When love is in the air and your thoughts turn to moving in together, the last thing on your minds will be the practicalities of splitting-up.
When married couples divorce there are specific laws that give rights and obligations towards each other, and determine how property and finances are to be shared. When couples who live together decide to separate there is no consolidated legal framework to refer to if you disagree about property ownership, finances or children. Instead, there is various legislation and scattered cases which are difficult to access easily.
With property values skyrocketing, it is prudent to ensure that your interests are protected when making such an important investment.
Amanda Brown Family Law Solicitor at Family Law Group in Nottingham, explains why drawing up a cohabitation agreement could save you both from unnecessary heartache and financial turmoil in the long run, should the worst happen.
When couples decide where they will live, there is more to consider than simply answering the question, “your place or mine?”
If you are renting, the landlord should be informed and you should consider adding both of your names to the lease. If the lease is only in your partner’s name, you may find yourself with a limited legal right to stay there. You may also have to face litigation in the small claims court to obtain the return of your share of the deposit.
If you move into a property that your partner owns, and the relationship breaks down your partner could ask you to leave at any time. Even if you have made contributions towards the outgoings, you have no automatic right to stay in the property. You would have to apply to the court for permission, and if granted it may be limited for a brief time only.
If there are children involved, then you can apply to the court to be allowed to live in the property with them until the youngest child reaches the age of 18 or permanently leaves home, whichever is the sooner. However, this will not entitle you to a share in the property.
If you decide to buy a home together and register it in your joint names at the land registry, there are added complications if you are not married. You will need to decide how you are going to own the home from the outset and consider what you will do if you split up, or one of you is unable to work and pay their share of the mortgage. Unless you have a cohabitation agreement to the contrary, you may only be entitled to a 50 per cent share of the equity in the property even if your contributions to the mortgage were higher.
There may be other things to think about. If you have bought the house with financial help from parents, will they expect to be repaid? If you have taken advantage of a shared ownership scheme to buy your home, you will need to clarify the exit strategy.
If you do bring assets into the relationship like savings, cars and valuables, then it may be important to protect your ownership of them via a cohabitation agreement.
As time goes on, and you begin to build a home of joint belongings, be it flat-pack furniture or fine antiques, the lines of ownership can get blurred. It is not always clear who bought what, or whether it was a gift from one party to another. Virtual assets like e-books, music, films and games can represent a substantial investment over time and may be harder to separate than a box of CDs.
With a cohabitation agreement you could also clarify the contribution of each person to the daily household finances such as rent, mortgage, bills and insurance premiums. Consider how you will fund the purchase and own bigger assets such as cars and manage your bank accounts. If you build up savings, how will they be divided if you separate?
Using mediation is an excellent way to agree the terms of your cohabitation agreement. Your Mediator will help you discuss your options in a dignified and respectful environment. Together, you can decide how long your cohabitation agreement will last for, any events that will trigger its end and any penalties for non-compliance.
In today’s market, extra caution should be paid to any joint credit agreements and loans as you could find your credit reference adversely affected by your partner’s actions.
You may also need to consider how you will pay your outgoings if one of you has an accident and cannot work, or becomes unemployed. If you are financially dependent on each other and you are considering taking out life insurance policies including critical illness cover, you should explore the options about ownership and who will be entitled to a payout before signing up.
Unlike married couples who can turn to the divorce courts for help, if living together does not work out you will have to sort it out yourselves, or face some complicated property, and children litigation. A cohabitation agreement will help you to avoid unnecessary financial distress at an upsetting time.