Cohabitation Agreements

Last autumn we considered the impact of a 2018 ruling by the Supreme Court about the state of relationships in Britain. Specifically we reviewed how the law on civil partnerships was to be changed to allow couples of the opposite sex who did not wish to get married to have some legal recognition. In the case, the Supreme Court made a declaration that the current law was not compatible with Human Rights legislation. As a result, the government confirmed that it would change the law to allow any couple to register as civil partners. Unfortunately the rules contained in the Civil Partnership Act 2004 (CPA 2004) have not yet been changed.

In this month’s article we will review what problems a couple may experience because of the delays in changing the law. In addition we will consider the increasing use of cohabitation agreements as a stop-gap measure to help couples protect their respective interests.

The problem with cohabiting?

Making the decision not to get married is not only common, unmarried cohabiting families are the fastest-growing type of family in the UK. With more than 3 million couples already cohabiting, they could be forgiven for assuming that they have the full protection of the law. Unfortunately that is far from the truth. Only legally recognised couples, i.e. those who are married or same-sex civil partners have full financial protection:

•           In the event of a relationship breakdown;

•           On the death of a spouse or partner; and

•           In respect of their tax status.

The rise of the cohabitation agreement

Because the law remains out of step with modern family life and is unfair, one option an unmarried couple may use to protect themselves is to enter into a cohabitation agreement. These agreements can be entered into before a couple moves in together or they may be entered into if a couple’s circumstances change. So for example if a couple are having children or getting a mortgage together they may want to consider entering into an agreement.

These agreements can set out how a couple will share their finances while living together or what happens if one of them becomes ill, dies or they split up. Examples of specific issues that could be covered in a cohabitation agreement might include:

•           How rent, the mortgage or household bills are paid;

•           What happens with joint bank accounts or pensions;

•           How property and assets will be owned;

•           What the arrangements will be for children;

•           Who owns any pets; and

•           What rights, if relevant, each cohabitant has as next of kin.

For an agreement to be valid it must be entered into freely, be in the form of a deed and signed by the parties. Each person should get independent legal advice to make sure they understand and are happy with what they are agreeing to.

Provided these conditions are followed then the agreement should help protect the respective parties while they are alive. The couple should also make a Will if they want to make sure they inherit from each other if one of them dies. Where the couple own assets outside the UK then they may need to draft agreements and Wills that reflect the law where the asset is based.

Compare and contrast

In Scotland the law was changed in 2006 to deal with the many couples that cohabit. The Scottish Parliament created an Act which provided a set of basic rights for cohabitants whose relationship ends. Some of these rights included:

•           Sharing of household goods bought during the time the couple lived together;

•           Financial provision when, as a result of the decisions the couple made together during the relationship, one partner has been financially disadvantaged; and

•           A cohabitant’s right to apply to the court for an award from the estate (property) if their partner dies without leaving a will.

Looking at these provisions begs the question: “Should the law in England and Wales be reformed in a similar way?” We will not know the answer to this until the government reforms the law as it has promised to do. In the meantime couples who are cohabiting may be best advised to spend the money now entering into a cohabitation agreement to potentially save money further down the road in the event of relationship breakdown or death.

Last autumn we considered the impact of a 2018 ruling by the Supreme Court about the state of relationships in Britain. Specifically we reviewed how the law on civil partnerships was to be changed to allow couples of the opposite sex who did not wish to get married to have some legal recognition. In the case, the Supreme Court made a declaration that the current law was not compatible with Human Rights legislation. As a result, the government confirmed that it would change the law to allow any couple to register as civil partners. Unfortunately the rules contained in the Civil Partnership Act 2004 (CPA 2004) have not yet been changed.

In this month’s article we will review what problems a couple may experience because of the delays in changing the law. In addition we will consider the increasing use of cohabitation agreements as a stop-gap measure to help couples protect their respective interests.

The problem with cohabiting?

Making the decision not to get married is not only common, unmarried cohabiting families are the fastest-growing type of family in the UK. With more than 3 million couples already cohabiting, they could be forgiven for assuming that they have the full protection of the law. Unfortunately that is far from the truth. Only legally recognised couples, i.e. those who are married or same-sex civil partners have full financial protection:

•           In the event of a relationship breakdown;

•           On the death of a spouse or partner; and

•           In respect of their tax status.

The rise of the cohabitation agreement

Because the law remains out of step with modern family life and is unfair, one option an unmarried couple may use to protect themselves is to enter into a cohabitation agreement. These agreements can be entered into before a couple moves in together or they may be entered into if a couple’s circumstances change. So for example if a couple are having children or getting a mortgage together they may want to consider entering into an agreement.

These agreements can set out how a couple will share their finances while living together or what happens if one of them becomes ill, dies or they split up. Examples of specific issues that could be covered in a cohabitation agreement might include:

•           How rent, the mortgage or household bills are paid;

•           What happens with joint bank accounts or pensions;

•           How property and assets will be owned;

•           What the arrangements will be for children;

•           Who owns any pets; and

•           What rights, if relevant, each cohabitant has as next of kin.

For an agreement to be valid it must be entered into freely, be in the form of a deed and signed by the parties. Each person should get independent legal advice to make sure they understand and are happy with what they are agreeing to.

Provided these conditions are followed then the agreement should help protect the respective parties while they are alive. The couple should also make a Will if they want to make sure they inherit from each other if one of them dies. Where the couple own assets outside the UK then they may need to draft agreements and Wills that reflect the law where the asset is based.

Compare and contrast

In Scotland the law was changed in 2006 to deal with the many couples that cohabit. The Scottish Parliament created an Act which provided a set of basic rights for cohabitants whose relationship ends. Some of these rights included:

•           Sharing of household goods bought during the time the couple lived together;

•           Financial provision when, as a result of the decisions the couple made together during the relationship, one partner has been financially disadvantaged; and

•           A cohabitant’s right to apply to the court for an award from the estate (property) if their partner dies without leaving a will.

Looking at these provisions begs the question: “Should the law in England and Wales be reformed in a similar way?” We will not know the answer to this until the government reforms the law as it has promised to do. In the meantime couples who are cohabiting may be best advised to spend the money now entering into a cohabitation agreement to potentially save money further down the road in the event of relationship breakdown or death.