A "Cohabitation Agreement" is a contract between a cohabiting couple, or a couple who are soon to cohabit.
One common scenario in which a Cohabitation Agreement might be entered into is where a couple are purchasing a property in joint names but are making unequal contributions towards the cost of acquisition of the property. In that event, a Cohabitation Agreement can effectively ringfence their respective contributions in the event of a separation. However, such agreements are bespoke, tailored to the particular circumstances of the couple, and can address a wide variety of matters: there is no "one size fits all".
If such an Agreement is documented in writing, and properly signed and witnessed, the chances are that it will be considered to be a binding contract. There is no "cooling off period". Binding agreements, by their very nature, can be extremely difficult (at times impossible) to vary or to set aside,, regardless of any future change in the circumstances of the parties. Parties intending to enter into such Agreements are therefore wise to take full legal advice to ensure that they are satisfied, prior to signing, that the contract achieves the purpose for which it was drafted. Whilst each agreement will be tailored to individual circumstances, there are certain provisions which may be worth considering in all cases.
What to include in a cohabitation agreement:
1. Effect of marriage or civil partnership
Spouses and civil partners have a much wider range of claims available to them on separation than those applicable to cohabitants. It is prudent to consider,before signing a cohabitation agreement, whether or not the terms of the cohabitation agreement should remain in force in the event of marriage or civil partnership. If a marriage is anticipated, cohabitants may consider entering into a pre-nuptial agreement to ensure their intentions with regard to certain assets are clearly recorded.
2. Renunciation of other claims
Cohabitants have the right to make financial claims upon breakdown of their relationship. A properly drafted cohabitation agreement can allow parties to restrict the right to make such claims.. If a Cohabitation Agreement is intended to cover only one specific scenario, eg the purchase of a property in joint names, then it is critical that parties have a clear understanding of whether the agreement goes beyond that and contracts parties out of making any financial claim, which could have costly consequences.
3. Binding after death
A Cohabitation Agreement will not automatically be enforceable against a deceased's estate. If the parties intend the Agreement to apply after death, the Agreement must contain express provision to that effect. Failure to include this may result in an outcome which was against the cohabitant's wishes.
4. Change of Circumstances
A Cohabitation Agreement will bind parties to the terms and there is no legislative provision which allows courts to automatically overturn agreements in the event of a change in either party's circumstances. This means that if such an agreement is drafted to provide, for example, a generous monthly maintenance payment to one cohabitant, and the relationship breaks down, the payer may be bound by the maintenance clause indefinitely if there is no express provision that this would cease to apply.
Cohabitation Agreements are a useful tool and can provide parties with peace of mind that their finances are protected. However, examples of what can go wrong with a cohabitation agreement are almost endless. Even if cohabitants have the best intentions when drafting their agreement, they can still be surprised by the unexpected, particularly if there are complex issues involved. Taking legal advice on the drafting of an agreement is likely to be money well spent . The cost of entering into an Agreement which is not properly understood could run into many thousands of pounds, not to mention countless sleepless nights!
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