Like many family lawyers, I regularly meet with clients who are under the impression that, because they have lived with their partner for a long period of time, they automatically have a financial claim against their partner.
However, this is not the case. The starting point is that, unlike couples who are married or in a civil partnership, cohabiting couples do not automatically have financial claims against each other. In this blog, I am going to explore what this means in more detail and suggest why we advise that cohabiting couples put in place a cohabitation agreement to help avoid disputes.
Property is clearly a key concern for couples, and likely to be the biggest asset they have to consider when making the decision to separate. Where a property is owned, the starting point is to look at how the property is owned, for example, is it owned by the couple jointly or by just one of them? I have written an earlier blog on property rights for cohabiting couples (read here), but the key points are outlined here.
Jointly owned property
A property can be owned jointly in two ways:
Where a property is owned as Joint Tenants the owners are deemed to be equal owners and if one of them were to die, that person’s interest in the property would automatically pass to the other owner.
Tenants in Common
Where a property is owned as Tenants in Common the owners each own shares in the property. Those shares could be held 50/50, 40/60, 99/1 or whatever variation they choose. Where ownership is not equal this would normally be recorded in a Declaration of Trust.
If no Declaration of Trust has been entered into then the presumption is that the owners own the property equally.
Where a Declaration of Trust is in place, this will normally be conclusive unless evidence can be shown of a later agreement or a very good reason (e.g. fraud) as to why the Declaration of Trust should not be upheld.
Property owned by one person
It is possible for one person to be the legal owner of a property but for the other person to have an interest in the property. This should be recorded by way of a Declaration of Trust.
However, if there is no Declaration of Trust then there are still circumstances where the “non-owner” may be able to establish an interest in the property but these are highly fact-specific. Typically, this would involve the non-owner making a material contribution to the property on the understanding that they would be acquiring an interest in the property.
What if there are children involved?
If a couple has children together then Schedule 1 of the Children Act allows the court to order that:
- One parent (Parent A) pays a sum of money which can be used by the other parent (Parent B) to purchase a property to meet the housing needs of the child.
- A property that is already owned by one parent (Parent A) is transferred to the other parent (Parent B) to meet the housing needs of the child.
However, if a sum of money is paid or a property is transferred in this case to Parent B then this would usually revert back to Parent A when the child reaches 18.
Therefore, it does not afford Parent B long term security as the purpose is to provide a home for the child, not the parent. In view of this, it can be quite unattractive for Parent B to pursue this as a standalone claim where they are potentially incurring significant legal costs without actually gaining a capital interest themselves.
In addition to the financial issues that arise when a couple separated where there are children involved, there are often important decisions to make regarding arrangements. We have written a number of blogs on the subject of child arrangements in the event of separation which can be found here.
What if there is a dispute?
As lawyers, we are frequently instructed when things have gone wrong. In these circumstances, it can be difficult to establish what the intentions were at the time and there is often very little documentary evidence.
Litigation is expensive and, where it takes place, the loser will normally be ordered to pay the winner’s costs (or at least a proportion of them).
One of the ways this uncertainty can be avoided is by a cohabiting couple entering into a cohabitation agreement.
This can record things such as:
- Who owns what?
- What financial arrangements will be in place whilst the couple are living together to meet utility bills etc
- How should property and assets be divided if the relationship comes to an end?
In the first instance, if a couple choose to enter into a cohabitation agreement, this means that there will be a discussion over what the arrangements are/will be. This helps both people enter into the relationship with their eyes open.
Thereafter, by recording the agreement it minimises the risk of costly litigation in the event the relationship breaks down.
If you would like to book a consultation to talk to a member of our specialist cohabitation team, please contact us for an informal discussion about your personal circumstance.