The Dos and Don’ts of cohabitation
Living together, without getting married, is the fastest growing type of family in the UK. Currently, however, the law offers little protection for couples who cohabit with many falling into the mistaken ‘common law marriage’ trap, believing they have similar financial protection as married couples if the relationship breaks down. There is no such principle in England and Wales.
In reality, cohabitants have very limited financial claims against the other. There is no duty to pay spousal maintenance or to divide property in accordance with each party’s needs if the couple separate. Instead, cohabitants’ property disputes apply trust and case law, with the needs of the respective parties’ largely irrelevant.
The law around cohabitants’ disputes can be complex and litigation can be lengthy. To protect themselves, couples should ensure clarity of ownership of assets as they accumulate.
Where children are involved, financial claims can be brought on their behalf for housing and child maintenance. This article does not address such claims.
The family team at HJA offers some ‘Dos and Don’ts of cohabitation,’ which can help determine who owns what should the relationship end and avoid protracted arguments:
Do make it clear who owns the property/properties and in what shares. This can be detailed in a document referred to as a deed of trust and a cohabitation agreement, and a recording on legal title of the property. For example:
i) If the property is in your sole name, decide if any of your partner’s financial contributions will give him/her an interest in the property, and if so how much.
ii) If the property is purchased and owned jointly, whether you contributed equally or unequally, quantify your respective interests.
Do consider entering into a cohabitation agreement. It can set the ground rules for the financial and other arrangements in the relationship.
Do consider keeping finances separate – it may be easier to see who has what should you separate.
Do keep accurate records of your financial contributions to any property owned jointly, or by your partner and vice versa.
Do write “gift” or “loan” on any payments made to your partner (check, bank transfers or direct debits).
Do make a Will to ensure your partner will inherit from you should you die as cohabitants do not benefit automatically under the intestacy rules.
Do review, update and amend the cohabitation agreement, deed of trust and/or legal title, during the course of the relationship to reflect any change in your respective shares in the property/properties.
Don’t agree to your partner buying a property and placing it in their sole name if you make a direct contribution to the purchase price.
Don’t make a significant financial contribution to the property, such as paying for an extension, without agreeing whether this increases your interest in the jointly owned property or gives you an interest in the property owned by the other party. Prior to the contribution or shortly thereafter, revise your cohabitation agreement, deed of trust and the legal title.
Don’t make direct contributions to the mortgage repayments unless you both decide whether this gives you an interest in the property. Again record this in a cohabitation agreement and/or deed of trust.
Don’t intermingle your money by opening joint accounts, incurring joint debts, or making joint purchases; showing a complete separation of finances may assist during a dispute.
Don’t co-sign or guarantee debts that are incurred by your partner unless you intend to be equally responsible for paying them back. Should you separate you will continue to be legally responsible for them.