Why You Should Have A Cohabitation Agreement
Living together, or cohabiting, is more common in England than getting married or entering a civil partnership. However, while there are lots of articles about why you need a prenuptial agreement before you get married, there are relatively few on why you need a cohabitation agreement before you move in with your partner.
In this blog, our Family Law Solicitors explain what a cohabitation agreement is and what can go in one.
Contact OTS Solicitors Today for Cohabitation Law Advice.
What is a cohabitation agreement?
A cohabitation agreement is a contract between unmarried partners. The agreement records how they intend to live together and what should happen if the relationship ends.
A cohabitation agreement is important for all those in unmarried relationships because cohabitants have limited legal rights.
The law and cohabitation agreements
The family court will only uphold a cohabitation agreement if it was entered into freely and voluntarily. Ideally, both parties to the agreement should have taken independent legal advice and provided full financial disclosure.
Although it is possible to have a verbal cohabitation agreement covering anything other than an interest in land, the existence of a spoken agreement and its terms can be impossible to prove. To avoid a cohabitation dispute, it is always best to ask a Family Law Solicitor to draw up a cohabitation agreement for you.
The protection of a common law marriage
Some people tell friends and family that they don’t need a cohabitation agreement because they have the protection of common-law marriage. If only that were true. In law, there is no legal concept of common-law marriage, and therefore, an unmarried partner has no rights or protections as a common-law spouse.
If you were led to believe that you have legal rights as a common law spouse, it's best to seek legal advice on cohabitation law. A Family Lawyer can explain your rights and the protections you can receive by signing a cohabitation agreement. You can sign a cohabitation agreement at any stage during your relationship.
The legal rights of unmarried partners
If you are cohabiting with your partner in an unmarried relationship, you do not have the same legal rights as a husband, wife or civil partner.
The legal rights of unmarried partners stem from several pieces of legislation and property, trust and children law. There is no single statute that clearly sets out the legal rights of an unmarried partner.
Family Law Solicitors find it easier to tell a person in an unmarried relationship what legal rights they do not have, compared to the rights automatically given to a husband, wife or civil partner.
Unmarried partners do not have the right to:
- The formal end to their relationship – unlike a divorce in a marriage or a dissolution of a civil partnership, an unmarried relationship does not need to be formally ended. As the relationship was not recognised in law, you just need to sort out the practicalities of ending the relationship, such as transferring a rental tenancy from joint names into one name with the landlord's agreement or transferring the family home from joint to sole ownership.
- Housing provision – an unmarried partner will only be able to claim a share of the equity in their partner’s property if they have a claim using property or trust principles, or a trust deed, or a cohabitation agreement sets out their rights to the house and its equity. If the couple have financially dependent children, the weaker financial partner may be able to obtain housing provision temporarily until the children are 18 or 21, using Schedule 1 of the Children Act 1989 to bring a housing claim.
- Maintenance – in many relationships, there is a high earner and a lower earner or stay-at-home parent who has compromised their career or earnings potential to enhance their partner's career, to create a home or to care for the couple’s children. Unlike spouses or civil partners, an unmarried partner cannot ask the court to order spousal maintenance payments, even if there are young children, the relationship was long-term, or there is a significant income disparity.
- Pension provision – a cohabitee cannot claim a share of their partner’s pension at the end of a cohabiting relationship. A spouse or civil partner can ask the family court to make a pension-sharing order or to offset the value of their partner’s pension so they receive a larger share of other assets, such as the equity in the family home. The lack of pension provision and the court's inability to make a pension-sharing order apply even where a couple based their financial decisions on one partner building up their pension while the other focused on being a homemaker or providing most of the childcare for the couple's children.
- Assets – unless an unmarried partner making a claim over an asset can show that they have a legal claim to the asset under property or business law, they cannot get a share of the asset because of fairness principles or because they need it. For example, an unmarried partner cannot claim a share of the family business, shares, or investments on the grounds of fairness or need. Their claims are limited to their property rights. It can be hard to prove property rights if they are not recorded in a cohabitation agreement.
- Be the next of kin for decision making if their partner loses capacity to make their own decisions– a cohabitee is not the legal next of kin of their partner. The legal next of kin could be a spouse (if the partner has not divorced), a child of the deceased, or a parent. A cohabitee may only act as the next of kin for their unmarried partner if their partner has signed a Health & Welfare Lasting Power of Attorney or a financial Lasting Power of Attorney, and their cohabitee was appointed as an attorney. The Lasting Power of Attorney ends if the donor (the person who signed it) passes away.
- Inheritance rights – if a cohabitee dies without making a Will in their partner’s favour, their unmarried partner has no right to a share of their partner's estate under the intestacy rules. They may be able to make a claim for reasonable financial provision if they were in a relationship of over two years duration, but that will involve a court application.
The consequences flowing from an unmarried partner's lack of rights
The consequences that flow from a lack of legal rights as an unmarried partner can be devastating. A cohabitee does not have automatic rights in the same way as a husband, wife, or civil partner, so may need to commence court proceedings to claim their limited rights. The court application may need to be brought under:
- Property or trust law for a share in property.
- Schedule 1 of the Children Act 1989 for housing provision for a child, but ownership of the property will revert to the property owner when the child is 18 or older.
