Why cohabitation agreements are essential for the unmarried couple
This summer, the Office for National Statistics announced that the number of cohabiting couples increased by 3% in the 10 years leading up to 2011 whilst the number of households which are made up of married couples fell by 5% over the same period.
With couples becoming less inclined to marry before moving in together, cohabitation disputes are on the rise. The types of issues that come about when a cohabiting couple separate can range from the simple to the complex, much like during a divorce.
For couples who are renting, disputes may arise about such things as who will take over the tenancy agreement, who should keep which items of furniture and what to do with the joint account which was opened to take care of household bills etc.
In the situation where one party owns a property and their girlfriend or boyfriend moves in with them a whole can of worms can unexpectedly open if the couple decide to separate. An alarming number of people are unaware that it is possible for the non-owner of the property to claim back any money which they put into the property, such as contributions to the home owner for the mortgage, despite their name not being on the title deeds of the property.
Entering into a cohabitation agreement prior to moving in with a girlfriend or boyfriend really can make all the difference if the relationship does break down. The agreement records each parties financial rights and responsibilities when they decide to cohabit and also what should happen if they decide to separate. The great thing about them is they can include as much or as little as the parties was to include and really set out from the beginning what the deal is in terms of the finances during and after the relationship. This can be a weight off peoples’ minds not only during the relationship as each party knows where they stand, but also if the relationship breaks down as it is a useful tool to avoid litigation and also the stress which comes along with deciding how finances should be dealt with at a time when quite often both parties would rather not have such a conversation.
If a property has been purchased by one or both parties to the relationship and they have signed up to a declaration of trust, they may think that a cohabitation agreement is not necessary. It is important to be clear that although a declaration of trust records the parties’ respective beneficial interests in the purchased property, it does not go on to deal with a wider range of issues that a cohabitation agreement deals with such as how the mortgage and household bills should be paid, how and when the property should be sold, and whether any ongoing financial obligations to either party should be in place if their relationship breaks down. In this situation it is therefore best to take a belt and braces approach and obtain both a declaration of trust and sign up to a cohabitation agreement to ensure all bases are covered.
Cohabitation agreements are not solely for the use of couples in a relationship. They could be used by those who are pooling their resources with friends or family members to purchase a property and/or live together to record how finances should be dealt with both during the cohabitation and when it ends.
Although it is preferable to enter into a cohabitation agreement before cohabitation begins, there is no strict rule in relation to this and there is no reason why such an agreement could not be drawn up after cohabitation has commenced. The only thing to be weary of is not to enter into a cohabitation agreement when one party might be feeling particularly vulnerable as they could claim at a later date that they were under undue pressure to sign the agreement which may render it voidable.
Without a cohabitation agreement there is a real and serious risk of dispute arising upon separation. By entering into such an agreement, not only will the cohabitation be more likely to run smoothly as intentions are set out from the beginning, but if things do break down both parties are able to avoid the stress of having to face what to do and can simply implement the terms of the agreement and get on with their lives, making such an agreement essential for the unmarried couple.