Moving in together – why you should consider a cohabitation agreement
Cohabitation Agreements – what are they and why are they important?
According to the Office of National Statistics Families and Households study in 2021, the number of cohabiting couple families saw an increase of 22.9% in the past decade.
If you and your partner live together, do you know what your rights would be upon separation? For cohabitants, the rights given by law are less than those married couples have. For that reason, before you and your partner consider buying a property together, whether in joint names or not, you should consider entering into an Agreement with your partner, which would set out exactly what is to happen with your home in the event of a separation. We appreciate this is not what you will want to think about when purchasing a property together but it is good to be prepared!
What is a Cohabitation Agreement?
A Cohabitation Agreement is a legally binding document which would set out exactly what would happen to your property, and the money that went into it, upon separation. The agreement will be specific to your particular set of circumstances, and can include other financial matters, alongside the jointly owned property. It can even provide for the division of household goods if felt necessary.
What is the legal definition of a cohabitant?
The legislation defines a cohabitant as a person who is or was living with another person as if they were husband and wife, or civil partners. If you are living together as a couple then you will likely be considered a cohabitant by law.
What does the law say?
If the home is purchased in joint names, and the title is held equally, then both parties will be deemed to be joint owners of the property entitled to a 50/50 share in its value. This means that each party will be entitled to a one-half share of the net free proceeds, in the event that the house is later sold.
A common misconception here is that each party would be entitled to take back what they put into the property – but that is not the case. As each party is deemed to be an equal joint owner, under the legislation, you are only entitled to receive one half of the net free proceeds of sale. This could result in a financial disadvantage for one party if, for example, they paid a larger part of the deposit or if the Bank of Mum and Dad assisted one party with quite a substantial contribution. Upon separation, there is no guarantee under the legislation, that you would get the full amount back.
Without a Cohabitation Agreement in place, if your partner does not agree to deviate away from a 50/50 share when the property is sold, then the only recourse available would be to raise a court action. This would also be necessary if one party refused to agree to the sale of the property. For more information about cohabitants rights and court actions, see https://www.macandmac.co.uk/frequently-asked-family-law-question-q4/. Litigation can be expensive and it is not a quick process. There is also no guarantee that the Court would make an order allowing you to get back what you put in – the legislation gives the Court a wide discretion when making an award for financial provision.
With all of this in mind, we would advise you to seriously consider entering into a Cohabitation Agreement with your partner if you are buying a property together. They can save a lot of time, upset and expense in the future. If the relationship ends badly, you could end up in a position where you and your partner are unable to agree matters, and a court action becomes necessary.
If you are looking to purchase a property with your partner, and would like to speak to a member of our Family Law Team about the possibility of Cohabitation Agreement, then please do not hesitate to contact us.
Author: Gemma Johnston