Protecting your assets against the impact of relationship breakdown

Cohabitation Agreements

The data from the ONS shows that in 2019 the number of marriages decreased by 6.4% on the previous year.  The figures also show that in 2019, 18.4% of families were cohabiting couples.  That figure rose to 22.9% in 2021.  It seems that more and more couples are choosing to live together as a form of commitment rather than getting married.    

There is a common misconception that couples who live together automatically become ‘common law’ spouses, especially if they have children or property together.  Many believe that they have the same rights as a married couple.  Unfortunately this is not the case, irrespective of the length of their relationship. 

So what happens to the parties’ assets on separation?  At present, where there is property owned by one or both of the parties, cohabiting couples are limited to the principles of property and trust law if a dispute arises out of a relationship breakdown. If property is owned jointly, the parties’ respective rights will depend on how the title to the property is held at the Land Registry (as joint tenants or tenants in common).  

There is no obligation on either cohabiting party to provide financial support for the other and the court does not have power to make financial orders of this nature. Similarly, the family court does not have any authority to determine how the assets of the relationship should be divided. Married couples however can make various claims for financial relief under the Matrimonial Causes Act 1973 and the court will take several factors into account when determining whether or not there should be an obligation to pay maintenance and how the assets of the marriage should be divided.   

Whilst it is possible that there may be a reform in the future, at present, there is very little protection for cohabitees when the relationship comes to an end.  It is however possible for cohabiting couples to enter into a contract with one another, known as a ‘Cohabitation Agreement’.  Cohabitation Agreements are bespoke documents and can include a variety of scenarios setting out how property and assets should be dealt with in the event of separation.  If the Cohabitation Agreement is properly drafted, signed and witnessed it is likely that it will be considered to be a legally binding document.

One example of where a Cohabitation Agreement may be considered is when a couple purchase a property together and each make unequal financial contributions to the purchase price.  A Declaration of Trust can be included to protect their respective shares upon separation.  In the absence of such, it will be deemed that the equity should be divided in accordance with how the title to the property is held, irrespective as to who paid what.   

Moving in together should be an exciting time for couples and whilst separating may be the last thing on their minds, it is a good idea to seek advice on how respective shares in property or assets can be protected in the unfortunate event of a relationship breakdown in the future.  

For further information, please contact Rachel Newsome on Malton 01653 69227, York 01904 716000 or Wetherby 01937 583210 or email rachel.newsome@warekay.co.uk for a confidential discussion.