A Cohabitation Agreement - What Is It and Why Do I Need One?
A cohabitation agreement is a legal contract, usually prepared by specialist family lawyers and which is designed to protect the interests of couples who cohabit without being married. It differs, for example, from prenuptial agreements as prenuptial agreements are agreements made by an unmarried couple in the expectation of marriage.
It is a common misconception that if you cohabit with another person in a relationship for a number of years, paying the mortgage jointly, that you automatically receive the same equal rights as those awarded to couples in the marital home. This is incorrect. A cohabiting couple do not receive the same protection under the law as a married couple. The following are some examples that highlight the difference:
1) Separation - if a married couple divorce and thus divide the family assets accordingly, the marital home (irrelevant of who's name the property is held in) is normally divided 50/50. Subsequently one partner will buy the other out or the property is realised and the proceeds divided. Where you have an unmarried couple cohabiting, it is the partner who owns the property who can stay in the event of a separation - he/she then has the right to remove the other partner and pay no maintenance (unless children are involved).
2) Death - when a married person dies without creating valid will (i.e. has died intestate) then everything they own automatically passes to their spouse or civil partner (subject to intestacy rules. However, if an unmarried cohabiting partner dies, the property belongs to the deceased's estate and thus his/her family (according to intestacy rules), not the cohabiting partner.
In situations such as these the vulnerable cohabiting partner will need to go to court to fight over the smallest of assets to try to prove that their ownership. Although the Law Commission is looking at changing the law surrounding this area, there have been no substantial developments as yet. As a consequence of this, couples should protect themselves using tools such as cohabitation agreements.
What actually is a cohabitation agreement?
A cohabitation agreement is a contract formed between cohabiting couples that determine what happens to their assets in the case of a separation. The agreement should define the couple's substantial assets, including any properties, bank accounts, savings, investments and valuable independent chattels. It will then proceed to provide a valuation for the percentage share each partner holds of the asset. It is also sensible for both parties' to produce a statement showing their independent financial situation (ie highlighting any debts they may owe) at the start of the agreement. This provides the foundation for a couple to decide on how debts would be dealt with if they were to separate.
It is also very important to also state how long the cohabitation agreement is to last. As the document may have an expiry date, it is fundamental that it is kept updated and renewed when necessary. Most cohabitation agreements will be formed as a deed (ie signed as a deed in the presence of an independent witnesses, often lawyers) thus making it legally binding.
A cohabitation agreement prepared by specialist family lawyers can be prepared from as little as