‘While the absence of formality has its attractions, it is important to note that the lack of legal clarity and protection can be problematic for a couple if a dispute should arise in the future,’ says Peter Lewis, Partner and Head of the family law team with QualitySolicitors Parkinson Wright. ‘When a cohabiting couple separates, they are often surprised to find that there is no clear legal framework to help unravel any disagreements.’
Peter explains how it is important to consider how to put safeguards in place and outlines six reasons why you may benefit from a cohabitation agreement.
1. Escaping the ‘common law marriage’ trap
Having heard the phrase ‘common law marriage’ (which is nothing more than a myth) being used by older couples or on the media, you might think that a long-term cohabiting relationship of say 20 years or more gives you all of the legal rights enjoyed by a married couple or civil partners. This also includes inheritance tax, if you are married and one of you should die and leave your estate to your spouse they would not have to pay inheritance tax, however, cohabitees are treated as a beneficiary and would have to pay inheritance tax on anything above the nil band rate of £325,000.
There is no such legal concept as a ‘common law marriage’ and, regardless of the length of the relationship, cohabiting couples have no legal financial obligations towards each other if they split up.
Common problems can arise, which include deciding:
- who takes over an existing tenancy agreement and who moves out;
- whether one of you should pay occupational rent to the other; or
- how ongoing school fees are going to be met.
Having a cohabitation agreement means that you can set out that you both wish to have similar rights and duties as a married couple, or you can tailor it to state the extent of such responsibilities towards each other, and towards the home you share.
2. Obtaining clarity on your legal position
Given that there is no unified law governing what happens when a cohabiting couple splits up, as there is for a married couple or civil partners, a cohabitation agreement will give you a useful understanding of what your rights (if any) are.
There is no automatic 50/50 split of anything. Your lawyer will consider your personal objectives and the law, and they will help you think through important matters such as:
- what happens to any property;
- whether or not to expect financial assistance from your ex-partner; and
- how any children of the family will be provided for.
Children will always be the most important consideration, and you will receive advice on the specific legal structure in place to ensure they remain well looked after if you have to rely on the law to help you achieve this.
3. Protecting a property you own
Moving in together does not necessarily mean that you are making a lifelong commitment just yet, or that you wish to combine all your assets at this time. This can be a particular concern for people where:
- they have previously been through a divorce, and may have a family to provide for;
- the property has been funded with the help of the ‘Bank of Mum and Dad’; or
- the property is connected to their business, such as a farm, hotel, or holiday accommodation.
If your partner moves into your home, which you legally own in your sole name (or perhaps with other family members), while they will not benefit from an automatic right to a share of the property they could acquire some rights, known as a ‘beneficial interest’. Alternatively, they may seek to claim they have a right, which would be costly for you to deal with.
A cohabitation agreement is a sound way of safeguarding this asset, as it can confirm that your partner will not gain any legal interest or rights in your property by living there, even if they pay towards the bills or any mortgage. If they make significant monetary contributions on renovations or improvements, you might agree that they will get this money back if you should split up.
Alternatively, you might want your partner to acquire an interest in your property, especially if they contribute towards your mortgage or significant improvements, which increase its value.
4. Clarity over how bills will be paid
As with any shared household, it is sensible to agree on who will be paying for what and to what extent. You will want to have clarity on how much you each agree to contribute towards the bills.
This is often an equal split but may not be, especially if one person earns significantly more than the other or already owns the property.
Whilst monthly outgoings will be a level of expense you regularly review and have in mind, a handy point of reference, such as a cohabitation agreement, will clear up any confusion when it is time to pay an annual bill, such as school fees or renewing the insurance policies.
5. When one of you is unable to work
When one person is unable to work, a reduction in income can put a great deal of strain on a relationship. In some cases, this might be something you plan together, such as having or adopting children; but it could also be unplanned, such as having to care for an elderly or unwell parent, or one of you might have an accident or serious illness.
Discussing these scenarios with your lawyer when you draw up a cohabitation agreement will help you to plan ahead and will provide clarity if the situation should arise.
6. Confidence and reassurance
Undoubtedly, entering into a cohabitation agreement will provide peace of mind because you have taken steps to organise the logistics of your relationship and you know exactly where you stand on key issues. It will free up time and headspace, allowing you to focus on other areas of your life.
Working with a trained and experienced solicitor to draw up a cohabitation agreement makes it much easier to discuss tricky questions and the issue of what might happen if the relationship were to end.
The reassurance a cohabitation agreement brings is invaluable. You are not expected to remember every sentence and paragraph within your agreement, but should questions arise during the relationship you will have a document that you can refer to and which will provide the answers you are looking for.
How we can help
It is never too late to enter into a cohabitation agreement. Whether you are thinking of moving in with your partner or have been living with them for several years already, it is a good idea to explore your options.
If you are interested in finding out more and how to go about it, please contact Peter Lewis or a member of the family law team on 01905 721600 or via email: worcester@parkinsonwright.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.