Mackey says.

"The court may award each partner the amount that each had provided to the initial deposit, together with a 50 per cent share of any increase in the property's value, despite the fact that one individual may have contributed more to the monthly repayments."

If one partner pays for improvements to the property that have the effect of increasing its market value, they may also have difficulty in claiming that they are entitled to more than a 50 per cent share.

If the property is in one name only, the non-owning cohabitee has no claim on the property. Unlike a married spouse, he or she will not be protected by the Family Home Act and has no automatic right to prevent the ex from simply selling up.

Even if the person contributed to mortgage repayments, he or she would probably have to take the case to court - paying huge legal fees - and have clear evidence of the financial contribution made in order to gain a legal interest in the property.

Last April a Law Reform Commission consultation paper on the rights of cohabitees recommended that couples should be able to apply to the court for a "property adjustment" that should reflect the financial input made by both partners.

The new system is also designed to prevent hardship in situations where one partner has made no direct financial contribution because he or she has given up paid employment, perhaps in order to care for children.

"It would be left to the court to decide if there would be hardship and then to put a value on the unpaid work and say this is worth 10 or 15 per cent [ of the property's value]," according to Mr Raymond Byrne, director of research at the Law Reform Commission.

"One partner might say, how about taking the money instead of the percentage ownership, or indeed the court might make a ruling. This is what happens already in divorce cases."

The couple will have to be together a minimum of three years before the courts will issue a property adjustment, Mr Byrne adds. "It's really to protect people who have been together a long time and might be vulnerable," he says.

The commission's final recommendations have yet to be published.

In the meantime, even joint tenants who have contributed equally to both the deposit and the repayments will face certain dilemmas on splitting up. For example, who buys who out? It might be that only one partner earns sufficient income to be able to buy the other partner out.

But even if the bought-out partner gets his or her fair share of the gains, he or she will have fallen off the property ladder and may find it difficult to get back on at today's prices.

According to Mr Mackey, cohabiting couples in the process of borrowing or buying together should get a cohabitation agreement drawn up in advance, stating what will happen in the event the relationship splutters to a halt.

Like pre-nuptial agreements, these agreements have an uncertain status in Irish law.

But even if it won't hold up in court, Mr Mackey adds, having a contingency could avoid some messy rows down the line.