Why are cohabitation agreements so important?

The Office for National Statistics (ONS) has released its latest statistics, in a report titled “Families and Households in the UK”.

The report confirms what many of us have long suspected namely, that couples increasingly prefer to cohabit, rather than marry (or enter into a civil partnership). The number of families that include a couple in a legally registered partnership in the United Kingdom has increased by 3.7% in the past decade, to 12.7 million. However, the number of cohabiting couples increased over the same period by 22.9%, to 3.6 million.

This fact is important, not just as an example of how our population’s views on marriage are changing, but perhaps more so, because many individuals who now choose cohabitation over marriage, may find themselves unprotected, in the unfortunate event of the breakdown of their relationship.

When a marriage breaks down, a spouse can apply for financial orders (for example, spousal maintenance, a lump sum or a share of the other spouse’s pension) under the Matrimonial Causes Act 1973, even if they made no financial contribution during the marriage. Cohabitees on the other hand, are not similarly protected. Many clients who come to us for advice believe they are protected as a “common law spouse”, if they live together for several years. It comes as a shock to them to discover that there is no such status and therefore, no protection or automatic right to make financial claims against their former partner when the relationship ends.

This can lead to great hardship and unfairness. For example, a former partner found himself having to vacate a home he had lived in with his former cohabitee for almost ten years because he had assumed incorrectly, that having contributed towards various utility bills (but not  the mortgage) during that time, he was automatically entitled to an interest in the property. Not so!

In addition, unmarried couples have no automatic right to a share of their partner’s property in the event of their death, no automatic right to inherit their estate, no automatic right to various tax advantages and in many cases, no automatic right to receive the dead partner’s pension,   A properly drafted cohabitation agreement can address these issues, without the need to make an application to the court.

Just as a pre-nuptial agreement considers what should happen in the event of a marriage failing, a cohabitation agreement assists couples by addressing what should happen if their relationship fails. They will avoid being taken by surprise, or suffer hardship and disappointment, if each of them has thought about their respective rights jn advance. For example, the parties can agree to insert a clause in the agreement providing for the financial support of one party, by the other, most likely for a short period of time, to allow the party in the weaker financial position time to adjust to the change in their living arrangements. In addition, they can agree to include a clause in the agreement to nominate each other as a beneficiary in relation to a percentage share of pension or death in service benefits. If there are children, arrangements can be made for their financial support too, over and above what the Child Maintenance Service may assess a party’s liability to be.

Unmarried couples are advised to negotiate and execute a cohabitation agreement, with the assistance of their respective lawyers to ensure that both of them fully understand what their respective rights and obligations are, for example in relation to their occupation and ownership of  the property, payment of bills, including the cost of repairs and improvements to it and even the ownership of the furniture. This will lead to less confusion and disagreement, in the event of the breakdown of their relationship. Obviously, if circumstances change during the relationship, such as the birth of children, or one party no longer being able to work and therefore, not able to make a financial contribution to household expenses, the couple can review their situation and if appropriate to do so, amend the cohabitation agreement to acknowledge this change in circumstances.

In the unfortunate event of one partner filing a claim at court seeking for example, a share of the property, the other party can refer to the terms of the cohabitation agreement to rebut those claims. Alternatively, one can execute a cohabitation agreement (in addition to a declaration of trust) to confirm what interest each party has in a jointly owned property and what the arrangements would be if the parties separate. For example, the parties can agree which one will buy out the other party’s interest, or how long one party should have to vacate the property.

As can be seen from the above, having a cohabitation agreement provides both parties with more certainty if the relationship breaks down and thus avoid potential court proceedings.

Should you require any specific legal advice on the issues covered, please contact Desmond O’Donnell in our family team info@ts-p.co.uk.