Lots of couples cohabit but not so many are aware of the benefits a well written cohabitation agreement can bring. It can be as detailed or as simple as you want. Its purpose is chiefly to deal with what should happen in the (hopefully unlikely) event that the relationship breaks down and sometimes also in the event of the death of one of the cohabitants.
Some agreements simply record the funding for purchase of a property, where for example title is taken equally but one person contributes more than the other does.
In that situation, the agreement can provide for what should happen on separation, usually that each person will receive back the amount they put in.
The agreement can also be used to set out a framework for payment of household expenditure, for example recording that parties will pay in proportion to their respective incomes.
Sometimes, one person will move into a property already owned by the other. Here, the agreement can be used to make clear that the person moving in does not acquire any rights in the property and to make sure there is a clear protocol for that person to move out if the relationship ends.
That sounds very clinical but in the absence of such an agreement it is in theory possible for the person who has moved in to apply to court for a right to occupy the property for a period of time following the end of the relationship.
Financial provision on separation
Cohabitation agreements can go a step further. Under legislation which came into force in 2006, it is possible for cohabitants to apply to court for financial provision (in practice, for payment of a capital sum), in certain circumstances and provided the claim is made within one year of the date cohabitation stops.
Claims can be made where one cohabitant believes he or she has been “economically disadvantaged” by the relationship and can show that the other person has been economically advantaged as a result of his or her contributions and/or that an order should be made to help with the economic burden of caring for a child of the relationship.
Contributions include not only financial ones but also indirect and non-financial ones too. So, that could include looking after the children, or using interior design or DIY skills to enhance the value of a property owned by the other person.
Economic advantage is defined as including gains in capital, income and earning capacity. So, if one person is able to build up a successful business whilst the other gives up a career to stay at home to look after the house and children then that could give rise to a potential claim.
However, there are also counter arguments, such as the extent to which any disadvantage is offset by advantage, for example being able to enjoy a better lifestyle because of wealth accumulated as a result of the other person successfully developing their business.
The wording of the legislation is quite convoluted and the case law that has evolved has not been especially consistent, making it hard to predict with any degree of certainty how a claim will be decided.
A cohabitation agreement can be used to eliminate that uncertainty altogether because parties can contract out of the legislation, by giving up the right to make claims under it.
Care needs to be taken here, of course, as it might be better to leave in the possibility of making a claim under the legislation. We can discuss all of this with you so that you can make the most informed decision possible for your particular circumstances.