Unmarried couple solicitor Deborah Cahill explains the pitfalls of unmarried finance and why having a cohabitation agreement in place may help.
Many people decide not to get married but to live together. Perhaps because they think marriage is just a piece of paper, religious interference – or a form of control. They feel that living together is enough proof of their commitment.
Some people still believe that a period of cohabitation makes the relationship a ‘common law marriage’ with similar rights to married people. Others believe that having children make the relationship a type of marriage. In truth, there is no semi-married status and no common law rights. You are either married or not married – and rights or claims depend on that legal piece of paper.
If you move in with your partner and your tenancy is in joint names, you are both liable for the rent and both have a right to live there. Should the relationship end, you can either both walk away by giving up the tenancy or one of you can enter into a new tenancy with the landlord. It might seem simple. There are no joint assets – most importantly there are no children. However, one of you may not have paid their share of the rent and/or household bills leaving substantial debts for the utilities. If one partner has such credit issues, the other, who is living with them, becomes caught up in the situation. They not only have to pay their own share of the debts but also the partner’s. And there’s no opportunity to recover the money if the debtor has none.
Buying a home
Rather than rent, you may buy a home in joint names – but with no declaration about who put what deposit down or how the bills are going to be paid. As an example, you may borrow £50,000 for the deposit from your parents, declared to the mortgagors to be a gift. Perhaps your partner loses their job and you become the sole provider, paying back the loan from your parents whilst making all the mortgage payments. Then your partner meets someone else and wants to buy a home with them. They might now deny that the loan from your parents was a loan – after all there is a declaration that this was a gift. The property is sold – and your former partner gets 50% of the proceeds without any recognition of the debt.
Having a family
Should you decide to buy a house and start a family, one of you may take time off work to care for the children while the other forges ahead with their career, perhaps their own business. Because the stay at home parent is not earning, they cannot go on the mortgage. But they support the working partner for years, perhaps taking up part-time work to help the family out on the understanding that when the working partner makes good, everyone will benefit. But just as things do come good, the working partner decides that they want to keep all the rewards and share the care of the teenage children. The house, the assets and the business are all in their name. Nothing is in the name of the stay at home parent. They might argue that there is an agreement whereby they have some interest in the property or that the needs of the children mean that the other parent should provide a house. However, any money used may have to be paid back when the children leave education.
The law in England and Wales does not recognize cohabitation as a legal status with clearly defined rights. There are some provisions to recognise cohabitees when one party has died, where the survivor can claim pensions or a share of the estate. But there is no legal recognition of the partner’s existence as there is for a spouse and no legal right upon separation for any settlement to be fair as there is in divorce proceedings. The cohabiting partner may have to produce evidence of the whole relationship even to start a claim to anything, let alone a share of the assets.
Cohabitation contract and unmarried finance
If you want to protect yourself, a cohabitation contract may help, by setting out you and your partner’s intentions at the start of the relationship. This can be reviewed regularly or when there are changes in circumstance, such as the birth of a child. Such a contract can be legally binding and can help in the event of any breakdown of the relationship. The agreement can include details of the jointly held assets, the contributions the parties will make, and how those assets will be divided upon separation.