Scots law gives cohabitants the right to make a financial claim against their former partner in the event of separation.
Claims may arise if one of the partners has suffered an economic disadvantage as a result of the relationship or in the event that one partner has the burden of care of the children of the relationship.
Because of the potential for a claim in the event of separation, people are often advised to put a cohabitation agreement into place before they move in together, but how many people appreciate what they can and cannot do with such an agreement?
What can you do with a cohabitation agreement?
At its simplest, the agreement can waive both partners' financial claims in the event of separation.
Alternately, if one partner has made a clear economic contribution to the relationship, such as by gifting money to their partner to use for the improvement of the partner's house, the agreement could provide for the repayment of that money, or a sum of money calculated by a simple formula (for example, the original sum paid expressed as a percentage of the value of the house at the date of separation), to be repaid within a set timescale.
What about more sophisticated cohabitation agreements?
It is possible to enter into more sophisticated agreements, providing for account to be taken of the respective partners' contributions to a property from savings, as well as their contributions to various aspects of the household expenditure.
Experience however shows that these agreements have a tendency to become more and more complicated as both parties try to cover every possibility. This usually has a significant impact on cost. In short, they are to be discouraged.
What can you not do with a cohabitation agreement?
Whilst it might seem a good idea to agree on the future arrangements for residence and contact of children in the event a couple split up at a later date, the reality is that the arrangements for the care of children need to be considered at the time of the separation, rather than several years before.
Any cohabitation agreement providing for residence or contact at an indeterminate time in the future is unlikely to be enforceable.
Do I need legal advice before signing a cohabitation agreement?
A cohabitation agreement is like any other contract.
As long as the partners have entered into an agreement of their own free will, it is legally binding, making it very hard and expensive to try to get out of at a later stage.
A common mistake people make is to assume an agreement provides for something that is not actually recorded in the agreement.
For example, someone may think they are entitled to repayment of sums they invested in their partner's house upon separation, but does the agreement provide a time limit for payment, or do they run the risk of waiting indefinitely for payment, simply because the agreement does not do what they thought it did (i.e. give a date for repayment)?
It is much better to take legal advice before signing a cohabitation agreement, to check that it does what it is intended to do and to ensure that it doesn't contain any pitfalls that aren't immediately obvious.
