How to avoid falling into a black hole: top 5 reasons why you should have a co-habitation agreement
A survey carried out by Resolution in 2017 found two-thirds of cohabiting couples wrongly believe that "common-law marriage" laws exist when dividing up finances.
The reality for unmarried couples is that in fact there is no such thing as ‘common law wife or husband’ and whilst this may come as a surprise to many, it is all too familiar for solicitors who are faced with a warring couple who are not married.
Cohabitation Agreements enable unmarried couples to decide what should happen to their income and assets during their relationship and if they separate. Unlike married couples, there is no specific legislation setting out how unmarried couples’ property is to be dealt with on separation. This significant gap in the law is an unwanted black hole for both client and solicitor alike.
Unfortunately when a relationship between two co-habitants is coming to an end, the absence of any appropriate law expressly aimed at this situation can often bring even more upset.
Married couples have the benefit of the Matrimonial Causes Act 1973 which means that judges sitting in the Family Courts have a far-reaching discretion and a variety of powers when it comes to making decisions with regard to the distribution of matrimonial assets. In order to replicate this kind of protection, a co-habitation agreement can address some similar issues: Here are our top five reasons to enter into a Cohabitation Agreement.
- The family home
Any competent conveyancing solicitor will ask clients who are buying a property in joint names what their individual shares in the property will be, and advise the owners that ideally these shares should be declared in a Deed of Trust.
However, what happens where the legal title of the property is in one person’s name only, but their partner is going to contribute towards the mortgage repayments and maintenance of the property? Future upset can be avoided at the outset by defining in writing the legal significance or otherwise of the non-owning person’s financial contributions to the family home.
Expensive litigation under the Trusts of Land and Appointment of Trustees Act 1996 (which is the applicable law if there is a dispute in this scenario) is a far less attractive option to any couple if their relationship has unfortunately deteriorated.
- Gifts - Define how would gifts to the parties as a couple be distributed should the relationship not succeed; a clear understanding by both as to how these gifts may be distributed in the event of a separation will help prevent both parties from going round in circles.
- Establish commitments with regard to the more mundane part of living. For example, a cohabitation agreement can state how much each of you will contribute to your mortgage, bills and other financial commitments. It would also allow you to specify who will be responsible for debts etc. By having this agreed in advance, it reduces the potential for disagreement later on.
- Agreements about children are supremely important in circumstances of relationship breakdown. Agreement about: child maintenance; with whom the children will live should you separate; at what frequency the other parent will see the children; any special provision for children, is much to be preferred to difficult discussion after a relationship has deteriorated.
- Save money and upset. It is infinitely preferable to have a calm discussion at the outset of a relationship and set down some mutually accepted principles in writing, rather than engaging in distressing and potentially expensive quarrelling later on down the line when the relationship is at an end.
Unless and until Parliament addresses the significant gap in the law for separating co-habiting couples (and this is unlikely to happen any time soon), a Co-habitation agreement is a wise preventative measure to avoid falling into this black hole.
Without such an agreement, a couple can be left in a situation which may not be anybody’s fault, but which may be costly to resolve. At RFB LLP we look after our clients in a calm and sensitive manner helping you reach the right legal solution for you. Contact our friendly team today.
By Bik Wong, Associate Solicitor
Our team are happy to assist with any queries. Please contact Bik Wong 020 7613 7112 or at by email .