There are many reasons why two people might want to live together, be it based on love, friendship or just convenience for work. Cohabiting is a big step. Agreeing to share a home, splitting the bills, and pooling resources.
It is very rare for both cohabiting partners to be able to contribute the same assets and finances into the partnership at the outset. One might contribute more to the deposit for the house, or pay more towards the mortgage or rent. It may be that the person who earns more agrees to pay most of the bills, or that one partner contributes to the relationship by giving up their job to provide childcare. This way of living is completely normal and sensible, allowing both people to contribute to their partnership in the best way they can. However, issues often arise when such arrangements are not reflected in a legally binding manner.
What is a Cohabitation Agreement, and why might you need one?
A cohabitation agreement is a legally binding contract that sets out clear ownership and responsibilities for you both. The cohabitation agreement can cover elements such as ownership of property, share of the mortgage or rent you will pay, next of kin rights, how household bills will be dealt with, finances, pets and care of children, both when you are living together and in the event you separate.
By creating a legally binding Cohabitation Agreement, both partners are expressing what they want to happen should the relationship break down, or in the case of serious illness or death. Cohabitation Agreements also cover situations where the cohabitation is designed, or expected to be time-limited, for example, two friends moving in together and sharing costs, for reasons of their job.
Unfortunately, your finances are not protected by Common Law Marriage. The length of time you have lived with your partner has no legal validity and could leave you in a vulnerable situation should you separate.
Who is a Cohabitation Agreement aimed at?
A Cohabitation Agreement is aimed at any unmarried couple, or those not in a civil partnership, who are living together. This may include two people who are romantically involved, friends or siblings. Simply put, anyone who is cohabiting and does not have the legal protection of a marriage or civil partnership.
Even if you are unmarried and living together with children, you do not have the same rights as married couples to make claims for spousal maintenance, property adjustment orders, lump sum orders and pension sharing orders. There are limited orders that can be made, but that is dependent on the individual circumstances.
By creating a legally binding cohabitation agreement, both you and your partner can discuss what you want to happen around property, finances and care of children should your relationship come to an end.
What does a Cohabitation Agreement cover?
The agreement sets out how much of each asset both parties own, as well as expectations over how household bills will be dealt with. It can also cover assets such as cars, furniture or anything not completely and obviously owned by one individual. Financial assets such as bank accounts, savings, life insurance and pensions can also be covered. There is likely to be an agreement as to what share of rent or a mortgage each person will pay. It may also be applicable to include wishes for child care and ongoing support, especially if one of the couple is acting as a non-biological carer or parent.
Where the couple own a property, details such as the deposit and mortgage contributions made can be included. The agreement can also include wishes as to how the property might be divided in the case of the couple no longer cohabiting, or the death of a partner. Property owned before moving in together may need to be included, especially if the other partner is making contributions to either mortgage payments or indeed maintenance of the property.
Why would a couple need an agreement?
Cohabiting couples do not automatically have rights in the same way that married couples or those in a civil partnership have. Proposed legislation giving cohabiting couples automatic rights is still not close to being part of UK law.
A legal agreement can be very useful in case of serious illness, death, or separation. It can also avoid much larger legal bills in the case of a future dispute. You also have the peace of mind of knowing that your wishes for the share of each other’s assets, state pension and next of kin rights are clearly stated in a legally valid document.
Even when you may have loaned your partner money to pay debts, paid for cars, holidays and luxuries in life, you are still unlikely to be successful in a claim for a share of a property. If you were married, the court recognises all financial and non-financial contributions over the course of the relationship, including raising children, as broadly equal contributions.
The court has broad powers to order property to be sold, transferred, and cash payments to be made between spouses. The court does not yet have similar discretion when dealing with disputes between unmarried couples, nor any similar range of orders to make.
Is such an agreement legally binding?
Yes. A Cohabitation Agreement is a legally binding contract, enforceable in a UK court. The agreement needs to be drafted and executed properly and signed as a deed. It is therefore highly recommended to obtain legal advice before preparing such an agreement. Once created, both parties should seek independent legal advice to ensure the terms of the agreement meet their expectation and understanding.
When should a cohabiting couple make an agreement?
The ideal time to draw up a Cohabitation Agreement would be before you start living together, or shortly after commencement of such a relationship. Significant changes in circumstances or responsibilities, such as the birth of a child, might also be the event that makes such an agreement more valuable. We would recommend all cohabiting couples seriously consider the merits of such a legally binding contract. A Cohabitation Agreement can be updated to reflect changes in circumstances or wishes.
How to go about creating a Cohabitation Agreement?
Before you seek professional help, it is a good idea to discuss as a couple what you want the agreement to reflect. This might be a split of property, based on deposit contribution and ongoing mortgage payments, or simply who is responsible for paying specific bills. It should include what you wish to happen in the case that one party becomes seriously ill or, unfortunately, dies.
Online templates exist and may be useful to help guide these initial thoughts, but they may miss something important. Good legal advice is recommended and can also help avoid unintended consequences.
For an agreement to be valid in court, both parties should seek independent legal advice to make sure there are no mistakes in the document or a misunderstanding about the details or implications of the agreement itself.
How can Goughs help?
Goughs specialise in disputes between unmarried couples on separation, and also advise many from an early stage so that they better understand their rights and entitlements when purchasing a property with their partner, or if they are planning on starting a family when not married.
If you are cohabiting and do not have an agreement in place, we would welcome the opportunity to discuss how we can help create a suitable one to reflect your circumstances and wishes.
To find out more, complete our no obligation enquiry form below or call 01249 444499.
