Cohabitation agreements are similar to prenuptial and postnuptial agreements. If the couple separate and the agreement is subject to disagreement before the court – then the court is more likely to uphold the agreement if:
- the contents are reasonable
- each of the couple has received independent legal advice (or the opportunity of seeking independently the advice) – so it is clear that they know what they are agreeing to
- the taking of independent legal advice is also likely to include a degree of natural disclosure.
Cohabitation agreements can also address potential future events – for example what will happen if the couple intend to have children.
Bridget Garrood; Divorce and Cohabitee specialist
When should I make a cohabitation agreement?
A cohabitation agreement can be made at any time.
This includes if a couple are about to start living together or if they have been living together for a long time.
Why should I make a cohabitation agreement?
Unlike on divorce or civil partnership dissolution, there is not a single set of rules that automatically applies if the cohabiting couple split up. As we have said above there are a mishmash of different laws.
There is no such thing as ‘common law marriage’. Living with someone for a certain period doesn’t mean you are automatically entitled to some financial support or to share their property after you split up. This is important – because the idea that there is a legal status of common law husband/wife is still held by many. Unfortunately, it is an urban myth.
Where a couple has not been married or in a civil partnership, sorting out disputes about property without an agreement can be expensive and take a long time. The laws that do exist can be quite harsh in the outcomes they produce.
A good cohabitation agreement can mean that areas of potential dispute on separation are reduced or avoided.
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 later on. This is not a bad thing. It is always better to sort out potential problems when a couple are getting on, rather than when the problem has become significant and they have fallen out.
Kris Seed: Divorce and Cohabitee specialist
Areas you may want to cover in a cohabitation agreement
Your shared home
It is important to record how this is owned, and whether there has been any separate agreement or promise that isn’t currently reflected in the legal documents.
Situations can easily arise where the member of the couple who does not own the house but who has may be paid more than their fair share of bills, ends up homeless and uncompensated if the couple split up.
It is also worthwhile considering any endowment policies or other savings arrangements linked to a mortgage. Who is contributing what money to these and how will they be dealt with if the couple split?
Should there be life insurance?
Money and paying bills
We regularly see situations where one of a couple has incurred debt in order to purchase something that is being used by the other. The debt is a contract with the organisation that lent money – therefore the person who borrowed the money will be liable.
A Cohabitation Agreement can include things like how finances are run on a day-to-day basis – this could include coupes bills and how accounts are managed.
If there is to be a joint account?
Many couples find it convenient to have a joint bank account when they live together but need to decide what contributions they are going to make to that account.
Will the contributions be equal and if not, will they consider the money in the joint account to be equally owned?
When will the joint account be used for and for what? When should personal accounts be used instead? If the couple are not using a joint account, who will pay which of the household bills and will this be considered an equivalent contribution to something else? What about credit cards and debts?
Fiona Griffin: Divorce and Cohabittee specialist
Pension provision is easily overlooked by cohabiting couples. Pensions are often contentious assets as there is a tenancy for the person who was taken out the pension to view the pension as their exclusive property even when a couple have been married.
In any relationship, it may be the case that one of the couple is working and paying into a pension fund. The other has limited capacity to work – for example because of childcare commitments – and is therefore relying on the pension of the other to look after both after retirement.
Cohabitation agreements can look at pension provision and agreement could include the agreement to nominate the other as the beneficiary for any death-in-service benefits.
Simply having the conversation about pensions – Could mean that the couple seek financial advice and make additional plans for retirement.
Cohabitation agreements commonly set out who owns and/or will keep items such as furniture and cars if the couple were to split. Cohabitation agreements can also set down rules about ownership of important things or a way to sort out any disagreements about them in the event of a separation, for example, each of the couple picking in turn from a list of items in turn.
Although not legally binding, a cohabitation agreement could also include whether the couple agreed that one should pay child maintenance above the minimum rate produced by the Child Maintenance Service Calculator.
There could also be clauses setting down some expectations and how the couple’s children would be cared for if they separated.
Looking into the future
It may be that eventually a government will get round to passing a law which more clearly recognises the rights of cohabitants – and does so with greater discretion than the current law. Given that we are still working with the divorce law passed in 1973 – it seems fairly obvious that family law is not much of a political priority.
However, couples circumstances will likely change over time. For example the couple may move house or have more children or change jobs or one may receive an inheritance. It is therefore a good idea to keep any agreement under review and to update it as circumstances change.
it is highly recommended that everyone should have a will. This especially applies to couples who live together – as the cohabiting partner will often be in a very vulnerable position if the other were to die without a will. This is not something that should be left to chance.