Overview

Some people see Living together, or 'cohabitation', as an alternative to getting married or forming a civil partnership. Sometimes people will move in together as a prelude to getting married or to forming a civil partnership. For whatever reason people cohabit, there should be an understanding between them of the rights and responsibilities that arise from this cohabiting relationship.

Legal issues

If a couple is married or in a civil partnership and the relationship ends, legislation provides how the courts should deal with the financial arrangements - property and maintenance. The courts have wide powers to redistribute property in the event of a divorce, irrespective of which of the spouses actually owns it. However, in England and Wales, when a cohabiting couple's relationship ends, there is no legal provision for maintenance or for any redistribution of property. Where a property is only in one of the cohabiting partners' names, the starting point for the court would be that the other partner is not entitled to share in it at all. Unlike in a divorce, therefore, there is no search for fairness or reasonableness in the division of the unmarried couple's property when they split up. The court only has the power to declare who owns what and no power to redistribute the assets of the unmarried couple.

In Scotland, however, cohabitants are entitled to make a claim for financial provision when the relationship ends, under the Family Law (Scotland) Act 2006. The claim would be made on the basis of economic advantage suffered or economic advantage gained by the parties during their relationship. Any such claim must be made within one year of the date that the cohabitation ceased. In the event that one of the cohabiting partners should become deceased, without having made a will, the surviving cohabitant will find that the intestacy rules make no provision for them, unlike in the case of a surviving spouse. Unless there is a will which provides for that, a cohabitant will not inherit anything from his/her deceased partner. In Scotland, however, it is possible even if there is no Will for a surviving cohabitant to make a limited claim on a deceased's estate under the Family Law (Scotland) Act 2006.

Couples who do decide to live together without getting married or without forming a civil partnership should therefore protect their own rights as well as that of their partner by:

• Making a Will so you will know that your partner will be taken care of in the event of your death.
• Making a 'Cohabitation agreement'. This document is not just a 'prenuptial for unmarried couples' but also functions as an agreement to deal with assets while you are living together. In your cohabitation agreement, you can therefore deal with daily financial arrangements as well as with the financial issues should you break up.

Sharing a home

Having an agreement

The number of unmarried couples living together has dramatically increased. Over 1/3 of births are outside marriage. There may be various reasons why people choose to set up home together without getting married or entering into a civil partnership. However, the reality that the relationship may fail and the resulting financial consequences should always be kept in mind. The only way to ensure that the cohabiting parties' rights are adequately protected in the event of a breakdown in the relationship is by way of an agreement. There is no legal requirement that the agreement must be in writing. However, if it is not in writing, there may be difficulty in establishing the exact terms that were agreed. Such agreements are known as cohabitation agreements. See our article on Making a 'Cohabitation agreements' for more information.

In England and Wales, in order to avoid any challenge on grounds of public policy, an agreement must avoid the implication that cohabitation is part of the obligations of the agreement. It is therefore safer to enter into the agreement after, rather than before the couple have started living together. It is also important that both parties ensure that they have independent legal advice, so that the allegation of undue influence cannot be raised after the agreement has been entered into.

In England and Wales, in domestic circumstances, there is a rebuttable presumption that the parties do not intend to enter into a contract. Where the couple have a written agreement, especially if they received separate legal advice upon it, it should not be difficult to rebut the presumption. There is no such presumption in Scotland, and the agreement would stand unless either party claimed they were forced into the agreement or lacked the capacity at the time of signing it. Any arrangements proposed must be set out clearly; otherwise the agreement may fail through lack of certainty. It is better to make the agreement as a deed.

The main issues normally covered in a cohabitation agreement include:

• The ownership of real property (known in Scotland as heritable property) and personal property
• Finances and how to divide bills and resolve ownership of joint accounts
• Issues with relation to any children including their maintenance and surnames

It should be noted that any agreement made in relation to children would be open to review by a court. It is important not to include matters of a trivial or personal nature, such as the division of chores because a court might then find that the parties did not intend to create a legally binding agreement.

Although the general rules of contract will apply to the enforcement of cohabitation agreement, it might be advisable to include an arbitration clause in the agreement for dealing with disputes between the parties.

Buying property together in England and Wales

Couples might buy property together. One of them might contribute significantly more to the purchase price than the other. An effective way of clarifying the beneficial interest in a jointly owned property is by using a declaration of trust. This declaration of trust should be in writing and signed by the buyers. It will be conclusive evidence of each owner's shares in the property. The declaration can either be included in the purchase deed of the property or can be contained in a separate deed.

If a separate declaration of trust deed is used it can also provide for other matters such as:

• Dividing the liability for costs of repairs, insurance premiums and mortgage re-payments between the owners
• Determining the circumstances in which a sale may take place or may be postponed
• Provisions giving one party an option to buy the other's share

Where the unmarried couple both own the property they share as their home, their equitable or beneficial interest in the property can be held as either of the following:

• Joint tenants - this means that in the event of the death of either one of the couple, the deceased's legal and beneficial interest in the property will automatically pass to the survivor. (Where the legal and beneficial interests becomes merged, by being vested in one person, the trust comes to an end)
• Tenants in common - this means that each of the couple is deemed to own distinct 'shares' in the property and in the event of the death of either one of the couple, the deceased's share (beneficial interest) will pass in accordance with his/her will or the rules of intestacy where he/she has no Will. (Note however that the deceased's legal interest will pass to the survivor and if there was no Will leaving the beneficial interest to the survivor the trust will continue)

Having a Will

From the above it is clear that, especially where the equitable interest in the property is held as tenants in common, it would be important that the couple each have a Will in place, if they want to ensure that the surviving cohabitant receives the deceased's shares in the property upon either's death.

Buying a Property Together in Scotland

When couples buy property together, one of them might contribute significantly more to the purchase price than the other. When the property is purchased, the title can be taken in unequal shares to reflect the parties' contributions. Alternatively, a cohabitation agreement can be entered into, detailing the split of the beneficial ownership of the property. A cohabitation agreement should be in writing and signed by both parties.

If a separate cohabitation agreement is used it can also provide for other matters such as:

• Dividing the liability for costs of repairs, insurance premiums and mortgage re-payments between the owners
• Determining the circumstances in which a sale may take place or may be postponed
• Provisions giving one party an option to buy the other's share.

Where the unmarried couple both own the property they share as their home, their interest in the property can be held as either of the following:

• Joint ownership (either in equal or unequal shares) with a survivorship destination - this means that in the event of the death of either one of the couple, the deceased's legal and beneficial interest in the property will automatically pass to the survivor.
• Joint ownership (either in equal or unequal shares) with no survivorship destination - this means that each member of the couple is deemed to own distinct 'shares' in the property and in the event of the death of either one of the couple, the deceased's share will pass in accordance with his /her will or the rules of intestacy where he/she has no Will.

Having a Will

From the above it is clear that, especially where the property is held jointly with no survivorship destination, it would be important that the couple each have a Will in place, if they want to ensure that the surviving cohabitant receives the deceased's shares in the property upon either death.