Cohabitation agreements: steps you should consider when living together as an unmarried couple

In March 2022, ONS reported that over the last decade the number of cohabiting couple families saw an increase of 22.9% to 3.6 million. With numbers increasing year on year, what do cohabiting couples need to be aware of?

What is a cohabitation agreement and why might I need one?

If you are a couple living together or planning to do so, it is wise to have a cohabitation agreement.

An agreement can confirm or declare how you own property or other assets, with or without your partner, regulate financial arrangements while you live together, detail what will happen and who will get what if you separate, and indicate what should happen if either of you dies while you are living together.

Why is a cohabitation agreement important?

Cohabiting couples do not have the same rights as married couples, where the court has a wide discretion to fairly allocate resources between a couple if a marriage or civil partnership breaks down.

What can you include in a cohabitation agreement?

1. 1. Children: 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?
   4. Timing: 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? For more information see our article on families and business.
   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, you are 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 the arrangements be? 

Call for reform

Over the years, many have called for legislation to be introduced to address the legal difficulties that are faced by some cohabitating families.

The latest call to arms in England and Wales was made by the Women and Equalities Parliamentary Committee in August 2022.

See our previous insight for a summary on cohabitation agreements according to Scottish law.

Cohabitation in England and Wales

Contrary to popular belief, cohabiting couples in England and Wales do not have the benefit of an all-encompassing law, either during their relationship or on separation. Current legislation, such as it is, is limited in scope, expensive to access and uncertain in outcome.

The legal remedies available to a cohabitant in England and Wales are extremely restrictive and based solely on the law of property and trusts rather than any element of fairness/discretion as would apply on divorce or a civil partnership dissolution.

Unless the couple start a family together, when different legal regimes exist under Schedule 1 Children Act 1989 to cater for the financial needs of any children (albeit the regime is not as generous as that on divorce or dissolution) and to regulate child support payments, there is no obligation for one party to support the other with maintenance payments and there may well be no recourse to any property/a home or pension.

The court is unable to consider the financial and housing needs of the parties and cannot take into account non-financial contributions to the relationship, such as looking after the home or caring for any children of the relationship. This can leave one partner extremely vulnerable if the relationship breaks down.

Cohabitation in Scotland

Unlike in England and Wales, Scotland does have legislation to protect cohabitants’ interests when they separate 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 that 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 financial imbalance arising from contributions made by one 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 court has a wide discretion to decide what is fair, but can only award a capital sum. The court cannot order a transfer of a house or other property or a pension share as it could in a divorce or dissolution case.

Scottish lawyers are calling for further reform.

Summary of differences between Scottish Law and the law in England and Wales

There are some key differences between Scottish cohabitation laws and the law applied in England and Wales.

Cohabitation agreements

How can a cohabitation agreement help?

Let’s consider the situation in both Scotland and England and Wales.

Are cohabitation agreements legally binding?

A cohabitation agreement is a witnessed deed entered into by the parties, setting out the arrangements that will apply when the couple live together. Importantly it records rights and obligations on the breakdown of the relationship.
As a contract, certain conditions, standards and safeguards must be complied with to ensure that it is a valid agreement.

We encourage people to approach us at the beginning of a relationship to consider the merit of a cohabitation agreement. Understanding the position at the outset and taking simple precautionary measures can help to prevent significant problems later.

As a cohabitation agreement regulates the arrangements during the period of cohabitation and provides for what happens to assets if the relationship breaks down, it can be much wider in scope and more creative and flexible than a court-imposed solution.

What issues could a cohabitation agreement cover?

A cohabitation agreement can regulate financial affairs during the course of a relationship and can include the contributions each party will make towards the bills/mortgage/rent, as well as the proportion of the property each will own.

On separation, as well as dealing with the division of assets, arrangements can be agreed about how business assets are held, how any debts should be paid and how contents should be divided.

How do cohabitation agreements help?

Entering into an agreement before cohabitation means that on any future breakdown of the relationship both parties can determine what will happen and help avoid the expense and stress of legal proceedings.

Cohabitation agreements in Scotland

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.

Given that cohabitant claims can be for substantial sums, couples contemplating cohabiting should consider whether it might be prudent to enter into a cohabitation agreement to regulate what will happen if they later separate.

Cohabitation agreements in England

As property and trust disputes can often be avoided if there is clear documentation to establish the position, with clear evidence of the intention of the parties, a written cohabitation agreement entered into at the start of a relationship can be extremely valuable.

Property ownership

If a couple are proposing to purchase a property together they should consider whether they will own the property equally or whether they need to enter into a declaration of trust setting out their unequal ownership of the property, and what might happen if it were to be sold in the future, for example, if they separated. This should be addressed with their conveyancing solicitor at the time of purchase.

They should also discuss with their conveyancing solicitor whether to own the property as ‘tenants in common’ or ‘joint tenants’ which have different legal implications if one of the co-owners were to pass away whilst the parties own the property together.

If the property is owned in the sole name of one of the cohabiting couple, the other does not automatically have a right to live there and may not be able to establish a claim to the property itself.
The legal remedies available for property disputes are limited to trusts and land law solutions which are not specifically tailored to cohabiting relationships.

It may be possible to establish an interest in a property and bring a claim regulated by the Trusts of Land and Appointment of Trustees Act 1996 (TLATA or TOLATA). These can be complex disputes and it is crucial to seek legal advice at an early stage.

Wills

Unmarried couples should always consider making Wills as the intestacy laws may not result in what they intended if one of them were to pass away, as well as considering whether to enter into a cohabitation agreement and take out life insurances.

How to deal with a cohabitation dispute

As with many issues, taking precautionary steps at the start of a relationship can smooth the way if a dispute arises in the future. You can find cohabitating advice in our survival guide.

If a relationship comes to an end, early advice can be crucial, and steps taken to gather supporting evidence may be required.

As these cases may be complex, time consuming and expensive, parties should be encouraged to look at non court methods of resolving their differences. Read more about how family mediation can assist property disputes for unmarried couples.

Summary

Cohabitation agreements are becoming increasingly popular. A well-drafted cohabitation agreement will provide considerable protection for any person considering, or currently, cohabitating. They can be updated and modified over the years as situations change.

If the parties subsequently choose to marry or enter into a civil partnership, they will then be governed by different, and more generous, legislation as a married couple and so may wish to consider a prenuptial agreement before they marry.