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Cohabitation

Cohabitation agreements and property disputes

We advise and assist unmarried couples should you wish to draw up a cohabitation agreement, or if you have become involved in a dispute when separating.

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Cohabitation agreements can also reflect agreements made between family members or friends considering living in a shared property. 

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Cohabitation Agreements

Despite what many believe, couples who live together do not have the same legal rights as couples who are married or in a civil partnership. They may have limited rights such as:

The question for many couples is what can they do if they don’t wish to marry or enter into a civil partnership, but do wish to put in place financial arrangements in the event of their relationship breaking down or the death of a partner? The answer is to enter into a cohabitation agreement.

  1. Claims arising from financial contributions they may have made towards their partner’s property

  2. Rights to financial support for any children of the relationship

  3. Claims on the death of their partner (depending on circumstances)

Whether you are about to move in together or you are already in cohabitation we can advise you of your options and the type of items you should include in the agreement.

Things to Consider

Every cohabitation agreement is slightly different depending on the needs and circumstances of the couple creating it, but in every case the agreement will record essential facts regarding a couple’s ownership of assets, as well as arrangements for if the relationship breaks down.

A cohabitation agreement can also cover other arrangements, such as how children will be supported after a break-up, as well as how things like bank accounts and debts, household bills, cars and other shared vehicles, and even care of pets will be handled at the end of the relationship.

  1. On separation should the property be sold or transferred to one of the parties?

  2. Does a party have an interest in a solely owned property?

  3. Individual and joint debts

  4. Inheritance and wills

  5. How will disputes between you be resolved?

  6. What length of time will the cohabitation agreement cover?

  7. How will furniture and belongings be divided?

Related Topics

Property Interest

It is also important to consider at the start of a relationship whether you wish your partner, friend or family member to have an interest in your property. If you own a property in your sole name and your partner, friend or family member is moving in with you they may later try to claim an interest in your property. To claim an interest they would have to prove:

  1. Prove that you intended that they should have an interest when the property was purchased or when they moved into the property

  2. Prove that they have contributed to the property by financial payments i.e. payment of or towards the household bills or the mortgage.

  3. If they have provided a substantial contribution to the property for example by paying for a home improvement

In the event you do not wish for the person moving into your property to have an interest then it would be advisable that you protect your property from any future claims.

Cohabitation agreements can be drafted to reflect this and to make sure your position is safeguarded in the event your relationship breaks down.

Benefits of a Cohabitation Agreement?

While it might feel overly pessimistic and unromantic to put time into planning for the breakdown of a relationship, a cohabitation agreement can provide valuable certainty and peace of mind and offer the following advantages:

  • A well drafted cohabitation agreement records each party’s legal and beneficial interest in the property. This reduces the possibility of a dispute about ownership if cohabitation ends and helps reduce the chances of costly litigation.

  • Entering into a cohabitation agreement gives cohabitees the flexibility and freedom to organise their financial affairs as they wish, both during and following cohabitation.

  • Cohabitation agreements are also often entered into by cohabitees who are beginning a new relationship following divorce or dissolution of a civil partnership. These cohabitees are more aware of the financial repercussions of relationship breakdown. Many therefore enter into a cohabitation agreement to safeguard their own financial security and, in some cases, to protect a future inheritance for their children.

Cohabitation FAQ

Do unmarried couples have the same rights as married couples?

Many unmarried couples live with the assumption that if they have cohabited for a number of years they have similar legal rights to those couples that are married. This myth is normally referred to as ‘common law wife or husband’. This is not the case and the courts will not take into account the length of time you have lived together or even if one of the parties has contributed to the household by raising children and being responsible for the running of the family home.

When should I draw up a Cohabitation Agreement?

A cohabitation agreement can be drawn up at any point during a relationship, both before a couple begins cohabiting or after they have already been living together for many years.

More important than when the agreement is first created, is how often it is updated.

As with any legal document, it is important to periodically review a cohabitation agreement and to amend it as necessary, in line with any major life events that may have occurred since the agreement was first created – such as buying a property, having a child, becoming the beneficiary of an inheritance, or one partner undergoing some other significant change to their financial status.

How much does a Cohabitation Agreement cost?

The cost of a cohabitation agreement can vary depending on the complexity of the couple’s affairs.

Typically, one partner’s solicitor would take on the work, which includes an initial meeting, drafting the document, amending it, and finally signing off on it. This solicitor can also provide one party with legal advice, while the other partner will need to pay for their own, independent legal advice on the agreement.

While the cost of a cohabitation agreement may seem expensive to some, it is minimal compared to the cost of settling affairs in court, where costs can easily reach into the tens of thousands of pounds.

Does a Cohabitation Agreement still stand if you get married?

Marriage significantly alters the legal status of a couple, which will invalidate a pre-existing cohabitation agreement. So, if your legal status as a couple has changed to that of a married couple, it helps to know how this changes things.

A cohabitation agreement is designed to reflect the couple’s circumstances and intentions while they are cohabiting. Upon marriage, it is advisable to prepare a prenuptial agreement which aligns with the new legal framework and marital status, to replace the cohabitation agreement.

What is the difference between a Cohabitation Agreement and a Prenuptial Agreement?