- The Inheritance (Provision for Family and Dependants) Act 1975 to claim reasonable financial provision from their deceased partner's estate if they have not been adequately provided for in their partner’s Will, as the intestacy rules will not provide for them as a relative of the deceased.
These court proceedings can be expensive and time-consuming. They can add considerably to the stress of a relationship breakdown or bereavement.
The documents an unmarried partner needs to protect themselves
A couple in a cohabiting relationship needs:
- A cohabitation agreement.
- A parenting plan.
- A Will.
- Insurance and pension nominations.
- Lasting Power of Attorney – health and welfare and financial.
The benefits of cohabitation paperwork
By taking the relatively simple steps of sorting out cohabitation paperwork, you can:
- Avoid any bitter disputes if you separate.
- Protect your children in case the relationship ends or your partner passes away.
- Protect your partner if they lose the capacity to make their own decisions.
- Provide for your unmarried partner in case you pass away before they do so.
What should be included in a cohabitation agreement?
A cohabitation agreement can be short or detailed, depending on how comprehensive you want it to be. A Family Lawyer in London will ensure that your agreement is tailored to your circumstances and covers the aspects important to you.
It is usual to include these matters in a cohabitation agreement:
- Property rights and ownership.
- Financial arrangements during the relationship.
- Key points about parenting or children arrangements.
- What will happen if the relationship ends.
Property ownership and cohabitation agreements
A cohabitation agreement is necessary whether you rent or own your own property. If the property is owned, an agreement is necessary if:
- You own the property as joint tenants.
- You own the property as tenants in common.
- You own the property in your name.
- Your partner owns the property.
- A trust or extended family owns the property.
A cohabitation agreement is important in many situations. For example, if you live in a house in which your partner is the sole legal owner (your name is not on the title deeds to the property), you could be left homeless if your relationship breaks down and you have no legal protection.
Family Law Solicitors recommend that anyone considering moving in with their partner enter into a cohabitation agreement to avoid bitter disputes if they separate.
The cohabitation agreement should record:
- Who is the legal owner of the family home, and who has a beneficial or equitable interest in the property – the legal and beneficial ownership can be different.
- Who paid the deposit and purchase costs, such as stamp duty?
- Who has made additional financial contributions, such as paid off a chunk of the mortgage or paid for an extension or kitchen renovation?
- What happens to the property ownership if the relationship ends. For example, will the property be transferred into the sole name of your partner, or will it be sold? If the property is transferred, how will its equity be valued and agreed upon?
If additional financial contributions are made to a property after the cohabitation agreement has been signed, the agreement may need to be reviewed and amended. For example, if an inheritance is received and used to pay off the mortgage.
Financial arrangements and cohabitation agreements
The agreement should record how you and your partner plan to:
- Pay the rent or mortgage payments.
- Share the payment of household bills and living expenses.
- Operate a joint bank account or share expenses.
- Purchase significant items, such as cars or furniture, and consider how they will be split if you separate.
- Take out any debts or loans, such as car loans and who will be responsible for the debt if you split up.
The agreement may need to be reviewed and revised if you have children and one of you takes extended parental leave or one of you is unable to work due to ill health.
Children arrangements and cohabitation agreements
A cohabitation agreement can still set out practical childcare issues and arrangements, such as:
- How will maternity leave be funded?
- How will childcare costs be shared?
- How will payment of mortgage and bills be affected by the agreement on childcare arrangements?
Ending the relationship provisions in the cohabitation agreement
A vital part of the cohabitation agreement is to record how you will separate if your relationship unfortunately breaks down. It is better to agree on how best to do this when things are amicable, to hopefully avoid an expensive court battle.
The cohabitation agreement discussions should consider:
- Whether you will both stay in the family home until it is sold or transferred.
- Who will be responsible for the mortgage and bills if one of you moves out?
- How long will you have to raise the money to buy your partner out if you or they plan to stay in the family home?
- How the property will be valued if the agreement is that it will be transferred to one of you?
- How will any joint account savings, joint or sole investments, cars, expensive items or shared assets be divided between you?
- Whether you agree to use family mediation or arbitration to resolve any disputes over the cohabitation agreement?
Reviewing and updating a cohabitation agreement
As the years go by, circumstances change. Costly and stressful disputes can arise if you and your partner do not keep your cohabitation agreement up to date with your changed circumstances. That does not mean that your agreement needs to be reviewed annually, but when there are significant life events, such as :
- You and your partner are having a child, and your maternity or child care plans are not as set out in the original cohabitation agreement.
- You are starting a business together. You will also need a partnership agreement or shareholder agreement.
- One of you suffers a serious illness or accident, which prevents that partner from working
- One of you receives a significant inheritance or uses their savings to renovate the property, and your original cohabitation agreement does not say how a major change in financial contribution will affect the equity share.
- You are selling the property and upsizing or downsizing, so your property and financial contributions require review.
Talk to OTS Solicitors about your cohabitation agreement
The saying “hope for the best, plan for the worst” undoubtedly applies to cohabitation agreements. While a cohabitation agreement may not be romantic, the specialist Family Lawyers at OTS Solicitors in London can sensitively guide you on what should go into your agreement.
Contact OTS Solicitors Today for Cohabitation Law Advice.
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