6th March, 2017
Parties considering moving in together or buying a house together are often advised to enter into a Cohabitation Agreement (often referred to as a Cohabitation Contract). This article explains what a Cohabitation Agreement is and looks at some of the advantages and disadvantages of entering into one.
What is a Cohabitation Agreement?
A Cohabitation Agreement sets out arrangements between two or more people who have decided to live together. They are usually partners in a relationship who have decided not to marry but they can be used by friends who have decided to put their finances together and also have decided to live together.
The agreement can:
- Record contributions made by both parties for the purchase of the property;
- Regulate the financial arrangements of the parties whilst living in the property, for example, confirming who is to pay the mortgage and the bills;
- Set out what is to happen to the property and the proceeds of sale in the event of a separation or when the relationship comes to an end;
- Record the parties’ intention in relation to legal and beneficial ownership of the property;
- Set out financial provision to be made for children during and at the end of the relationship;
- Confirm the ownership of personal property owned by one party.
What are the advantages?
By entering into a Cohabitation Agreement you can prevent the need for costly litigation in the event of an end to the relationship.
It encourages both parties to think about their financial arrangements both before and after their cohabitation and be clear about their financial obligations during and at the end of the relationship or arrangement.
Cohabitation agreements can preserve one party’s investment in situations where one party has invested more in the property than the other.
What are the disadvantages?
Cohabitation Agreements are not automatically enforceable by the courts and there remains uncertainty about their standing. They are subject to the principles of Contract Law and can be challenged upon contract principles.
The costs can be a deterrent as parties entering into a relationship or arrangement are often unwilling to incur the extra cost of negotiating and entering into a Cohabitation Agreement in circumstances where:
- They do not contemplate a breakdown in that relationship or arrangement; and
- They are already stretched financially.
It is important whenever contemplating entering into a Cohabitation Agreement that both parties obtain their own independent advice from a Solicitor.
For more information on the issues raised in this article please contact us.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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