Research has shown that around half of cohabiting couples believe in the existence of ‘common law marriage’.
For those of you who have not heard this term – it is the old-fashioned concept that couples who live together and are in a stable and committed relationship receive the same or similar treatment as married couples under the law.
Couples who have children are especially likely to think that they are in a ‘common law’ marriage. After all, what could show your commitment to your partner more than having a child together? Your relationship with your partner now has legal status, right?
The fact is, there is no such thing as ‘common law marriage’. Due to a misguided belief in this concept, many couples fail to take steps to protect their own and their children’s financial security in the event that their relationship breaks down.
On the breakdown of a marriage, the parties can claim rights to each other’s assets, including property, pensions, bank accounts etc. It does not matter who legally owns these –they can all potentially fall within the matrimonial pot. Spouses can also make claims on each other’s income through maintenance orders.
For cohabiting couples, the situation is far more complicated. They will need to rely on property law and/or Schedule 1 of the Children’s Act 1989. Claims in property law are decided very differently to claims under matrimonial law. Judges do not have the same kind of discretion they have when determining the claims of a married couple to arrive at a fair result, and it is much more difficult for the often financially weaker party to make out an interest in property that they do not legally own.
In order to prevent this situation arising in the first place, it is advisable to enter into a Cohabitation Agreement. This is an agreement that sets out the way yours and your partner’s finances are arranged during, and crucially, on the end of your relationship. You can think of a Cohabitation Agreement as an ‘insurance policy’ – it doesn’t mean that you will split up, but if you do, you’ll be glad that it was in place!
The Agreement is designed to be a legally enforceable contract. For this reason, the Agreement should only deal with land, property or money issues. If the Agreement deals with domestic matters (such as who is to do the cooking, cleaning or childcare) then it is open to challenge because this can indicate that the Agreement was not intended to create ‘legal relations’ between the parties. The matters dealt with in the Agreement therefore need to have a sufficiently ‘legal’ character.
Some examples of matters that can be included in the Agreement include:
- Who is contributing to the purchase price of the property and where are these funds coming from
- In the event of a split, will one party have the option to ‘buy out’ the other party?
- Who is responsible for paying the mortgage and other outgoings?
- How are the other assets e.g cars to be owned? How will these be divided if you separate?
Where you are planning to purchase or already own a property together, it is strongly advisable that you enter into a Declaration of Trust as well. This will set out the proportions in which you both own the property and is especially important if you have made unequal contributions to the purchase price.