With this ring, I thee house: protecting property interests in prenuptial agreements

Deciding to get married and buying a dream home are among life’s happiest milestones. Engagements and property purchases involve a great deal of energy and excitement as the loved-up couple starts to plan their happy day and life together.

However, there are more practical considerations for engaged couples. These might not be as enjoyable as wedding dress shopping or cake tasting but they have a much more lasting impact on the couple, their relationship and their finances. Namely: prenuptial agreements.

Traditionally seen as only for the super wealthy or members of the aristocracy, prenuptial agreements are becoming increasingly common in England and Wales. This is largely down to a seminal shift in the courts’ approach to nuptial agreements following the key case of Radmacher v Granatino in 2010, which held a French-German couple to the terms of their prenuptial agreement even where the financially weaker husband sought to be released from it. In the 14 years since that case English family law has witnessed a significant uptake in prenuptial agreements, and they are also increasingly being tested and litigated in the courts as the early adopters of prenuptial agreements are now going through their own divorces.

A well-drafted prenuptial agreement can give couples greater clarity and control over financial arrangements during their marriage and on divorce. While this might not sound like the most romantic task on the pre-wedding to do list, there are several benefits to entering into prenuptial agreements, not least because they should in theory significantly reduce the scope for future litigation and the associated cost (both financial and emotional).

The Family Home

Under English law, the family home has a central importance during a marriage and is also regarded as a particular category of asset on divorce because it sets a benchmark for the couple’s standard of living during the marriage which will be relevant to the overall financial settlement. As a starting point, it is usual for a court to treat the family home as belonging to the couple in equal shares regardless of their individual respective contributions to the purchase price, and sometimes even regardless of how the property is legally held.

By contrast, a prenuptial agreement allows couples to set their own rules in terms of how different assets, such as the family home, are treated during the marriage and on divorce. For example, consider the following example scenarios and how a prenuptial agreement can assist:

• A young couple are starting out in their careers and living in rented accommodation. They do not have much individual wealth so the bride’s parents decide to gift them a large amount of money to buy their first house without a mortgage. That money derives from the sale of a long-established family business which the bride’s parents only recently sold. The couple decides that the bride will receive credit for her parents’ gift, and that they will share equally in any increase in the property’s value. In this way, the bride’s early inheritance is effectively ring-fenced, while still allowing the couple to share in the fruits of their marriage.
   
• A couple marry later in life. They will move into the husband’s home which he bought many years ago and has spent significant sums of money renovating prior to their relationship to include a state-of-the-art studio from which he works. Their prenuptial agreement allows the husband to retain this home and studio outright, but states that the wife will be entitled to live in a property of a similar, though not equivalent, standard. The agreement further states that if the husband is required to pay a sum of money towards his wife’s housing needs, that sum will be at least partially held on trust such that it eventually returns to his estate.
   
• The groom-to-be of an engaged couple is the heir to his parents’ landed estate. While he and his fiancée currently live in a relatively modest flat in London, it is accepted that they will move into the family ancestral home in the future. Their prenuptial agreement has to comply with strict rules set out in his family trust documents so as to protect the estate from claims on divorce, but includes a fairly generous provision for his fiancée so that she is guaranteed a minimum sum from which to meet her housing needs – a sum that increases in line with the length of their marriage and depending on whether they have children.
   
• A couple are living and working in London at the time of their marriage, but one of them is French and the other is American. While they are happy to share the value of any family home which they purchase together in London (in percentages tied to their respective contributions), they each want to protect family holiday homes in France and in the US so that these remain in their respective families under any eventuality.

It is not just prenuptial agreements that can help protect property interests during relationships and/or marriages. Unmarried couples may wish to enter into a cohabitation agreement to set out their interests and intentions in the event of a relationship breakdown, and to establish principles in relation to the home they share, for example if one party is repaying the mortgage on a property owned in the other’s sole name. In a similar way, a married couple can decide to enter into a postnuptial agreement if they wish to set out an agreed framework for their overall financial division in the event of a divorce, including terms relating to keeping their financial affairs and the divorce process confidential, which is a significant concern for our clients these days.

While it still may feel unnatural to think carefully about what should happen if a marriage does not last at the same time as planning a wedding, prenuptial agreements are helpful in encouraging couples to have frank conversations about their finances and their expectations for their marriage, which is no bad thing. Prenuptial agreements can be tailored to the couples’ specific circumstances and can include a variety of different scenarios so the couple knows that they still retain some flexibility over how to manage their finances. Both parties should receive independent legal advice on the terms and implications of the agreement, and the implementation of the agreement should not leave either party in a predicament of real need, i.e. in any of the scenarios above it would not be sensible to say that the financially stronger party should retain all of the significant assets in the marriage leaving the financially weaker party unable to meet their housing and income needs. However, as the cost of housing continues to increase and as the family home will always have a significant emotional and financial value in a marriage, we expect that more and more engaged couples will turn to prenuptial agreements to ensure they are protecting and clarifying their respective rights and responsibilities towards each other.

further information

If you have any questions, please contact Nevin Rosenberg in the Family team.

about the author

Nevin is an Associate in the Family Team. She joined Kingsley Napley in 2022 after training and qualifying into the Family Team at Withers. Nevin advises on all aspects of family law and relationship breakdown including divorce, financial settlement, non-molestation and occupation orders and pre and post nuptial agreements.