Cohabitation Agreements

Setting up home together is an exciting time for any couple, but it is easy to overlook the legal considerations that can shape long-term outcomes.

Couples are increasingly going down the route of entering into Cohabitation Agreements to ensure transparency and provide them with clarity and certainty if the relationship breaks down.

This article will explore who may benefit from these Agreements, why they are essential in various circumstances, and when they should be considered. By addressing these points, we aim to highlight the importance of proactive planning in safeguarding personal and financial interests throughout different stages of a relationship.

What is a Cohabitation Agreement

It is a legal document between couples who are living together, or intending to live together, who are not married or in a Civil partnership.

Cohabitation Agreements can also be made between individuals who decide to live together, but whom are not involved in a romantic relationship – for example, friends or siblings.

A Cohabitation Agreement is essentially a contract used to spell out the parties’ intentions, clarify their rights and responsibilities, and ensure clarity on how finances and property are managed and divided – to include provision for separation, illness or death.

Agreements can be adapted to reflect specific features of a couples’ financial arrangements, plans and requirements. It is also possible to provide advance assurance to the parties that they will each agree to maintain confidentiality regarding their affairs.

Where there is no written evidence of such matters, a couple may later disagree about their original intentions if the relationship breaks down. Documenting such matters can minimise the likelihood of a dispute, perhaps many years down the line, involving further heartache, stress, uncertainty and expense.

A Cohabitation Agreement can be made at any time. Ideally, the Agreement should be finalised before the couple begin living together. However, it is often changes in circumstances which cause parties to consider putting things in writing – for example, if one party begins contributing more financially; there is a contribution from one party’s family or inheritance which is invested in the property; or once the couple have children.

Reasons to consider entering into a Cohabitation Agreement

Often the practicalities and sheer joy at moving forward in life when buying a house together detracts from the legal considerations. These considerations can often have significant, long- term implications – which should ideally be an additional focus, particularly where these is any degree of wealth involved.

Cohabiting couples do not automatically have rights like married couples – even if they have lived together for a long time and have children together. Without a Cohabitation Agreement, unmarried couples in the UK have limited legal rights regarding property, finances, and inheritance.

There has been a long-standing campaign for amendments to the law to provide clarity regarding the rights of cohabitees. Whilst the Labour government pledged to review the rights of cohabitees as part of their 2024 Election campaign, there is no new legislation currently in the pipeline.

As it stands currently, the law relating to cohabitees’ financial rights upon separation differs to the law relating to married couples. Disputes between former cohabitees are currently determined by reference to a mixture of property and trust laws, and equitable principles in certain circumstances. The resolution of such disputes will usually involve a detailed consideration of the factual circumstances (for example what the ‘deeds’ or land registry title to a property says in terms of who owns the property), and the background narrative to those circumstances about whether that is truly what the parties intended, agreed and understood.

A key consideration is that there is a distinction between a ‘legal interest’ in a property, and a ‘beneficial interest’. A person with a ‘legal interest’ in a property is the person whose name appears on the title deeds, which are registered with the Land Registry. Someone with a ‘beneficial interest’ in a property will be entitled to receive the benefits of the property, such as occupying it, receiving a share of the net sale proceeds or an income from renting the property. The person with the ‘legal interest’ may not be the same person as the beneficial owner who has the beneficial interest. A person can have a ‘legal interest’ in a property, but have no ‘beneficial interest’, for example – a person may hold the legal title to a property but hold it on trust entirely for another person who has the beneficial interest.

For a married couple, it would not matter whether the family home was registered in one party’s sole name. The marital home is almost invariably a ‘marital asset’ available for sharing upon a couple’s Divorce.

The same does not apply in Cohabitation situations. If a separating couple disagree over their interests in the family home, there will be an analysis of both the legal title and any conflicting evidence suggesting that the legal title does not reflect the parties intentions, agreement and understanding about their interests.

It will very often be the case that Partner 1 moves into Partner 2’s home, but the property remains registered in Partner 2’s sole name despite the contributions Partner 1 makes over the years to, say, the mortgage repayments or home improvements, which enhance the value in the property. The parties may initially intend and agree that Partner 1’s contributions will give them a ‘beneficial interest’ in the property. However, that is difficult (and costly) to prove if it is later disputed and it has not been documented.

Other examples include:-

situations are where a couple are buying a property together, but it has to be registered in only one name – perhaps because the other party has a bad credit score and is not accepted as a borrower for mortgage purposes. However, that person will be contributing to the costs and upkeep of the property, and it is intended they will ultimately have a beneficial interest;
situations where the property is to be jointly owned with both parties have a joint legal interest, but their beneficial interests are not to be equal because they have contributed unequally to the purchase of the property; or
a couple purchasing a property jointly, which is to be registered in one party’s name but both parties are to have a beneficial interest – perhaps because the other party will not be working and contributing financially whilst raising their children, but it is ultimately intended that the property would be a home for the children until they are no longer dependant, despite the fact that one party may not have contributed financially.

