Why every cohabiting couple should enter into a ‘no-nup’ agreement

Cohabiting couples are the second largest type of family in the UK after married or civil partnership families and the fastest growing. But they do not have the same legal rights, and couples who live together without entering into a cohabitation agreement are making a big mistake.

Where you buy a property jointly it is even more important that you specify your respective entitlements, especially where you and your partner contribute different lump sums or pay the mortgage and/or outgoings in different proportions.

There is no such thing as a common law wife or husband. It is a misconception that if you live together you acquire legal rights as if you are married.

That's why cohabiting couples are well advised to enter into a cohabitation agreement (less formally known now as a 'no-nup'). This is an agreement that sets out financial, property and other arrangements between a couple during their relationship and in the event that it unravels down the line. Even if you think your assets aren't large enough to warrant such an agreement, you will probably save yourself a huge amount of hassle by signing one.

What should your no-nup cover?

A no-nup can cover any number of issues, including (but not limited to) the following:

1.Property and living costs

Property is usually the biggest asset people own and as a result the battleground for the most disputes. If your partner is moving into a property you own they may pay you 'rent' or simply contribute in other ways to the day-to-day running of the property.

Payment of bills or food does not mean that they would acquire an interest in your property. To be able to make a claim, they would have to show that you both intended them to have a beneficial interest in the property.

Contributing towards the mortgage or paying for an extension, for example, may give your partner grounds for claiming they hold an interest in the property if the relationship ultimately breaks down.

To guard against this, a cohabitation agreement should set out who pays what and what rights your partner will acquire (if any) in the property. If it is clearly the intention that your partner will not gain any rights, you might include a declaration of trust confirming that they have no beneficial interest in the property. You could also grant them a licence giving you the right to require them to vacate the property if you break up. Not exactly romantic but it would protect your asset.

Where you buy a property jointly it is even more important that you specify your respective entitlements, especially where you and your partner contribute different lump sums or pay the mortgage and/or outgoings in different proportions. If your contributions are not equal and you don't record your entitlements, on the breakdown of the relationship a court may order that the net proceeds of sale of the property are divided equally irrespective of your respective contributions.

The cohabitation agreement should also set out how you split household and other living expenses.

2.Who owns the assets you hold when you enter into the agreement

Assets can include a car, furniture, antiques, household goods such as kitchenware and anything else either of you possesses, including money in joint bank accounts. You should list who owns what and who pays liabilities such as overdrafts, credit debts, car loans or lease hire costs.

You should also consider the status of assets bought during the relationship and gifts received from your parents or friends.

3.Wills and pension arrangements

The intestacy laws provide that the surviving spouse of someone who dies intestate will automatically inherit their estate. This does not apply if you are unmarried and you should consider making a Will if you want your partner to benefit from your estate (and vice versa).

You may also want to consider what rights each of you will have to the other's pension.

4.Children

If you have children, the cohabitation agreement can set out the arrangement concerning how they will spend their time if you split up and what financial support will be given in relation to them.

5.Pets

You may or may not be surprised how much heartache, anger and expense there can be over custody of the dog (or cat or rabbit, etc.). Couples have fought expensive legal cases over this issue with cases even turning on whose name the pet was registered in at the vet.

6.Trigger events

A cohabitation agreement should specify what events trigger the termination of the agreement and what happens when one of those events happen. This may include defining what the parties mean by infidelity as not everyone sees these things the same way.

7.Social media and announcing the split

In these days of all-pervading social media, you can also set out what rights you each have to announce any break up on social media or to friends and family.

To be valid, parties to a cohabitation should be separately represented and both parties should provide full financial disclosure. The parties should be open and disclose their assets and liabilities before they sign up so there is no question of one party claiming that they entered into the agreement on the basis of misrepresentation by the other.

This type of agreement should be reviewed regularly as circumstances change such as moving into a new property, starting a family, or inheriting from one's parents, etc.

If you would like to discuss entering into a cohabitation agreement, please contact Mark Goldstein now at [email protected] or on 020 7616 5322.