The number of couples choosing to cohabit or live together has dramatically increased in recent years. Since 1998, over 60% of all births registered outside marriage or civil partnership have been to a cohabiting couple. In 2017 the figure was 67.3%, according to the ONS.
In this article, we will explore what a cohabitation agreement is and how they can help you in future years. “Cohabiting family” and “cohabiting couples” are used throughout this article to refer to couples who live together without marrying or entering into a civil partnership.
Family solicitors have traditionally been approached by cohabiting couples when their relationship breaks down but nowadays it is common for people wanting to set up home together to take advice on how their cohabitation would work on the ground, and in the event of a couple separating or if one of the parties passes away unexpectedly.
A cohabitation agreement is a legally binding contract with the person you live with. They are becoming more common especially where family members have financially contributed to the property and in the case of ‘blended’ families where it may be important for the couple to not have equal shares.
It is a common misconception that cohabiting couples have the same legal rights as married couples. This is far from the truth. A cohabitee has no automatic right to their partner’s property, income, capital or pension on separation no matter how long their relationship has lasted, unlike married couples.
The laws relating to couples who live together is a matrix of property law, family law and trust law and is often complex and unclear. The Law Commission was asked to review the law and focus on the financial hardship suffered by cohabitants or their children when their relationship breaks down or if one party dies but despite all efforts to change the law, it remains largely unchanged, however, there are ways for couples to protect themselves.
Resolution, who are a group of family lawyers committed to the constructive, and non-confrontational resolution of family disputes, have also been active in their attempts to change the law to protect cohabiting couples on separation. Resolution will be gathering in Parliament in late 2019 to call on MPs to change the law and provide more legal protection for cohabitants on separation.
The current legal position when a cohabiting couple separate is:
- Neither party can claim maintenance from the other (except for maintenance for any children of the relationship which can usually be claimed from the Child Maintenance Service)
- Ownership of the home will be determined by land law principles. Where only one partner owns the property, the non-owning partner may be able to obtain rights to live in the home, prevent their partner from living in their home or obtain a share of the net proceeds of sale when it is sold, if they can demonstrate that they have contributed to it.
- Where a cohabiting couple with children separate, one partner can ask the court to transfer the property into their name whether the property is jointly owned or owned by the other partner.
- Cohabiting couples have no automatic rights in relation to death-in-service benefits under their partner’s pension scheme and will not receive a widow’s or widower’s pension.
- If a cohabiting partner is made bankrupt, sale of the family home can be delayed only if there are dependent children, and then only for a period of 12 months.
- If a cohabiting partner dies without a Will there is no provision under current law for the other partner to obtain any part of their deceased partner’s estate on death, but children of the couple will have a claim.
What is a Cohabitation Agreement?
Because the law is uncertain when a couple separate, cohabiting couples should consider entering into a cohabitation agreement to define their living arrangements both during their relationship and in the event they separated. This is a legal document designed to protect the rights of cohabiting couples and makes things more straight forward if they ever separate or one partner dies.
The main issues which are covered in a cohabitation agreement tend to be ownership of any property and each party’s contributions to that property, so in the event of relationship breakdown, there is certainty as to how assets should be divided between the couple.
Cohabitation agreements can help couples communicate about the practical aspects of living together on a day-to-day basis, for instance, who’s responsible for paying the mortgage, utility bills or household repairs and whether a joint account for bills is a good idea, or whether they’d both prefer to retain sole accounts.
How to start a conversation with your partner about drawing up a Cohabitation Agreement
It is worth sitting down together to talk over the practical aspects of living together as there will be bills that need to be paid, household chores that need to be carried out and what personal items each partner would wish to bring into the shared home. These discussions will vary depending on whether a couple are buying their first home together, or whether one partner is moving into a property already owned by the other partner. It is important that discussion is also had around Wills and life insurance, which are protective measures that can be taken to ensure the other partner is secure in the event of the unexpected.
A cohabitation agreement can be viewed as a document to protect both partners. Once you have in place a measure of agreement, the next step is to appoint Solicitors and for both partners to take independent legal advice on the terms of the agreement to ensure it will be valid.
Usually, one solicitor draws up the agreement and sends it to the other partner and their Solicitor. Once there is agreement on the terms, the document should be signed and witnessed as a Deed.