In the above scenarios, it would be difficult for individuals to expect a resolution which contradicts what the ‘deeds’ say unless their intentions behind this are documented. A Cohabitation Agreement can be used to record understandings and intentions about who is entitled to what, e.g. if one party contributes a higher amount to the purchase of the family home, and/ or if one party is repaying the mortgage on a property owned in the other’s sole name.

An Agreement can make sure parties have, for example, a share of each others’ assets, access to each others’ state pension, and next of kin rights in a medical emergency.

Again, this can assist in providing peace of mind and clarity about intentions and understandings from the outset. Couples may avoid having to endure the heartache and costs of a dispute associated with trying to retrospectively “unpick” the arrangements and decipher intentions several or many years later.

What might a Cohabitation Agreement cover?

Usually, this will include agreed arrangements for the responsibilities at the outset and during the relationship, i.e. financial responsibilities – who will contribute what to the outgoings including the mortgage, household outgoings and expenses, child care costs, etc.

The primary content of a Cohabitation Agreement may include the following:-

directions about how any shared property is owned, managed, and divided, including bank accounts, debts, and household bills;
intentions regarding financial support for one partner if the relationship ends or one partner becomes ill or dies, and how enhanced contributions impact on the parties’ shares;
confirmation of arrangements for the children of the relationship , both during the relationship and if the parties separate; and
confirmation about how any children will be supported if the relationship breaks down.

How to go about it?

By definition, a couple would need to be in agreement about what their intentions are to enter into a Cohabitation Agreement. The couple would need to be transparent with one another regarding their financial affairs, and discuss how they would want them to be divided if their relationship breaks down. They would need to consider potential changes in circumstances, including what they would want to happen if they have children together.

The terms of a Cohabitation Agreement can be agreed directly between the parties, following a negotiation through solicitors or via Mediation. There is no way to compel a party to enter into such an Agreement.

The parties should each seek independent legal advice regarding the potential terms of a Cohabitation Agreement (and also Wills and Lasting Powers of Attorney). The Solicitors appointed by each party is likely to request sight of financial documentation, who will want full details of the current situation and the couple’s future plans. Once the wording of the draft Cohabitation Agreement is agreed on both sides, it will need to be signed or executed. For the agreement to be legally binding, it needs to be signed as a Deed, preferably in the presence of a witness.

Considerations

There are certain points to note with regard to the enforceability of Cohabitation Agreements. All clients would require detailed and specific advice tailored to their individual needs.

Key considerations:-

A Cohabitation Agreement would be evidence in the event of a dispute about intentions and understandings. It will have more persuasive value if it is executed in the correct way and in the appropriate circumstances;
The Agreement can only be entered into if both parties are willing and able to proceed;
There would need to be an exchange of full financial disclosure before the terms of the Agreement are negotiated and agreed;
The parties would both require independent legal advice with regard to the financial situation and the proposed terms, but also the nature and effect of the Agreement;
Until such time as there is full financial disclosure (and potentially an independent valuation of any assets) from both parties to provide a clearer picture of the financial situation, it would be difficult for any legal representative to advise either party regarding the appropriate terms and/ or the likely costs of finalising a Cohabitation Agreement;
It may well be the case that parties’ respective legal representatives will advise that the proposed terms of the Agreement do not reflect the level of award that they might achieve if the Court were to determine the appropriate outcome if their marriage were to break down;
For the reasons noted above, the parties would need to bear in mind that the terms documented in a Cohabitation Agreement would not necessarily be 100% binding upon the Court in the event of a subsequent dispute;
If either or both parties have any assets overseas, it would also be prudent to take advice in those countries, or at least from lawyers specialising in those jurisdictions, as to the need to enter into ‘mirror’ Agreements. Ideally this would be achieved round the same time The lawyers in different jurisdictions will need to liaise with one another;
The parties would be a need to keep the terms of the Agreement under review even after it is executed. This is because circumstances change over time and the terms agreed now might not be appropriate in years to come. It is important to review and update the Agreement to reflect any new financial commitments or property acquisitions. The Agreement may be less persuasive as evidence in a dispute if it is not updated when circumstances change.
The arrangements proposed may necessitate the need for further, specialist advice e.g. tax, inheritance, etc;
The parties would also need to consider making a Will , or updating any existing Will, both to appoint Guardians for their Children and to confirm their intentions for their estates in the event of their death; and
Finally, but perhaps most importantly, the Cohabitation Agreement will be useful as evidence of intentions whilst the parties are cohabiting. However, right and responsibilities are different for married couples. Therefore, the Cohabitation Agreement is likely to be largely irrelevant if the couple do proceed to get married or form a Civil Partnership.

Any party considering the above options will need specific legal advice based upon their personal circumstances. Please contact our Family Law Specialists for expert advice regarding Cohabitation Agreements and our Cohabitation Legal Services :-

Colette Blackburn