Congratulations, you found that special person and are now moving in together. It is important to understand the significantly different level of legal protection given to cohabitees as opposed to that enjoyed by married couples.
There is no such thing as “common law marriage”. As far as the law goes you are either married or not and a different regime applies on separation. It is important at the outset of your cohabitation to try to agree as much as possible with each other about the ownership of any property you may have and what would happen to it if the relationship broke down. Also consider how any gifts or loans from family may be treated.
Ownership of property
It is likely that at some point you will wish to purchase a home together or one of you may already own a property. When a property is purchased together by an unmarried couple, especially when one of you is putting in more money than the other, it is essential that it is purchased as tenants in common and a declaration of trust is drafted which records the shares in which the house is held. Otherwise, there is a presumption that the property is owned in equal shares. If the relationship breaks down with a declaration of trust in place it is much easier to establish on a sale or transfer who gets what percentage of the proceeds of sale.
If just one of you own the home in which you are going to live and you acquired it prior to the cohabitation or you are solely funding it, then to protect that property in the event of a relationship breakdown we would recommend asking your partner to enter into a declaration of no interest recording that there is no intention that they should obtain an interest in the property.
Why is it sensible to have a cohabitation agreement?
Unlike on divorce, there is no particular set of rules that automatically applies if the relationship breaks down. Living with someone for a period of time does not mean automatic entitlement to financial support or to share property following a relationship breakdown. This means that sorting out disputes about property without an agreement can be expensive and take a long time.
The position is different if there are children but even in that case the provision is limited to housing until the children are adults and to a carer’s allowance (for expenditure which directly relates to the children) rather than maintenance in their own right.
A well drafted cohabitation agreement can mean that areas of potential dispute on separation are reduced or eliminated as they provide clarity both during the course of the relationship and in the event that it should break down. It is important to note that it is possible that the law might change in future to give cohabitants specific rights. Under the current proposals, if there is a cohabitation agreement in place, it will take precedence over any new scheme that comes into force. The agreement can be reviewed if there is a house move, upon the birth of children or circumstances change dramatically. It is important to ensure that it is kept up to date.
It is also sensible to make a will to deal with what should happen to assets upon death. For example, it could be stipulated that a cohabitee should be given 6 months’ time to live in the property before it were sold, or be given a life interest in the property.
If you decide after a period of time to marry then you may want to consider entering into a prenuptial agreement to deal with any assets you have acquired prior to the marriage, e.g. a house owned solely by one of you, financial gifts from family, a family business and any future inheritances. Such an agreement should be prepared in good time prior to the marriage and we recommend that you consult solicitors at least 4 to 6 months prior to the wedding.
Gifts/Loans from family
If your parents or family wish to make substantial gifts to you these should be properly recorded. They will need to consider at the time whether the contribution is intended to be a gift, with the advantageous inheritance tax consequences, or a loan in which case you should have a legal charge secured against the title to the property and registered at the Land Registry. This would involve drafting a commercial loan agreement as well as the legal charge. Without a formal charge and loan agreement, it will be far more likely that contribution would be regarded as a gift and therefore potentially in the pot for distribution in the event the relationship/marriage breaks down.
At Helen Pidgeon Solicitors we are specialists in the law of cohabitation, divorce and all aspects of family law. Please contact us if you require further assistance to help you decide what is right for you and your family.