During the existence of the relationship it is important to review the terms of any cohabitation agreement to ensure they are still accurate and reflect the contributions that each party has made to the relationship.
Other ways to protect assets when living together:
When couples decide to purchase a property together, it is important that they take legal advice on how the property is to be owned either as joint tenants or tenants in common in either equal or unequal shares. Under a joint tenancy, both partners own the whole property meaning that if one dies, the survivor continues to own it. Under tenants in common, a partner owns a specific share (either equal or unequal shares) and can leave their interest in the property to whoever they choose in their Will.
If one partner is investing more money into the purchase of a property, a ‘Declaration of Trust’ can be put in place which sets out exactly what the ownership of the property is. A Declaration of Trust is binding once signed and it cannot be changed without the consent of both parties.
It is important that cohabiting couples both create a valid Will. If one partner dies without a Will, their savings and investments will go to their next of kin and not their cohabiting partner. There is no automatic right to savings or investments if the couple split up or die.
Co-habiting couples should put in place life insurance cover. If one partner dies with a joint mortgage, the other partner would be liable for the monthly payments in full and if unable to keep up these payments risk losing their home. If life insurance is in place, a lump sum would be paid which could be used to pay off the mortgage, either in part or full depending on the cover taken.
Unlike a married couple, a cohabiting couple will not have an automatic right to the pension pot of their partner. A married couple would receive a widow’s or widower’s pension on death of their spouse, or death-in-service benefits if the spouse died before the retirement age.
Under some pension schemes, it is possible for a cohabiting partner to receive a survivor’s pension therefore it is important to check the nominees under your pension schemes.
When couples split without any agreements in place
The family home is frequently a sore point of discussion and there are many cases where these issues have become a real problem for couples.
Owning a property as ‘Joint Tenants’
If the property was purchased as joint tenants either could apply to the court for an order for sale under section 14 of the Trust of Land and Appointment of Trustees Act 1996 and the net proceeds of sale would be divided equally. However, this type of litigation can be lengthy and costly and the losing party may be required to pay all the legal costs of the winning party.
Owning a property as ‘Tenants in Common’
If the couple owned the family home as tenants in common, at the time of purchase, the couple’s intentions ought to have been clear and set out in a Declaration of Trust. If there is no declaration of trust, it will be presumed that they own the property in equal shares unless the contrary can be proved. The onus will be on the party who wishes to show that the beneficial interest is different from their legal interest and should not be divided equally. The case of Stack v Dowden set out important factors for the court to consider such as the financial contributions the couple made, how the parties conducted their finances and why the house was purchased to determine whether the couple intended to own it in unequal shares. The principles established in the case of Stack v Dowden were clarified in Jones v Kernott.
There is, therefore, a two-stage test – the first is to establish if there was an agreement and the second is to decide on the size of the shares.
Where a property is owned in one of the couple’s names
To establish a beneficial interest in a property owned by one partner, the non-owner will need to establish the existence of a constructive or resulting trust. A resulting trust can be established through direct or indirect contributions to the property.
A constructive trust can be established if the non-owner is able to prove that either at the time of purchase of the property or later where an incoming cohabitee moves in, the parties formed a common intention that the non-legal owner would have a beneficial share in the property. The determining principles were set out in the case of Lloyds Bank plc v Rosset.
The first question is whether there was any express agreement or undertaking (promise) between the couple that the property was to be shared beneficially. If so, the non-owner must then show that he had acted in reliance on that agreement to his detriment to give rise to a resulting or constructive trust. Alternatively, if there was no agreement or understanding, the court may infer a common intention, for example, each having made a financial contribution. If the non-owner is successful in establishing the existence of a trust but there is no evidence of what the proportions are, the court is entitled to impute to the parties an intention to hold the shares fairly.
If a non-legal owner is unable to prove any beneficial interest in the property under the above principles, he or she will have no right to live there and may be excluded by the owner at any time on giving reasonable notice.
Creating a cohabitation agreement will clarify for both of you, how finances and assets are divided and also prepare you both for a change in circumstances if one of you dies unexpectedly or wants to move on from the relationship. Making arrangements clear from the start may not be romantic but it’s a very practical way to protect you both and any children involved.
Do you have a question about a Cohabitation Agreement?
If you have any queries, contact:
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert legal advice should be sought.