Why do I need a cohabitation agreement? The position in Scotland
We explain why a cohabitation agreement in Scotland can be extremely valuable to a cohabiting couple.
The law in Scotland
Unlike in England and Wales, Scotland has specific legislation to protect cohabitants’ interests when they separate. This is governed by the Family Law (Scotland) Act 2006.
The Act provides certain rights to cohabitants in respect of money, household belongings, and joint accounts or savings they may have accumulated during their relationship.
Most notably, the 2006 Act provides cohabitants with a right to make a claim on separation for a capital sum from the other party to try and redress any imbalance financially arising from contributions made by either party to the other during the relationship. For example, where they may have been left financially disadvantaged as a result of the relationship or may have financially advantaged the other party.
The test is one of fairness based on the individual circumstances of the particular case. The courts have a wide discretion to decide what is fair but they can only award a capital sum. They cannot order a transfer of a house or other property, or a pension split as they could in a divorce or dissolution case.
Strict time limits
A cohabitation claim must be made within one year of the date of the parties ceasing to cohabit with each other. Any claim made after that will be time-barred and therefore it is important that in a cohabitation situation legal advice should be sought as quickly as possible after any separation.
Cohabitation agreements in Scotland
Given that cohabitant claims in Scotland can be for substantial sums, couples contemplating cohabiting have to consider whether it might be prudent to enter into a cohabitation agreement to regulate what should happen if they later separate.
The cohabitation legislation in Scotland specifically recognises that a cohabitation agreement might be entered into. Such agreements can specifically exclude cohabitant claims and so provide certainty of outcome for the parties if a relationship ends.
As with prenuptial agreements in Scotland, these types of agreement are becoming increasingly popular. A well-drafted cohabitation agreement will provide considerable protection for any person considering, or currently, cohabitating.
Possible issues to include in a cohabitation agreement
What do you and your partner need to think about for your cohabitation agreement? Here are 10 issues to consider.
Do you have, or plan to have, children? How will they be provided for if you separate?
2. Property ownership
How do you want to own your house or other property? Will it be owned solely by one of you or jointly? If jointly, in what shares?
3. Running costs and repairs
What about contributions to the upkeep and repair of the property? Who will pay the mortgage? If one of you pays more towards the property or contributes to improvements, is it agreed that they should be reimbursed or gain a greater share of the property?
What happens if you separate? Will you sell the property or will one of you buy the other out? If the property is owned by only one of you, how soon would the other person be expected to move out?
5. Contents and belongings
What about the household contents? Who will keep them, particularly those jointly purchased or given to you as a couple?
6. Business ventures
Are you in business together? Will you continue to run the business together if you separate? Or will one of you buy the other out?
7. Joint accounts and investments (and debts)
Will you operate a joint account or other joint investments? If so, what are the arrangements and how will you separate your finances on relationship breakdown? Have you any joint debts? If so, are you jointly and severally liable for the debt, whoever runs it up?
8. Death and Wills
What about the death of one of you while you are a couple? How will you provide for the survivor? Will they have the right to remain in the home or receive anything from the deceased's estate? Do you need to make a Will to put your wishes into effect?
9. Plans to marry
Are you engaged and/or planning to marry? Do you need a prenuptial agreement as well as a cohabitation agreement?
10. Third parties
Is it just you and your partner who will live in the property or will you allow others to do so? If so, what will be the arrangements?
With some forethought, a cohabitation agreement can be prepared which should address many of the questions which commonly arise during cohabitation or when cohabiting couples separate and help to avoid much pain, cost and uncertainty.