Why have a cohabitation agreement?

The answer is simple: cohabitation agreements provide essential legal protection for cohabiting couples.

With approximately 3.6 million couples in the UK currently co-habiting, this type of relationship is growing at a much faster rate than marriage. According to the research briefing ‘“Common law marriage” and cohabitation’, between 1996 and 2021, the number of cohabiting couples increased by 144%, significantly outpacing the rise in marriages.

Despite this, cohabiting couples lack the same legal rights and protections as married couples. Here’s what you need to know.

Do cohabiting couples have legal rights?

The short answer is no. Cohabiting couples do not have the same legal status as married couples. The concept of a “common law marriage” is a persistent myth in the UK. In reality, cohabitation is governed by various areas of law, such as trust law, property law, and laws related to children, but there are no specific cohabitation rights.

The Law Commission proposed a statutory scheme to assist cohabitees in 2007. However, progress has been slow. In 2022, the Government stated that reforms to marriage law must be concluded before introducing legislation for cohabitation.

This legal gap highlights the importance of cohabitation agreements for those in unmarried relationships.

Why consider a cohabitation agreement?

Cohabitation agreements, which are sometimes called Living Together agreements, help couples establish clarity around property, finances, and other key matters. To understand their significance, let’s compare the legal position of cohabiting couples to married couples:

Intestacy and inheritance

• Cohabiting couples: If one partner dies without a will, their solely owned property will pass according to intestacy rules, which generally exclude the surviving partner. A claim for financial provision can be made within six months, but if no claim is made, the surviving partner could face homelessness.
• Married couples: Spouses usually inherit most, if not all, of the deceased partner’s estate under intestacy rules.

Property ownership

• Cohabiting couples: Without a legal agreement, a partner who does not own the home may have to rely on complex trust law claims to seek a share of the property. These claims can be costly, challenging, and may still result in homelessness. Cohabitees do not have an automatic claim to stay in a property upon separation if they do not own the property.

• Married couples: On divorce, the court considers the housing needs of both parties, regardless of property ownership. Married couples also benefit from matrimonial home rights. If a spouse remains in the home that he or she does not legally own, they are able to do so by exercising their matrimonial home rights.

Tax benefits

• Cohabiting couples: Transfers of assets between partners may attract capital gains tax, and inheritance tax exemptions do not apply.
• Married couples: Spouses benefit from tax-free asset transfers and inheritance tax exemptions.

Maintenance claims

If parties separate, a cohabitee could not issue a maintenance claim. They could however make a claim for maintenance for their children, either on a voluntary basis or through the child maintenance service. In limited circumstances a claim could also be made to transfer a property to the parent who the child lives with, if the child will not live with the parent who owns the home. Transfer of property ownership however, if awarded, will only be on a temporary basis. Ownership at a point in the future will transfer back to the other parent. Therefore, the remedy is not permanent, and the claim can be costly to make in terms of legal fees.

In contrast, if the parties were married and separation occurs, interim maintenance could be claimed during the divorce proceedings and then spousal maintenance on finalisation of divorce which could be capitalised as a lump sum payment. Children and their housing needs are considered in a financial settlement, together with any capital needs or school fees.

What can a cohabitation agreement include?

A cohabitation agreement can address a wide range of issues, particularly those related to finances and property. It can even outline who will take care of the family pet if the relationship ends.

One of the primary purposes of a cohabitation agreement is to provide clarity around housing arrangements in the event of a separation. It can also include provisions for what happens to property and assets if one partner passes away.

The key benefit of such an agreement is transparency. By setting out clear intentions regarding property ownership, financial arrangements, and other key matters, couples can avoid misunderstandings or disputes. Should the relationship break down or one partner pass away, there will be no unexpected surprises about the division of assets or housing arrangements.

We recommend that cohabitation agreements be reviewed regularly, especially following significant life events, such as the birth of a child, illness, loss of employment, or the purchase of a property together.

Reviewing your will

A cohabitation agreement should be considered alongside your will. Without an updated will, your intentions may not be carried out in the event of your death. Our dedicated wills and estate planning team works closely with our family lawyers to ensure your will complements your cohabitation agreement, providing complete peace of mind.

The benefits of a cohabitation agreement

The advantages are far reaching and include:

• Clarity: Clear arrangements for finances and property.
• Transparency: Aligns expectations between partners.
• Avoiding disputes: Reduces the risk of disagreements during separation or bereavement.

When drafted and signed as a deed, a cohabitation agreement becomes legally binding. It provides cohabiting couples with the most thorough way to regulate their financial and property arrangements without formalising their relationship through marriage.