Cohabitation Agreements - Are they worth the hassle?

What is a Cohabitation Agreement?

A Cohabitation Agreement is an agreement between two unmarried people who live together as a couple (or otherwise) and records the financial arrangements, rights and responsibilities of each party.

There is a common misconception that couples who choose to live together but remain unmarried have the same rights and protections as a married couple, just because they live together. Unfortunately, this is not the case and cohabiting couples have no automatic rights over each other’s income or assets, unless they are held in joint names. However, the law remains under review for cohabiting couples and their legal rights, and we may see some changes in future, although there are no immediate plans.

With cohabitation continuing to rise in the UK, couples who are not married may want to enter into an agreement with each other to deal with the division of their property and affairs. Oftentimes, disputes between cohabitees arise when the relationship ends and they tend to revolve around what the intentions of both parties were in relation to property, for example. Therefore, having an agreement in place setting out their intentions from the start will avoid such disputes and expensive legal action.

Generally, these types of agreements are enforceable provided they are entered into freely with the appropriate legal advice having been obtained.

Assets of Cohabitees

Unlike married couples, cohabitee’s rights and financial ties to each other are extremely limited. Assets will only be considered joint assets if they are held in the joint names of both parties or if both parties made a financial contribution towards the purchase of property. Issues therefore arise where property is held in one party’s name or only one party funded a purchase and the other party claims it was meant to be a joint asset. This therefore becomes a “he said, she said” scenario and so any doubt of intentions can be eliminated by being included within a Cohabitation Agreement. 

Advantages

There are many advantages to having a Cohabitation Agreement, such as:

• They are very flexible and can set out what will happen with assets if the relationship breaks down.
• There will be no doubt as to where each party stands in relation to the assets and liabilities.
• The parties’ intentions will be clearly recorded avoiding later disputes.
• It can be tailor made to the couple’s needs and can include anything from property, cars, pets, expensive gifts, and even debts.
• It can preserve assets brought into the relationship, and acquired during; for example, gifts or loans from family members.
• It can record how finances will be dealt with both during the relationship and in the event of break-up.
• It can set out who is to pay the mortgage or the rent, amongst other outgoings.
• If one party is financially dependent on the other, as they will have no automatic rights to maintenance after a break-up, the agreement can include continued financial provisions for support after the relationship ends. It is important to note that this is separate to any child maintenance which would be legally payable in any event.
• It stops the potential of becoming one party’s word against the other leading to arguments and expensive court action, in the worst case.
• It reduces stress in an already emotional and difficult time at the end of a relationship.
• You can enforce the terms of the agreement under contract law, you cannot enforce a verbal agreement.

Disadvantages

As ever, there are always some disadvantages, which include:

• There is no guarantee that the agreement will be upheld in its entirety by the Court if it is ever challenged. This is because technically the agreements are not legally binding. This makes it very important that specific criteria are covered by the agreement.
• The agreement does need to be updated throughout the relationship when circumstances change, such as the birth of a child, or a change in financial situations. If the agreement is not updated to account for these events, the court may consider the agreement to no longer be enforceable. However, you can include anticipated events in the agreement to ensure it remains relevant and enforceable in the future. Additional costs to update an agreement should therefore be considered.
• The discussions between parties about creating such agreement may come across as though there is a lack of trust in one partner’s eyes and it may lead to some difficult conversations. This means any such conversations need to be approached very carefully.

The advantages of such agreements outweigh the disadvantages, and couples should be encouraged to enter into a Cohabitation Agreement to avoid being left in a difficult financial position should the relationship end. It should not be viewed by couples as being insensitive or pessimistic about the relationship, but it should instead be a welcomed discussion between couples and seriously considered in order to make a worst-case future scenario easier.

Written by : Claudia Stachini (Solicitor)

For any enquiries regarding Cohabitation please contact us on 020 8290 0333 or email info@judge-priestley.co.uk.