Cohabitation agreements are on the rise in Scotland. This is partly because people are choosing to live together rather than marry, and partly because there is a greater awareness of the existence of cohabitants’ rights in Scotland.
Although people know that they should have a cohabitation agreement, there is often a reluctance, on both sides, to take legal advice. This reluctance can be for various reasons, but cost and/or inertia usually figure as one of the reasons.
Why bother to take legal advice on the terms of a cohabitation agreement?
A cohabitation agreement is a contract between a cohabiting couple. If it is in writing, and properly signed and witnessed, the chances are that it will be considered a binding contract. There is no cooling off period. It is a binding contract as soon as it is properly signed. The problem with a binding contract is that it can be very difficult, impossible even, to either overturn or vary the terms of a cohabitation agreement. You could be tied to the terms forever, regardless of any future change in either the fortunes of yourself or your former cohabitant.
Examples of what can go wrong with a cohabitation agreement are almost endless, but three recent problems we have seen include:
- An obligation to pay the other cohabitant generous maintenance, with neither a cut off date nor an option to vary the obligation. This means that if the payer’s financial fortunes change for the worse, or if the payer retires, they are tied to an obligation to pay maintenance at the original rate agreed. This may bring with it the prospect of bankruptcy if they stop, or reduce, the maintenance payments. The lack of a variation clause can mean that the obligation to pay maintenance will continue, even if the former cohabitant (receiving the maintenance payments) is living with, or married to, someone else.
- An obligation to pay a lump sum from a pension, when the payer would ordinarily have no obligation to make such a payment.
- Similarly, an obligation to pay any form of lump sum when they cannot really afford to take a lump sum payment from their pension or otherwise make payment.
Negotiating and adjusting the terms of a cohabitation agreement should not be overly expensive, but a properly drafted agreement may not be cheap, particularly if there are complex issues involved. However, it should be possible to find a lawyer to advise you on the terms of a cohabitation agreement for a fixed fee. This will be money well spent if you fully understand the obligations you are entering into. The cost of not understanding them could run into tens or hundreds of thousands of pounds, not to mention many sleepless nights!
On July 4, 2013