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Hetty Gleave discusses Cohabitation Agreements and how they should provide certainty and security

  • February 12, 2020
  • By Hetty Gleave, Partner

Increasingly, cohabitation agreements are seen as a sensible part of financial planning, and an opportunity for couples to have an open discussion about their current and future financial arrangements.

However, many people who might be interested in a cohabitation agreement feel awkward about raising the subject. It is never easy to raise the possibility that a relationship that is stepping up to cohabitation may fail.

On the other hand, leaving unresolved important questions, such as in what shares your home is owned, or whether one party should be financially supported by the other in return for giving up their job to care for children, or even who keeps the box sets can create tension and strain in a relationship.

A good way to think about a cohabitation agreement is as a type of insurance policy – it can save the expense and acrimony of resolving misunderstandings and disagreements later on if things go wrong, as well as contributing to a more open and honest relationship.

Cohabitation agreements often set out how a couple will arrange their finances during their relationship, as well as what should happen to their assets if their relationship comes to an end. As they are tailor-made for each couple, they can also deal with things like the ownership of gifts to each other, of personal items such as furniture, art and even pets, and how expenses are to be shared.

A cohabitation agreement is a legally binding contract if both parties intend it to create legal relations. Usually this is achieved if it is signed as a deed. Unlike pre-nuptial agreements, cohabitation agreements cannot be overridden by the court on the basis that they are not fair. However, if one party can show that they entered into a cohabitation agreement under fraud or duress, or it was clearly a mistake, they won’t be held to it – but this can be difficult to prove. If a couple gets married after they have entered into a cohabitation agreement, it will no longer be binding, and they may wish to consider entering into a pre-nuptial agreement.

A cohabitation agreement is particularly recommended where a couple is purchasing a property together, or when they are mingling their finances. For example, if one partner is giving up work to look after their children, or to support the other’s career, or will be making financial contributions to property owned by the other, a cohabitation agreement might be sensible to help ensure that both parties understand the long-term financial implications of the steps they are taking.

Significant events such as the purchase of a property, moving in together, or expecting your first child can be a convenient trigger to raise the prospect of a cohabitation agreement, especially if your financial arrangements will be changing. Cohabitation agreements are increasingly used by couples who want to be clear about their financial commitments to each other and regulate their financial and property affairs.

Last week, a Bill was introduced in the House of Lords which would allow the court to make limited financial provision on the breakup of a cohabiting relationship where the parties had a child or had cohabited for more than three years, and one party had retained a benefit, or the other had an economic disadvantage, as a result of contributions (financial or otherwise) made during the relationship. However, it’s not clear that the Bill will pass, and in any event its provisions may not suit the needs or wishes of all cohabiting couples.

Ultimately, a cohabitation agreement should make each party feel more secure in their own financial and living arrangements, as it provides certainty. Whilst it may be awkward to raise the topic and discuss the terms, this security is a positive aspect that a couple can focus on.

If you are interested in finding out more about cohabitation agreements, please contact Hetty Gleave or another member of our family team on 020 7412 0050, or send an email to Hetty.Gleave@hunterslaw.com

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