Info & Advice

The pros and cons of a cohabitation agreement

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Cohabiting families are the fastest growing demographic in the UK. However, the law is slow to catch up, and therefore legislation in this area has failed to move with the times. Currently, there are no laws protecting cohabiting couples, and the frequently reported “protections” afforded to common law husbands and wives is a myth. This presumption leaves many partners ill protected when their relationship ends. But there are ways to protect your assets when you move in with your partner.

A cohabitation agreement is a document drawn up in very similar terms to that of a pre-nuptial agreement and seeks to set out how assets should be split if the relationship breaks down. However, this is not a legally binding document and cannot be 100% bullet proof, although cohabitation agreements are seen by the court as increasingly persuasive. Crucially, they offer clarity about the parties’ expectations and intentions when they live together and if the relationship breaks down.

Advantages of cohabitation agreements

There are many advantages to having a cohabitation agreement in place. Here is our non-exhaustive list:

  • They are extremely flexible and can set out in detail what will happen with assets if the relationship breaks down
  • A properly drafted agreement will ensure that it complies with contractual requirements and will reduce the likelihood of arguments about validity or enforceability.
  • There will be no doubt where each party stands in relation to the assets and liabilities
  • Both parties intentions will be clearly recorded, therefore avoiding later disputes
  • The agreement can be tailored to each couple’s circumstances and needs, and can include anything from property, cars, pets, expensive gifts, and even debts
  • It can preserve assets brought into the relationship or acquired during it. For example, gifts or loans from family members
  • How the finances will be dealt with can be recorded, both during the relationship and in the event of a break up
  • It can set out who pays the mortgage or rent, and also include other outgoings and expenses
  • The agreement can include provision for the financial support of one party after the relationship ends if one person depends financially on the other. This is important, as cohabiting couples have no automatic rights to maintenance if their relationship breaks down. It should be noted that this is separate to any child maintenance which would be legally payable whatever the marital circumstances of the parties.
  • It reduces stress in an already emotional and difficult time at the end of a relationship
  • The terms of the agreement can be enforced under contract law. A verbal agreement is not enforceable.
  • Protects each party’s financial security and safeguards a future inheritance for their children

Disadvantages of cohabitation agreements

The following are examples of the disadvantages of a cohabitation agreement:

  • The basic principles covering property rights in the case of cohabiting couples are governed by trust and property law rather than family law, with ownership typically being confirmed by looking into the property’s title. This can make property division unfair with a party who has contributed towards the family such as looking after the children, potentially losing out financially if the property is in the other party’s sole name.
  • There is no guarantee that the cohabitation agreement will be upheld in its entirety by the court if it is challenged. This is because, technically, the agreement is not legally binding but is governed by ordinary contractual principles such as fraud, duress, undue influence, misrepresentation, or mistake.
  • Any agreement should be kept updated and reviewed throughout the relationship when circumstances change, such as the birth of a child, or a change in finances. If the agreement is not updated, the court may consider that it is no longer enforceable.
  • The discussions between parties about creating such an agreement may come across as though there is a lack of trust, which could lead to some difficult conversations.

When should a cohabitation agreement be drawn up?

A cohabitation agreement can be drawn up at any point during a relationship both before a couple starts living together or even if they have been together many years. As stated above, it is important to keep the document up-to-date, so a periodical review and making any necessary amendments in line with any major life changes since it was last looked at is essential.

What should be included in a cohabitation agreement?

One of the benefits we’ve mentioned above is that a cohabitation agreement can be tailored to the circumstances of each couple. That said, there are several fundamental elements that any good cohabitation agreement should contain. These are:

  • Property owned prior to living together – if either party own property purchased separately from their partner, the agreement can be used to confirm the asset will be kept separate so the other party cannot make a claim over it.
  • Property jointly purchased – if a property is purchased together, yet only one party is named on the title deeds, the agreement can be used to record their respective beneficial ownership, together with the percentage each partner is entitled to.
  • Household bills – contributions to the mortgage and what those payments entitle a partner to who is not an official owner can be recorded. Likewise, how bills and other expenses set up in the couple’s joint names will be handled after the relationship ends are things that can be included.
  • Inheritance and wills – although not technically part of a cohabitation agreement, it is important to recognise the increased necessity of making a will when you are living together. Unmarried couples do not automatically inherit one another’s estate if they die intestate (without a will), although they may have a claim for support under the Inheritance (Provision for Family and Dependents) Act 1975.

For a cohabitation agreement to be legally binding, both parties must be able to demonstrate they agreed to the conditions set out within the document willingly and with full knowledge of the implications of entering into it. If you subsequently separate, and the agreement is placed before the court, it is much more likely to be upheld if each party can show they received legal advice before signing anything.

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