While both a cohabitation and prenuptial agreement are available to unmarried couples, and both determine what happens should the relationship break down, there are several important differences between the two agreements.

A cohabitation agreement is appropriate for any couple who live together and have no intention of getting married or entering into a civil partnership in the immediate future. It determines what happens to assets and finances should the unmarried couple decide to separate.

In contrast , a prenuptial agreement (or a pre-civil partnership agreement) is designed for couples who are preparing to have their relationship legally recognised through marriage or civil partnership and want a different arrangement for their assets and finances than what they are ordinarily entitled to by law, should they divorce or dissolve their civil partnership.

How to legally protect yourself

Cohabitation Agreement

It details, amongst others, how property, capital and assets are owned and should be divided; arrangements for children; finances (mortgage and bank accounts) and next of kin.  To ensure that the agreement is correctly drafted and given full legal effect, you should consult a solicitor who will provide legal advice.

Declaration of Trust

An agreement that confirms the proportions in which two or more individuals own property, for example, the amount of equity for each party or how it will be split should the relationship breakdown.

Make a will

It is also important to make a valid will. If you were to die without leaving a will, unmarried cohabitees do not inherit under the rules of intestacy. We don’t provide a will service but can make recommendations.

Cohabitation Agreement or Declaration of Trust?

Difference between a Cohabitation Agreement and a Declaration of Trust

Just Focused on Property?

A cohabitation agreement is quite a broad agreement that outlines the financial arrangements between cohabiting partners. It can cover various aspects like property rights, responsibilities for bills and debts, and arrangements for children if the relationship ends.

A declaration of trust is a legal document that specifically outlines the ownership and financial interests of a property. It clarifies how much each party owns and what happens to the property if the relationship ends or if one party wants to sell their share.

While a cohabitation agreement covers a wide range of issues about the relationship, a declaration of trust is narrowly focused on property matters.

  1. The amount each party has contributed to the deposit on the property

  2. The amount each party will contribute to the mortgage repayments and other outgoings

  3. The percentage of the property each party will ultimately own

  4. How much each party will get from the sale of the property

  5. How the property will be valued before it is put up for sale

Both documents are legally recognised in the UK and can provide clarity and protection for cohabiting couples, but they serve different purposes and should be used in conjunction with each other for comprehensive coverage.

Declaration of Trust

Difference between a Cohabitation Agreement and a Declaration of Trust

Shared Property Interest

Eye-watering interest rates and inflated property prices combined with the current economic crisis has resulted in individuals and couples increasingly looking for alternative arrangements for buying a house. 

This might include clubbing together with friends or a partner to buy a property as joint owners, or seeking financial help from parents, relatives, or other individuals who are in a position to offer their support.

Protect Your Investment Share

A Declaration of Trust (also referred to as a Deed of Trust) is often considered when multiple people have a stake in a property and there are no existing legal arrangements in place between them to determine what each person is entitled to and what should happen if the property is sold.

A Declaration of Trust is a legally binding document made at the time of buying a property. It records the financial arrangements of everyone who has an interest in the property, detailing what share of the property they own and what should happen in various eventualities, such as if all owners agree to sell the property or if one owner wishes to buy out another.

What does a Declaration of Trust do?

A Declaration of Trust protects everyone’s interests in a property, ensuring each party gets what they are entitled to by their initial investment when it comes time to sell the property or sell a share of it. If there is no Declaration of Trust in place, it becomes more difficult to tell who should be repaid and how much they are entitled to when the property is sold.

Protecting someone whose name is not on the mortgage via a Declaration of Trust

There are many reasons why someone might have an interest in a property and contribute payments towards it but not have their name on the mortgage.

Whether because they have poor credit or other debts that make them ineligible for another mortgage, or because they moved into a house already owned by another party, a Declaration of Trust will record the specific arrangement and ensure that the right parties retain their beneficial interest, if appropriate.

What should be included?

Each Declaration of Trust is different, and we will advise and tailor the deed to reflect the fact that no two financial arrangements are ever exactly the same. That being said, there are some details that all documents should contain:

  1. The amount each party has contributed to the deposit on the property

  2. The amount each party will contribute to the mortgage repayments and other outgoings

  3. The percentage of the property each party will ultimately own

  4. How much each party will get from the sale of the property

  5. How the property will be valued before it is put up for sale

Beyond these key pieces of information, various clauses can be added to account for different eventualities that may occur.

In addition, a number of arrangements can be chosen from for how equitable interest will be treated: if one party has invested more in the deposit, for example, they could receive that larger sum back alongside their agreed share of profits upon sale; or if one party is contributing less to the mortgage repayments than the other, then the share ration could be recalculated each year to reflect the amount each party has invested as this sum changes.

How long does a Declaration of Trust last?

The lifespan of a declaration of trust typically aligns with the ownership of the property. It remains effective as long as the specified conditions are met and until a specified event, like the sale of the property or a change in the owners’ circumstances, occurs.

Parties can agree to modify or terminate the declaration of trust. This is often done through a deed of variation. However, changes could have legal and tax implications. If one of the property owners dies, the terms of the declaration of trust will determine what happens to their share of the property. This could be in line with their will or the rules of intestacy if there is no Will.

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Highly recommend the service received. Andy has been fantastic throughout. He has being informative and direct with advice, which is always reassuring at such a sensitive time.

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