Why cohabitation agreements can be vital for unmarried couples buying a home together

A new survey by Barratt has exposed a concerning lack of awareness about the reduced legal rights of unmarried homeowners, which is why the homebuilder collaborated with family lawyer Elizabeth Jones from Parfitt Cresswell to create a guide to finances and cohabitation agreements.

She says: “Buying your first home together means dreaming of happy times ahead but it’s also the time to be serious. What would happen to that home and everything you own, should you decide to go your separate ways?

“In England and Wales opposite and same-sex couples who live together aka cohabit do not automatically have the same legal rights as married couples.”

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This is concerning because more unmarried couples are buying homes than ever before. Marriage rates are at their lowest since records began and ONS census data found that the number of cohabiting adults in the UK rose by more than 800,000 between 2010 and 2020.

Make sure the legalities are sorted should you split upMake sure the legalities are sorted should you split up
Make sure the legalities are sorted should you split up

A Barratt survey found that 61 per cent of those questioned had never heard of a cohabitation agreement before.

One in four were unaware that unmarried couples do not have as many rights around property and finance as married couples and one in three people who were in a relationship but not married did not know that they had less rights around property and finance as a married couple.

Elizabeth Jones says: “I would recommend a cohabitation agreement to anyone who is planning to live with someone, whether on a relationship basis, on a financial basis sharing living expenses, or on the basis of familial and/or friendship bonds.

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“The dangers of not using a cohabitation agreement are uncertainty over ownership of property, furniture and effects, which can be very stressful and expensive to resolve via the courts.”

She adds that a strong cohabitation agreement should include: Detailed personal information and evidence of personal finances to avoid any accusation of misleading the other parties.

Information on whether the property will be held in fixed shares or is a more adaptable approach preferred. She also advises that details of how household expenses will be shared should be put in the agreement, along with how furniture and effects are to be owned and maintained;

Another consideration is whether a buy-out clause is available to all parties or not and what, if any, provision will be in place for a survivor should a person die.

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Also crucial is an agreed process for valuing and selling the property upon relationship breakdown.

Elizabeth adds:“The pros are that an agreement gives clarity and peace of mind . It can avoid the need for very costly and unpredictable court proceedings by declaring how the property, furniture and effects will be owned and maintained.

“Third party investors such as ‘the bank of mum and dad’ can also have the terms of their investment in a property agreed and protected.

“The cons are that cohabitation agreements are a recent phenomenon and the courts have processed few cases so practitioners can’t give certain advice upon enforceability yet.

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"However, that will change with time and soon, the cohab-agreement will be as ubiquitous as the pre-nuptial agreement but we are not quite there yet, though demand is slowly growing.”

Elizabeth suggests that the first step is to speak to who you are planning to live with to see if they are willing to enter into a cohabitation agreement. If so, then consider approaching an experienced family lawyer.

Most family lawyers will charge on a time basis so the more complex the agreement the more expensive it will be.

She adds: “Further preparation of such an agreement is likely to coincide with an expensive property purchase, that said, it is a worthwhile investment to ensure clarity and security.”

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She stresses that you will need to revisit and refresh your cohabitation agreement if either of you becomes seriously ill or disabled, loses their job or faces a drop in income or receives a large inheritance.

You will also need to refresh your cohabitation agreement if you have a child together or you decide to get married.

If you opt for a Civil Partnership and you are not a joint owner of the home you have no right to remain if the owner withdraws permission to stay. However, you can apply to the court for a right to remain for a set amount of time.

A partner who is not the owner cannot stop the sale of the property but may apply for a limited right to remain in the home. They are not entitled to a share of the proceeds.