Cohabitation agreements and how to protect your assets
This fact sheet covers frequently asked questions about cohabitation and cohabitation agreements.
What should I do in the event of a dispute about the house?
Unless an agreement can be reached, you will have to apply to the court under s.14 of the Trusts of Land and Appointment of Trustees Act 1973. The court has powers to assess whether you have a share in a property, what share in the property you have and when the property should be sold.
Does it make a difference if I do not own the property?
If both of you are named as owners, there is a presumption that you will both have a share in the property. If the property is owned by only one of you, the onus is on the non-owner to show that they have an interest. This can be shown through express discussions or by drawing inferences from the conduct of the parties.
What factors will the court consider when looking at a dispute?
Amongst other things the court will consider:
- The welfare of any child who may reasonably be expected to occupy the house as their home.
- The intentions of the cohabitees who bought the house.
- The purpose for which the property was bought.
What can I do to protect my assets?
One option open to you as a cohabitee is to enter into a cohabitation agreement which deals with who owns which assets, the financial arrangements you have, what should happen to assets and income in the event that you split up.
When should a cohabitation agreement be entered into?
This can be created at any time during the cohabitation and can be done through solicitors or through mediation. You may decide that a particular turning point in your relationship, e.g. buying a house together or having children warrants an agreement being put in place. Cohabitation agreements can also be entered into by two people who are not in a relationship but who have decided to pool resources together to buy a property either as friends or as business partners. This is becoming increasingly frequent.
Is a cohabitation agreement binding?
Where the agreement is created after you have both received separate legal advice, and the terms are reasonable, the court is more likely to accept the agreement. The agreement is enforceable as a contract and therefore can be challenged on the grounds of fraud, duress, undue influence, misrepresentation, mistake and illegality on other grounds.
What should be included in a cohabitation agreement?
Provisions could be made in terms of pensions, money and household bills, personal possessions, interests in property. You may wish to consider the following examples:
- Who is paying the mortgage? Should life insurance be sought?
- How will any joint bank accounts be split on separation? Should separate bank accounts be used for certain items? Who will be responsible for debts?
- Who will keep the furniture or the car on separation?
It is important to note that any provisions relating to children will not be legally binding. This does not mean that they should not be considered and reference should be made to the information sheet on child maintenance.
How does cohabitation differ from marriage when parties separate?
Unlike married couples, if cohabitees separate, neither of you are automatically entitled to a share of the assets or income. Disputes between cohabitees can therefore be long and complicated.
What are the benefits of a cohabitation agreement?
- Reduces or eliminates areas of dispute upon separation and therefore saves you time and money in what may be a lengthy court dispute.
- Can provide clarity to you early on in your relationship and the freedom to organise your affairs as you wish.
- There is the safeguard that the courts will consider the reasonableness of the agreement.
- Current proposals to change the law on cohabitation, will still allow previous agreements made to take precedence.
- Further certainty can be provided by you amending your will to reflect your wishes.
Is there anything else that a cohabitee should do to protect their property?
Where you buy a house together and it is agreed that each of you is to have a share in the house rather than the property remaining under the ownership of the other cohabitee in the event of your death (this is often the case with cohabitation, especially if the parties are not in a relationship) then a declaration of trust should be signed. This document will confirm what shares you hold the property in. A cohabitation agreement can deal with additional matters such as who is in charge of selling the property if the parties separate, arrangements for one party to buy the other out and who will pay the mortgage.