Cohabitation – Considerations for Unmarried Couples

Whilst marriage used to be the first step most couples made before moving in together, many now choose to live with their partner indefinitely, or until they plan to tie the knot.

We all hope that our relationships and living arrangements will work in harmony, and that at worst any separation can be dealt with amicably. However, it is the unfortunate truth that this does not always happen, and we find that many cohabiting or unmarried couples are not always aware of their legal rights.

Legal status of cohabiting couples

We often find that couples who live together assume that they acquire a number of rights as a “common law spouse”, however, this is not the case. Cohabiting couples are not treated the same as married couples under the law and any dispute about the ownership of property, which is usually the main asset in a relationship, is governed by the Trust of Land and Appointment of Trustees Act 1996.

Ultimately, unmarried couples have very limited legal rights and responsibilities to each other on the breakdown of a relationship, therefore it is important to give some consideration to your arrangements before you live together.

Cohabitation Agreements

A cohabitation agreement is simply a contract between two people who live together. The agreement can set out who owns any property and any beneficial interests each person might have in it (that is, how much of the sale proceeds they would be entitled to if it was sold), which can be the most significant point of contention in a separation.

As the agreement is tailored to each couple, it can also be used to set out each party’s rights and responsibilities in respect of the property they live in, their financial arrangements (including paying the bills) and ownership of any specific personal possessions, such as furniture (or the dog!).

Perhaps most importantly, a cohabitation agreement should be forward thinking and kept up to date. Thought needs to be given to exactly how each asset will be dealt with on separation (including how they will be sold, as well as the share of sale proceeds each person is entitled to) and whether there should be provision for supporting your former partner financially after separation, usually if you have children together. The agreement must also be updated to reflect any change in circumstances, for example inheritance, new business interests or income fluctuations.

You may not wish to keep referring to your agreement whilst you are not experiencing any problems, but it could become a vital tool in amicably parting ways in the future, reducing both costs and uncertainty where you may otherwise be left arguing about the shares in the house in Court.

Despite the benefits of a cohabitation agreement, many individuals may not enter into one due to the upfront cost of doing so, or not wanting to place any doubt on their relationship at the outset. However, open communication may be key to dealing with any problems before they arise.

Whilst these agreements have gained greater levels of Court approval over time, it is important that they are drafted properly and in line with contractual law to have the greatest prospects of being enforceable, should the need arise.

Declaration of trust

A declaration of trust is more limited than a cohabitation agreement.

Whilst a cohabitation agreement can deal with an array of different arrangements between the parties, a declaration of trust can only confirm the beneficial entitlement each party has in property (and in this instance, this is only a house or land, rather than furniture or money).

Therefore, if an unmarried couple are buying a house together, and one person is paying a significantly higher proportion of the purchase price than the other, the parties may choose to have a declaration of trust, setting out each persons ‘share’ of the sale proceeds if the property is sold in the future.

Whilst a declaration of trust can be included within a cohabitation agreement, it can also be used as a stand-alone document in complex cases where separate issues need to be clearly defined. Or, if the shares in the house is the only matter the parties need to be recorded, a declaration of trust might be the more straightforward, and less costly, option.

How property is held?

When two or more people own property, they own the legal title to the property as what is known as “joint tenants”. However, this is different to a person’s entitlement to the sale proceeds of property, also known as their “beneficial interest”.

There are two ways that people can own their beneficial interest together: as beneficial joint tenants, or as tenants in common.

To ensure that the law is fair in situations like those described above, where parties wish to be entitled to different amounts of the sale proceeds, they can own the property as “tenants in common”. Whilst you will both legally own the property (as joint tenants), you will be entitled to different shares of the sale proceeds, e.g. 50/50, 60/40 or any other arrangement that you choose.

The alternative option is to own the property as “beneficial joint tenants”. This means that, as well as both owning entire legal interest, you also both own the entire beneficial interest in the property. This means that if one person should die, the other would automatically be entitled to the full share of any proceeds of sale; if you own a property as beneficial joint tenants, you cannot leave a “share” in your will, as you have no “share” to speak of.

It is therefore worthwhile considering your arrangements in respect of property ownership if you are thinking of purchasing a property with your partner.

Wills and Intestacy

As above, how you hold your property between yourselves will determine how this is dealt with upon your death.

However, any other personal property you own, such as cars, savings, life insurance pay-outs and personal items, will not be passed to your partner unless you have a will specifying that they will receive your property.

If you do not have a will, this type of property (and any “share” of your house if you are tenants in common) will be dealt with under the laws of intestacy. These are statutory rules which govern the order in which property will be distributed, such as to children or grandchildren, parents, brothers and sisters.

If you want to ensure your partner is provided for upon your death, you may wish to consider putting a will in place.

What next?

Seeking advice from a specialist family lawyer on protecting your rights and getting your arrangements in order can help to minimise the stress and costs involved in dealing with your assets, especially if your relationship unfortunately breaks down.

If you would like to discuss you rights in a cohabiting relationship, or any of the other issues considered in this article, speak to one of our local family law experts today on 0800 015 0340. Our family team cover all our offices in Leeds, Wakefield, Huddersfield, Halifax, Morley, Pudsey, Horbury, Bradford and Guiseley and offer a free initial half hour appointment.