Binding agreements are useful for unmarried couples living together.
The most popular solution is a cohabitation agreement.
It covers both parties in the event of a breakup.
Read on to learn about this type of agreement.
What is a cohabitation agreement?
A cohabitation agreement is a written agreement between two unmarried people living together.
The purpose of this agreement is to clarify critical details about property ownership.
Confirming these issues can stop separating couples from ending up in court.
What’s included in a cohabitation agreement?
Ownership percentages
A property is not always owned 50/50.
Sometimes, one person owns more than the other.
This percentage can also change over time. This might be to reflect ongoing investment in the house.
Who pays bills, rent, and other financial responsibilities
You should indicate who pays each bill. This is sometimes be tied to the ownership percentages.
Details about joint bank accounts
It’s common for two people to live together to share a bank account.
If this applies, you need information about what it’s used for, which bank holds it, and so on.
What happens to a pet if the pair separates
This may seem like a trivial detail at first glance, but as any pet owner will tell you, it isn’t!
The situation can become complicated if you aren’t clear on this area.
Info about pensions, life insurance, savings, and investments
You aren’t alone if you find these details uninteresting. But that doesn’t make them unimportant!
You’ll need clarification on all these areas if a separation occurs or if someone else moves in.
Are cohabitation agreements binding?
Yes, this document is binding, provided it’s completed and executed properly.
You should get support from a solicitor to ensure that everything is ‘above board’.
Reasons to get a cohabitation agreement
Protecting rights
It protects the rights of both people involved.
When your agreement is well-written, it outlines each parties’ entitlement. This ensures that you receive everything you deserve.
Clarification of ownership
Misunderstandings are far more likely without a written agreement.
Even if neither party has genuine malice, there can be confusion about who bought what. This impacts what each party can take away when you move out.
A cohabitation agreement helps to keep track of things that are difficult to value.
Examples include driving children to school or cleaning the house. If only one person does this, you can reflect it in the settlement.
Insurance against unforeseen events
The agreement protects all parties in the event that one of them passes away.
You may not be entitled to any of their finances or belongings without a written contract.
But a well-written cohabitation agreement can change that.
Do I need a solicitor to create a cohabitation agreement?
You should use a solicitor. They can ensure that the document:
- Is binding
- Covers eventualities that you might not have thought of
- Fair to all parties.
They should have professional indemnity insurance to cover anything that goes wrong.
How much does a cohabitation agreement cost?
Solicitors prices for creating cohabitation agreements usually start at £700.
This can rise to several thousand pounds for the most complicated cases.
Ways to end a cohabitation agreement
The process is straightforward if both parties agree to end a cohabitation agreement. It can be achieved through a few different methods.
If you want to end the agreement but the other party doesn’t, a solicitor can help you. Disagreements about money, housing or children can often end up in court in this situation.
Deed of termination
You need to put it in writing and then witness a deed of termination.
A solicitor can help you with this. This is the most common and official way of ending the agreement.
One of the parties dying
Your cohabitation agreement typically ends when one of the parties passes away.
Ownership usually either defers to the person’s will or transfers to the surviving party. Speak to a solicitor for guidance.
One of the parties getting married
A cohabitation agreement can end when one of the parties gets married. This usually means that it’s no longer relevant and becomes void.
You will typically want to establish a new agreement in this situation.
The parties adopt or have a child
This can change the nature of the relationship and may thus warrant a new agreement.
Or it could invalidate the contract, depending on the circumstances.
A court order that forces you to end the agreement
You may be required by the court to terminate the agreement.
This only happens in rare circumstances. For example, someone going to prison or incurring sizable debts.
Alternatives to cohabitation agreements
Cohabitation agreements are ideal for unmarried couples. If you get married, a pre-nuptial agreement should take its place.
There isn’t a suitable alternative to a cohabitation agreement for unmarried individuals.
If someone passes away, the only real alternative is creating a will.
This can explain what happens to your finances and assets in the event of your death.
If both parties do this, you can ensure you leave all your things to each other. But inheritance tax will still be due.
