Cohabitation agreements

Cohabitation agreements

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Contents

Background

There are millions of couples living together in the UK in cohabitation. Cohabitants and their families have fewer rights and responsibilities than their counterparts who are married or who have formed a civil partnership, although cohabiting couples in Scotland have more rights than cohabiting couples elsewhere in the UK. Most people think that, after they have been living with their partner for a length of time, they become 'common law husband and wife' with the same rights as married couples. This is not the case. In fact, couples who live together have hardly any of the same rights as married couples or civil partners. There is no such thing as 'common law marriage'.

If a couple is married or in a civil partnership and the relationship ends, legislation provides how the courts should deal with the financial arrangements - property and maintenance. The courts have wide powers to redistribute property in the event of a divorce, irrespective of which of the spouses actually owns it. In England and Wales, however, when a cohabiting couple's relationship ends, there is no legal provision for maintenance or for any redistribution of property. Where a property is only in one of the cohabiting partner's names, the starting point for the court would be that the other partner is not entitled to share in it at all. There is therefore, unlike in a divorce, no search for fairness or reasonableness in the division of the unmarried couple's property when they split up. The court only has the power to declare who owns what and no power to redistribute the assets of the unmarried couple.

In Scotland it should be noted that the Family Law (Scotland) Act 2006 applies and makes limited provision for maintenance and redistribution when a cohabiting couple's relationship ends.

However, if you are living together as a couple, there are steps you can take to protect yourself and your partner. There are also ways to minimise the legal and financial problems which may arise if you do decide to separate, or if one of you dies.

One way that cohabitants can protect their interests is to create a cohabitation agreement.

What is a cohabitation agreement?

As cohabitants have limited legal protection a cohabitation agreement may be used to set out the main financial arrangements that govern the couple's relationship and, by doing so, they may avoid lengthy and uncertain litigation should a dispute arise.

England, Wales and Northern Ireland

There is no formal legislation which makes cohabitation agreements legally enforceable, but given that a cohabitation agreement is a contract existing between two parties, so long as it complies with the basic requirements of contract law, it should be legally enforceable.

In looking at whether a contract of this nature is enforceable, the courts will look beyond the agreement to all of the circumstances which might determine its validity. Some of the factors which could be taken into consideration by the court when determining the validity of a cohabitation agreement are:

  • Whether the parties understood the nature of the agreement
  • Whether one party was placed under duress to sign
  • Whether the party signing it was not aware of its contents
  • Whether the parties intended that the agreement should be legally enforceable
  • Whether either party was induced to enter into it based on a misrepresentation

To ensure that your cohabitation agreement has the best chance of being legally enforceable it would be advisable that each cohabitant should take independent legal advice before signing it.

A cohabitation agreement has two main purposes:

1. It will decide how the cohabitants will live together on a day-to-day basis covering issues such as the payment of bills, the ownership of the home and the ownership of joint and individual assets.

2. If a cohabiting couple split up, it will help to ensure that it is as amicable as possible by setting out who will be responsible for the payment of what and who will be entitled to which assets. By making such arrangements, this ensures that the interests of both parties are protected.

Main clauses

A cohabitation agreement may be tailored to the requirements of each couple, but should include provisions that deal with:

  • The couple's details including their names, addresses and ages
  • Whether (or not) the cohabitants intend the agreement to be legally binding
  • Arrangements in relation to any children (current or future)
  • Property - including the joint home, joint assets and individual property
  • General household expenditure - it should be made clear as to who shall be responsible for the payment of which bills. Bills may cover anything from a TV licence to gas bills. In some cases, payment of bills may be made from a joint bank account.
  • Termination provisions: Termination provisions expressly state what will happen if the couple split up and decide to end the agreement.

Scotland

In Scotland, a cohabitation agreement is a legally binding document that can set out, for example, the main financial arrangements of the parties, clarification of property ownership by the parties and a mechanism for the division of assets in the event of the cohabitation breaking down. As it is an enforceable, legally binding document, it is important that you consider taking legal advice before entering into such an agreement.

Generally speaking, Scottish cohabitation agreements do not detail the day-to-day running of the finances of a cohabitant household. They are more likely to detail property ownership only and what should happen to the property in the event of the cohabitation breaking down.

Example clauses

A cohabitation agreement may be tailored to the requirements of each couple, but may include provisions that deal with:

  • The couple's details including their names and addresses
  • An explanation that the cohabitants intend the agreement to be legally binding and are aware that it is legally binding
  • Arrangements in relation to any children (current or future)
  • Property – including the joint home, joint assets and individual property
  • Termination provisions: Termination provisions expressly state what will happen if the couple split up and decide to end the agreement.

Rights to a financial claim upon the separation of a cohabiting couple

The Family Law (Scotland) Act 2006 has made it possible, in certain circumstances, for parties to make a financial claim against the other in the event of their cohabitation breaking down. It is possible for a court to award a payment of a specified sum of capital where the circumstances of the case merit this. If you wish to make such a claim then it has to be intimated within one year of the cohabitation coming to an end. It is important to seek legal advice at an early stage to be advised on whether or not you have a possible claim.

Other documents to assist cohabitants

If you are living together with your partner and do not wish to get married or enter into a civil partnership, you may also wish to consider, in addition to entering into a cohabitation agreement, giving each other a power of attorney over your affairs, or making Wills to provide for the other upon the death of one of you.

Powers of attorney

There are different types of powers of attorney depending on where in the UK you live.

England & Wales

In England & Wales, you may want to consider entering into a lasting power of attorney. A couple will usually decide to make a lasting power of attorney to ensure that that their partner is able to make decisions about their finances and/or personal welfare in the event they become unable to do so. In the absence of a lasting power of attorney, a cohabiting partner will not automatically have the right to manage the affairs of the other should his/her partner become unable to do so due to, for example, an accident or the onset of a condition like dementia.

Scotland & Northern Ireland

In Scotland or Northern Ireland, you may want to consider entering into an enduring power of attorney, which will ensure that your partner is able to make decisions about your finances, in the event you become unable to do so. In the absence of an enduring power of attorney, a cohabiting partner will not automatically have the right to manage the affairs of the other should his/her partner become unable to look after his/her own affairs, due to such factors as an accident or the onset of a condition like dementia.

Wills

In the absence of an express gift in a Will, an individual may not receive anything upon the death of his or her cohabiting partner. Therefore, it is essential for cohabiting partners to make provision for each other in their Wills.

By planning ahead and making a Will, you can help to ensure that your estate is distributed according to your own wishes and that your loved ones will be provided for.

Scotland: Rights upon death

Where the cohabitant has died and has not made provision for his or her partner in a Will, the Family Law (Scotland) Act 2006 provides cohabitants with limited rights of succession upon the death of their cohabitant partner. A court can be asked to make an order for payment to the surviving cohabitant of a capital sum of money. Any such claim has to be made within six months of the date of death.