All's fair with a cohabitation agreement

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A cohabitation agreement is the most widely forgotten stage of moving in together, creating a high margin for error when it comes to individual financial outcomes in the event of a split.

Nowadays more and more couples are choosing to live together rather than get married. However, if that relationship sadly comes to an end, it can be more complicated to sort out finances and property than if you were married.

Most people still believe that if you live together for long enough you get the same rights as being married or in a civil partnership. However, cohabiting partners are not automatically entitled to a share of finances after a split, or to their partner’s pension after he or she dies.

If you split up, there is no presumption of arrangements for children nor provision for any kind of financial support. Cohabitants do not count as legal ‘next of kin’. Despite all that you read about being a “common law husband or wife”, there is in fact no such thing. This poses big risks when you’re pooling your wealth and setting up house together.

If a marriage ends in divorce, the Court has wide discretion to decide what is fair and reasonable when considering the division of property and finances. However, if a couple living together break up, the Court does not have that discretion. The court will not be able to redistribute financial assets based on needs or what is "fair" as the division of joint property is largely governed by what was agreed between the parties at the start of their cohabitation.

Unless this has been set down clearly, it can turn out that each party has very different ideas about what should happen and this can lead to significant legal arguments and cost.

If you own a property together, and perhaps you have put in more money than your partner, but you didn’t make it clear from the outset who was to have what if you split up, you can lose out. It can be very complicated and expensive to sort out this type of dispute. There are often arguments about contributions that have been made during the ownership of the property, and where these mortgage payments or DIY efforts have significantly improved the equity in the property, there can be differing views by the owners as to how the money is split.

These problems can be avoided, and the pain and trauma of splitting up minimised, if you have a Cohabitation Agreement dealing with all these issues when you first set up home together.

What is a cohabitation agreement?

A cohabitation agreement is like a pre-nuptial agreement. It is a basic contract covering assets and property which will save a lot of pain and difficulty if you do happen to break up. The agreement can dictate who will pay what during the ownership of the property and what impact it will have when the house is sold. This is seen by courts as a binding contract between unrelated parties, making it really useful if one of you is much wealthier than the other should there be a dispute later.

If you have children together there may be claims one party can make for cash or housing but these claims are for the benefit of the child, and not as far reaching as the claims a spouse can make on divorce. Child maintenance will may be payable in some form, if you are married or not.

The arrangements for children following a separation are focused on what is best for the children in that family, and there is not a fixed answer as to what this could mean. If the parents cannot agree, the court will have to decide which living arrangements and contact pattern they think is best in that case.

So, while you might not need a piece of paper to prove your love for each other, it is essential to have financial security and know what your rights are as a cohabitating couple, and what would happen should the worst happen, and you split up.