Cohabiting couples - have you thought about the future?

The number of couples choosing to cohabit is growing faster than the number of marriages. 

Over the coming weeks, many couples may wish to take advantage of the recent extension to the stamp duty holiday by pooling their financial resources to purchase a property together. From a family law perspective, there are several issues that should be considered, especially if the couple are unmarried.

Cohabiting couples - the potential issues

Many couples do not realise that they have very little financial or legal protection relating to their property if the relationship breaks down. There remains a myth that common law marriage exists and that cohabiting couples automatically have legal rights because of their relationship.

Unlike their married counterparts, cohabiting couples do not automatically have legal rights and responsibilities when their relationship breaks down, even if they have been living together for many years.  

On divorce, married couples have automatic claims for financial support and a share of the assets such as the family home, other property, bank accounts, investments, business assets and pensions. However, for unmarried couples, no matter how long they have been living together, no such claims automatically exist.s. This is particularly important in the event the unmarried relationship ends or if one partner dies.

For married couples there is an established legal framework for dealing with property rights on divorce, to ensure fairness and ensure each spouse has some right to a share in the property. For cohabiting couples, the situation is very different. Many people live together or decide to purchase a property together without considering how to protect their contributions to ensure they receive a share of the property should the relationship end.

We are often asked to advise on the division of property following the breakdown of an unmarried relationship. If the cohabiting couple decide to separate and the property is owned in one person’s sole name, it can be complicated to work out whether the other person has an interest in the property unless they can produce evidence of a direct financial contribution to the value of the property. For instance, this could be by:

• paying towards the deposit or purchase price, 
• by contributing towards the mortgage or 
• helping with the cost of renovations. 

If these contributions are not recorded in writing, by agreement, setting out how this reflects their respective shares in the property, the non-owning cohabitee may find it difficult to establish the extent of their share. For this reason, cohabiting couples should ensure that both names are on the title deeds for the property and that all contributions are documented.

Any unmarried couple wishing to purchase a property together should enter into a Declaration of Trust agreement, especially if they wish to own it in unequal shares. In addition, whether they own a property jointly or individually, they should consider entering into a Cohabitation Agreement to set out:

• how the mortgage repayments and household bills will be paid, 
• how any joint bank account will operate, 
• how repairs and renovations will be funded and 
• what will happen to their home should they separate.

If an unmarried couple are buying a property in joint names, they should also carefully consider how they wish to own it as there are two main ways in which a property can be jointly owned – as ‘joint tenants’ or as ‘tenants in common’.  

What does joint tenants mean?

Under a joint tenancy, their shares in the property are undefined and if one of the owners dies, their share will pass automatically to the surviving co-owner. This is known as the ‘right of survivorship’. If this is not how the parties would wish to deal with the property on death, then they should choose a tenancy in common.

What does tenants in common mean?

Couples may choose to own the property as tenants in common instead so that each party owns a specific share in a defined amount, which can then be left to whoever they choose in their will. 

It is therefore essential that when couples are considering buying a property together, they discuss how they intend to own it so that the appropriate documents can be prepared, and they ensure their wills are up to date to reflect this.

If you would like help with any of the issues raised in this blog, or if you would like general cohabitation advice, please contact our expert family lawyers for a free, no obligation, 15 minute conversation to discuss how we can help you. 

I can be contacted on 01206 217378 or shelley.cumbers@birkettlong.co.uk.