What Is a Cohabitation Agreement and Why Do You Need One?
Posted on in Family Law
With cohabitation law in England and Wales under review, now is a good time for unmarried couples to consider putting a cohabitation agreement in place or reviewing an existing one. A cohabitation agreement sets out how property, finances and other shared responsibilities will be managed during the relationship and if it comes to an end. As cohabiting couples do not have the same legal rights as married couples, a well-drafted agreement can provide clarity, help prevent disputes and protect both parties' interests.
What is a Cohabitation Agreement?
A cohabitation agreement is a written, signed document between unmarried people who live together or plan to. It can be made at any time, whether you are about to start living together or if you have been doing so for many years.
You do not need to be in a romantic relationship to need a cohabitation agreement – if you plan on living together with someone else, be that a friend, colleague or a family member, who you are not married to, it may be a good idea to agree certain rules in respect of your day-to-day living arrangements and have this agreement recorded in a legal document.
A cohabitation agreement generally deals with three principal areas:
- who owns (and owes) what at the time of the agreement, and in what proportions
- what financial arrangements you have decided to make while you are living together; and,
- how property, assets and income should be divided if you should split up/when cohabitation comes to an end
Where the agreement is properly drawn up, the terms are reasonable, and each of you has had separate, independent legal advice on its effect, a court is more likely to uphold the agreement in the event of a dispute.
Why should I make a Cohabitation Agreement?
Unlike on divorce or civil partnership dissolution, there is no single set of rules that automatically apply if you split up from someone you have been living with. A good cohabitation agreement can mean that areas of potential dispute on separation are reduced or eliminated. Many couples also find the process of making a cohabitation agreement means that they have the chance to think and talk about how living together is going to work financially, meaning that arguments about money are less likely to take place later.
Furthermore, following the recent government consultation, A Fairer End to Relationships, now is a good time for parties cohabiting or planning to live together to consider coming to an agreement regarding their arrangements (or reviewing an agreement if one is already in place) to address the potential implications of any change in legislation. For further information regarding potential cohabitation reform please see our insight: ‘Cohabitation reform: planning ahead as the law moves closer to change’.
Key points to cover in a Cohabitation Agreement
Ownership of property
- how the property is owned
- are there any other legal documents, such as Declaration of Trust, that may give raise to a claim for ownership
- who is paying the mortgage
- are there any endowment policies or other savings arrangements linked to a mortgage
- what contributions are being made to the mortgage payments or endowment policies
- what happens to those contributions when the parties separate
Division of bills and household expenses
- do you have, or planning to open, a joint bank account, what will it be used for, and what would happen to the account and the funds held if you separate
- what contributions to the joint account are going to be made
- who pays the household bills and in what proportions
- liability for credit cards and debts
Pensions
- are you going to make provisions for each other by, for example, agreeing nominations for death-in-service benefits.
Personal possessions
- who owns and/or will keep items such as furniture and cars in case of separation
- who is responsible for maintaining family cars
Children
- Although not legally binding, it is worthwhile thinking about whether you might like to provide financially for any children over and above the minimum expected by the child support system in the event of your separation (e.g., in respect of school or university fees)
- It is worth noting that a cohabitation agreement cannot override legal entitlement regarding children, such as contact or child support
Wills
- You should also make a Will so that if you die while living with someone, your wishes can be put into effect. Although it is possible in some circumstances for a cohabitant to inherit where there is not a Will in place, there is currently no automatic entitlement, so it is important that you make clear what you want.
- You are not obliged however, to make any provisions for each other in your Wills
Anticipating changes in the law
The agreement can record your agreed intentions to:
- Opt out of any future legal rights to claim financial support from one another in the event of a separation if the changes in the law being considered are enacted; or
- If you wish to ‘opt in’ to any changes in the law, you could make financial provision for one another (much like a Pre-Nuptial Agreement between a married couple) to avoid dispute in the event of a separation; or
- Agree to include a clause requiring you and your partner to review the terms of your agreement if there is a change in the law to ensure that it provides adequate protection for each of you.
You may need to review the agreement if you move house, have children or your circumstances change significantly or if there is a change in the law of the kind presently under discussion. It’s important to ensure that the agreement is kept up to date.
It is also important to note that marriage has a significant impact on a cohabitation agreement. Upon marriage, the legal framework that governs relationships changes, meaning that a cohabitation agreement may no longer be enforceable. It would be advisable therefore to consider the preparation of a pre-nuptial agreement in contemplation of a forthcoming marriage. See our insight. ‘Pre-nuptial Agreements in England and Wales: Are They Legally Binding?’ for further information regarding Pre-Nuptial Agreements.
Advantages of having a Cohabitation Agreement
Contrary to a common misconception, in the UK there is no such thing as “common law marriage”. Under the current law, regardless of how long a couple is living together, if they are unmarried, they are not granted automatic legal rights. It is therefore important to discuss and agree on key issues with your partner and record this agreement in a formal document. Additionally, a cohabitation agreement can help to provide certainty in circumstances where momentum for reform is ever-growing.
Planning ahead
Although no one enters a relationship expecting it to end, having open conversations about finances and putting appropriate legal arrangements in place can provide reassurance for both parties. A well-drafted cohabitation agreement can help reduce uncertainty, minimise the risk of costly disputes and ensure that your intentions are clearly recorded should your circumstances change.
With growing public and legal focus on the rights of cohabiting couples, it is also sensible to review any existing agreement regularly to ensure it continues to reflect your wishes and remains appropriate as your relationship, finances and family circumstances evolve.
How can Tozers help?
Whether you are planning to move in together, already cohabit or would like to review an existing agreement, our specialist Family team can provide clear, practical advice tailored to your circumstances. We can prepare a bespoke cohabitation agreement, advise on related matters such as Declarations of Trust, Wills and pre-nuptial agreements, and help ensure your arrangements provide the protection you need.
If you would like to discuss your options, our cohabitation solicitors offer a free initial meeting. Get in touch using our online enquiry form or contact one of our offices to arrange a conversation with a member of the team.