What is a cohabitation agreement?

The last few decades have seen a major shift in what might be considered the traditional family make-up. According to the Office of National Statistics, there are 2 million cohabiting couples in the UK.  Cohabitation is now a common and accepted domestic arrangement.  Sadly, the law has not followed this modern progression and still does not provide for people who choose to cohabit rather than get married or enter into a civil partnership. Worryingly, one in four cohabiting couples believe they have the same legal rights as married couples upon separation. However, there is no such legal status in English law as a common-law spouse or partner. As a consequence, one party can often be left exposed and at a financial disadvantage.

There are a number of ways in which a cohabiting couple, whether heterosexual or of the same sex, can make some basic preparations which can greatly assist them in organising their finances and managing their relationship.

A cohabitation agreement can be a very useful tool and if certain criteria are met, such as both parties having independent legal advice, then it will have the full force of the law.  It is a form of legal agreement between a couple who choose to live together.

Also referred to as a living together agreement or “no-nup”, the agreement not only details who owns what within a relationship, but also how personal savings, inheritances and jointly owned possessions will be distributed should the relationship come to an end. The agreement can also be used to pre-determine how much each person will contribute towards the mortgage or rent and household bills, as well dealing with future financial support for any children, should the relationship end.

Entering into a Declaration of Trust

If you are buying a new home together, or moving into a home which your partner already owns, then you should also enter into a Declaration of Trust. This is an agreement which sets out the proportion of the property each un-married partner will receive if they break up and would usually be drawn up by solicitors dealing with the purchase.

A Declaration of Trust is also used in situations where the parents of one party provide a deposit to enable a couple to purchase a property together and get their feet on the housing ladder. These gifts can be recognised in a deed which states that the deposit is to belong to the person whose parents gifted it with that person receiving a larger share of the sale proceeds to reflect the gift made.

If the couple then get married, the cohabitation agreement should be converted into a prenuptial agreement to ensure that any assets acquired before the marriage are not included in any matrimonial asset “pot” upon divorce.

The importance of making a Will

It is vitally important that un-married couples make Wills. If you die without leaving a Will, there are strict rules about who gets what. Many are shocked to find that nowhere in English law are cohabiting partners recognised, regardless of the length of time they have been living together.  If you are not married or in a civil partnership, the only way you can make sure your partner will inherit assets which are not jointly owned on your death is by making a will.

To some, these considerations may seem unromantic or cynical, but they could save a lot of heartache and potential conflict in the future. There has been much media coverage recently concerning un-married couples who have not been able to reach agreement about how to deal with their financial affairs following a break-up.  Consulting experienced solicitors when contemplating cohabitation about the legal protections which can, often simply, be put in place, could prevent complex and costly legal disputes if things go wrong.