Why Should We Make a Cohabitation Agreement?
15 March 2016
There are many good reasons for making a Cohabitation Agreement if you and your partner are about to buy a property and move in together or even if you are going to rent a home together.
A Cohabitation Agreement can help you to outline the financial aspects of your relationship and lay them out in clear, legal terms. Cohabitation Agreements can also be known as Living Together Agreements.
Many people, around 25%, still believe in the myth of common law husbands or wives. They think that if you live together for a period of time, this provides the same legal rights afforded to people who are married or who are in a civil partnership, but this is simply not true (in English law).
As a result of the downward trend in marriage and the upward trend in couples living together (cohabitation), there are many more bitter disputes happening between unmarried couples who have separated. It is for this very reason that a Cohabitation Agreement is an essential part of starting your life together.
You can, of course, make an informal agreement between the two of you and put it in writing, but this is unlikely to have any legal standing. A Cohabitation Agreement that can be relied upon in Court is a contract between you both and is intended to have the legal impact of a contract. A Family Solicitor can provide you with all the details and necessary framework to put this in place. There may be additional paperwork to be completed such as Deeds and or Trusts to be prepared, depending on the arrangements.
What a Cohabitation Agreement Can Do for You
The first, and probably most important, reason for making a Cohabitation Agreement is that without being married, you have absolutely no legal rights in a relationship. A Cohabitation Agreement usually covers the financial aspects of your relationship. This can include any property you own, your rental property, your financial split of household bills and expenses and how you will treat all of your jointly owned property.
If you separate without a "co-hab", there is no formalised way of dividing your assets as there is if you are married or in a civil partnership and want to split. So a Cohabitation Agreement can help you both to lay out all of your financial arrangements and agree how your relationship will work whilst you are both happy in your relationship and are on good terms.
For some, making a Cohabitation Agreement seems cynical and feels like you are betting on your relationship to fail, but you can alter your perception of a Cohabitation Agreement. By viewing it as insurance, just in case something happens rather than because something will happen, you can see that it is well worth putting the time and money aside to put one into place. After all, you wouldn't see buying building insurance on your property evidence that it will fall down one day!
Your Cohabitation Agreement should focus on the financial arrangement of your relationship and one of the most important elements of this will be where you live together and this can be complicated. You could live together in a property either that one of you owns, you could rent a property together or you could buy a property together.
Whatever your arrangements, this will affect your Cohabitation Agreement and there are some points that you will need to work through before putting an agreement together.
Not many people know, but there are two ways to own a property together. The first is a joint tenancy, which means you own the property jointly and when one of you dies, the other half of the property passes to the survivor. A joint tenancy supersedes any requests made in your Will and may not be what either of you want. Therefore, you should consider becoming 'tenants in common' which allocates the share of your property to each of you (mostly an equal split of 50/50) and leaves you the choice to leave it to someone else other than your partner in your Will.
It may be necessary to prepare Deeds or set up a Trust for the property so that if you die and you wish to give your share to someone other than them, they can continue to live there, if that is your wish.
If you are renting a property together you should set out who is responsible for the rent costs, bills and expenses that will incur. It is worth considering setting up a joint bank account and managing all your joint purchases through this so that they are classed as 'jointly owned'. This will ensure that if you should separate, it is a cleaner way as everything is then split in equal share.
If you live in a property owned by one of you, you should be careful to make sure that you make it clear whether you will have a share in the property if you live there and pay the bills and part of the mortgage or not. If you do not have a share in the property and your relationship breaks down, you could be asked to leave and you would have no rights against the property. A Cohabitation Agreement would be particularly valuable in these circumstances.
Children and Cohabitation Agreements
If either of you has children from a previous relationship, it make sense to include any financial arrangements regarding them in your agreement. This will help to keep the financial support of the children separate from your agreement if that is your wish.
For any Cohabitation Agreement to be taken into account, it has to be fair and reasonable or else it could be ignored if tested in Court. Your Family Solicitor can advise you on what is considered 'reasonable' when you are putting your agreement together.
After a time, you may decide you want to get married or enter into a civil partnership together. Your Cohabitation Agreement could be taken into account if you later get divorced or dissolve your civil partnership, however to be certain, you may wish to have a Prenuptial Agreement instead as this is likely to be considered as long as it is fair and reasonable.
It is vital that you both get independent legal advice on your Cohabitation Agreement as there are many different facets for you as an individual that should be considered. A Cohabitation Agreement is a good and sensible way to protect you both if anything were to happen in the future.