Cohabitation rights and you

By Vivien Hardy
Partner, Boodle Hatfield solicitors

Legal expert Vivien Hardy

The government has announced that unmarried couples will be able to make divorce-style financial claims against each other after a relationship has broken down. What does this mean for you?

The reforms could be introduced as early as next year.

Under the proposed plans, cohabiting couples will be able to claim lump sums, a share of property including the family home, regular maintenance payments or even a share of their partner's pension in the event of a split.

The move towards new rights for cohabiters follows recommendations made by the Law Commission earlier this year.

Until now, couples choosing to live together, rather than get married, have enjoyed far fewer rights under the law than their wedded equivalents, even if they have been in a relationship for many years and have had children together.

The changes only apply to the law in England and Wales. Scotland has had similar arrangements in place since May 2006.

Misconception

There is a common misconception that couples cohabiting for long enough are effectively "common law" spouses.

There is no such thing recognised in law and cohabiting partners that subsequently split up may find themselves left with nothing, even if they have contributed financially to a household or paid a mortgage on a property in their partner's name for many years.

What is particularly interesting is that it appears that cohabiting couples may be able to opt-out of the law

All that is set to change, however, following a consultation paper published in May 2006 which is set to report in August 2007.

Indeed a recent interview with family justice minister Harriet Harman, published in the Guardian newspaper, suggested that the recommendations could be fast tracked into law as early as next year, as part of a family justice bill.

Fast track

Under the proposed legislation, unmarried couples who split up would be able to compare their respective assets at the point of separation versus the start of the relationship, in order to determine so-called "economic advantage" or "economic disadvantage" compared with the other party.

This could then lead to a claim being brought in the courts.

Economic advantage could mean a gain in capital, income or earning capacity during the course of the relationship.

Cohabiting partners could win the same rights as married couples

Contributions to the relationship could be financial or non-financial, such as work without pay or improvements to a partner's home.

Economic disadvantage could be sacrifices such as the loss of earnings, or the chance to accumulate capital or pension savings, because a partner was undertaking childcare or other domestic tasks rather than paid employment.

The proposed new rules will apply automatically if there are children born either before, during or after the relationship. If not, then a claim may still be possible after a couple have lived together for a certain length of time, say, two years, which is commonly used as a threshold in other countries.

Same-sex relationships

The rules will apply equally to same-sex relationships, as well as heterosexual couples.

Couples who do not wish to be bound by the new legislation can opt out by mutual agreement if they sign a special cohabitation contract, which would be legally enforceable and state beforehand exactly how their assets were to be divided in the event of a split.

What is particularly interesting is that it appears that cohabiting couples may be able to opt-out of the law by signing a legally enforceable cohabitation contract stating what will happen when they separate.

This opt out appears at odds with the lack of enforceability of pre-nuptial agreements; cohabitees may be able to protect themselves but not married couples.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.