Cohabitation Agreements – Are They Necessary?
There is an ongoing myth in society that a 'common law partner' has the same legal rights to make financial claims in the event of relationship breakdown, as a married spouse. This is not the case and cohabiting couples do not enjoy the same legal status as those who are married, no matter how long they have lived together.
It is therefore prudent for parties to set their intentions in writing when they live together to protect their respective interests should their relationship break down. This written record is known as a 'cohabitation agreement'.
The cohabitation agreement sets out the terms of an arrangement between parties relating to their cohabitation, particularly in respect of property or other financial assets. The benefit of having such a document is that it removes any ambiguity concerning the arrangements should the relationship breakdown.
Cohabitation agreements are not limited to relationships of a romantic nature. They can cover a variety of cohabiting relationships such as siblings and friends. Albeit not as commonly used, a cohabitation agreement can also cover the position on financial and children matters.
Whilst a cohabitation agreement is not a court order, in the event of a relationship ending, it can be exhibited to a court to demonstrate the parties' prior intentions and can create a legally binding contract. For a cohabitation agreement to be effective, it must satisfy the criteria that:
- Full financial disclosure was exchanged between parties;
- All parties received legal advice on the matter; and
- The document has been properly drafted and executed as a deed.
If the court is not satisfied that these conditions have been met, it has the discretion to overrule the agreement and make an order itself. Battling such a process can be timely and expensive, so it is imperative for a cohabitation agreement to be properly drafted. A well drafted cohabitation agreement could be a cost-effective measure to ensure all parties are in a better position to receive what they consider to be fair should it become necessary.
A cohabitation agreement is not only advisable to save the cost and distress of later dispute but also because it is flexible. Parties do not need the court's approval to change terms of a cohabitation agreement and assuming all parties agree, it could be amended easily to reflect a change in circumstances at any time with modest cost.
Although cohabitation agreements may be thought to be unromantic and distrusting, life can throw up many unexpected challenges; preparing for them as a worst-case scenario does not increase the risk of them happening, nor does it suggest intention for them to happen. It simply protects parties as individuals, with the hope that it will never need to be used.
As members of Resolution, here at Band Hatton Button LLP we encourage and welcome alternative methods to court litigation and aim to work with you to reach an amicable agreement. For further information, please contact any member of the Family team.
Ruth Hayfield - Paralegal - Family Team