A Cohabitation agreement (sometimes referred to as a Living Together Agreement) is a form of legal agreement reached between people who have chosen to live together. They are generally made between couples, but can also be used by friends who have bought a property together and want to set out what would happen in certain circumstances.
The legal test for cohabitation is as follows:
No particular part of the test is definitive. There can be a sexual relationship without living together. Staying together in the same house several days of the week may not sound like cohabitation to you, but has been held to amount to cohabitation by the Courts in the past. Everything is a matter of degree.
People will often live together to see how things work out. The longer a relationship is, the more difficult a breakdown can be to deal with. Over time your finances can become entwined. There may be a joint account and you may have given a guarantee over your partner's loan or business. You may have also bought a house together. As soon as you start mixing your finances together, legal issues arise. You do not have to hold a joint bank account, as long as there is contribution and that contribution does not have to be financial.
Attempts have been made to update the law in this field, but it is still based on old principles. Just because a person's name is not on title deeds does not mean they have no rights, or that the Court cannot make provision for any children of the relationship, even if their parents are not married. If you need help working out what to do, give us a call and we'll advise you on the best solution for your circumstances.
Where there is a clear statement or agreement at the start of a relationship on how things should be dealt with at the end, this would normally be binding. However, where there are children, the court may depart from this and how far they depart will be dependant on each individual case and the facts. However, if you sort out your legal position properly when you start living together, it is likely to save a great deal of difficulty and legal costs if you do eventually split up.
People assess risk based on immediacy. The further away a problem is likely to be, the less likely they are to deal with it at the time. This is the same with living together as it is with making a Will.
If there is no Living Together Agreement, you may find the law overrides your intention. While the problems and concerns of cohabiting couples are virtually indistinguishable from those of married couples or civil partners, the legal remedies are much more limited.
Property - If you are buying a property, you should make it clear to the solicitor dealing with it how you want the property to be dealt with if you separate. If you do not, then anyone who has paid a greater proportion of the price or deposit may find they lose the extra money. Your solicitor should ask you how you want to deal with this, but sadly they sometimes fail to do so, or people do not understand the significance of the question.
Capital Gains and Inheritance Tax - People living together are not entitled to make use of the Capital Gains Tax exemptions that apply to married couples. Any transfer of assets is therefore likely to be liable to Capital Gains Tax. Also anything left in a Will between people living together does not qualify for the inheritance tax exemptions that apply to spouses. This means in the event of one of you dying, the home may have to be sold to pay any capital gains or inheritance tax liabilities. Careful estate planning is required and we are here to help with this.
Maintenance payments – Cohabitees cannot claim maintenance from the other person. Where two people are living together, the legal aspects of their relationship are governed by the general law, along with a number of statutes. You do not have any matrimonial rights, only property rights.
Other problems - Where you are splitting up, you may find one of you wants to keep the home for them and the children and the other person wishes it to be sold. You may also find that liabilities are in your name and the other person is refusing to pay or contribute to these. These issues can be fraught with difficulties and be very expensive to resolve.
If you are about to start living together, we can provide discreet and sensitive advice on how you should arrange your affairs. If you have recently separated, we are also able to advise you on how matters should be dealt with. We usually provide this service on a Fixed Fee basis, so call us now on 01935 823883 for some initial free, no-obligation advice on how you can best move forward.