When two people make a decision to live together this is undoubtedly an exciting time in their relationship and certainly the last thing on their minds is separation. However it might be sensible to think about the financial consequences of living together and importantly the financial consequences of separating.
Cohabitation agreements or living together agreements are documents which govern the arrangements for those who live together to include what might happen when they separate.
A couple who choose to live together do not have any financial rights against each other in the event that the relationship breaks down. This means that unlike marriage, financial claims, rights or remedies are not created by virtue of being in a relationship with someone. It is widely believed, although mistakenly, that there is a concept of ‘common law marriage’ which gives people who have lived together the same rights as those who are married. The only claim that arises automatically is that of child maintenance which is dealt with by the Child Support Agency (CSA). Parents can also come to their own private arrangements and indeed this is very much promoted by the CSA. There may also be claims which arise out of property or trust law. These can be complicated and expensive to resolve. Our page on unmarried couples will give you more information about this.
What kind of things does a Cohabitation Agreement cover?
- It may record the ownership of certain property or assets and how these are to be treated by the parties. For example one party may wish to record that the property in which they intend to cohabit was owned by them prior to the relationship and that their partner shall not obtain an interest in that property irrespective of any financial contribution that they make towards it in the future eg mortgage payments, bills, maintenance and repairs.
- A statement about how assets obtained during the course of the relationship are to be treated if the relationship breaks down
- Who will be responsible for rent or mortgage payments, utilities, household expenses and other financial commitments.
- A statement about the duration of the agreement and whether it should be reviewed at any stage. A review might be considered necessary by a couple who plan to have children in the future.
- It can also include arrangements for the care of any children.
Are Cohabitation Agreements legally binding?
The agreement is not binding on the Court which means that the Court does not have to uphold the agreement. These agreements are treated by the Court like contracts. It must consider the circumstances surrounding the making of the agreement. On that basis couples need to be careful about the way in which they enter such agreements and at the very least ensure that the list below has been complied with;
- That there has been full and frank financial disclosure from both parties to each other (copies of bank statements, valuations etc maybe recorded in a schedule attached to the agreement itself) ;
- That both parties are entering the agreement voluntarily and in the absence of any undue influence or pressure;
- Both parties should receive independent legal advice so that it may be demonstrated that each understood the consequences of the agreement that they were entering;
- That the agreement contains a statement that both parties intend the agreement to be legally binding.
In the event of a dispute the Court will certainly take into account the Cohabitation Agreement and will be in a position to place considerable weight upon that agreement if the above list has been complied with.