How the Government is changing laws for cohabiting couples: Sarah Coles

It’s looking at three particularly messy legal areas. It wants to reform the law for unmarried couples that separate after living together, change the rules for unmarried couples who die without a will, and clarify the rules around divorce.

For cohabiting couples who split, the aim is to provide them with new rights. They wouldn’t be as extensive as those for married couples, because the government is keen for marriage to retain exclusive rights. However, the new rules should provide more protection than couples have right now.

The idea is for this to apply to couples who’ve lived together for at least three years or who have a child together. There could be an option to opt out if both partners agree, with safeguards like insisting both sides of the couple have independent legal advice before they do.

The assumptions behind the split would be fundamentally different from divorce – which starts with the principle of a 50:50 split of matrimonial assets. For cohabiting couples, the idea is for each person to keep what they legally own, except where that leaves one or the other with real financial issues. In establishing any financial issues, it would consider the needs of any children before anything else, and wouldn’t worry about nice-to haves. There also wouldn’t be an equivalent of spousal maintenance, except in very rare circumstances.

For cohabiting couples, where one of them dies without a will, it has outlined a possible new approach. At the moment, they may get nothing if there’s no will, because their estate is left according to intestacy rules – which don’t include unmarried couples. The government is proposing adding cohabiting couples to these rules.

However, it is considering a separate definition of cohabitation from the one set up for cohabitees who split. The idea would be to more closely match case law around inheritance. The definition would be designed to establish an equivalence to marriage, so it suggests a couple might have had to be together for five years where there are no children, or two years where there are. Those who have a child together and lived together for less than two years might also be able to make an application for reasonable financial provision from a will.

The government is also exploring the law around divorce, much of which is open to interpretation and is based on the result of cases rather than clear guidelines. The idea would be to bring together existing case law and then add extra rules in areas where case law isn’t currently settled.

It could clarify that the starting point would be to share assets built during the marriage equally – unless it has to be unequal in order to meet everyone’s needs. This wouldn’t include any assets built beforehand and kept separate. It’s only when there’s not enough matrimonial property to meet everyone’s needs that the court would consider sharing these separate assets.

When looking at needs, those of any children come first, followed by how much capital and income each of the couple needs, and finally any discretionary needs if there’s enough money to go around. The law currently requires the court to consider other factors too – like how old the couple are and how long they have been married. The new roles could add in a ‘compensation factor’, to take account of any economic disadvantage one of them may have faced during the marriage – in many cases this will be where one of them has given up a career to care for children.

One major and very welcome change would be a requirement to consider pension assets as part of the financial settlement, reducing the possibility that it’s completely overlooked by the member of the couple with very little set aside for retirement.

The government is also considering rules around pre-nuptial agreements, which lay out what might happen in the event of divorce, but aren’t currently legally binding. The idea would be to make them binding, as long as both sides of the couple know what they are agreeing to, they make the decision freely, and the pre-nup isn’t designed to avoid the couple meeting one another’s needs.

Another incredibly positive step in this consultation is considering the needs of the victims of domestic abuse, in marriages and between cohabiting couples. The current approach is flawed in many ways, not least that in order for misconduct to be considered during divorce it needs to be incredibly serious, and the case law requires it should be enough to provoke a ‘gasp’ rather than just a ‘gulp’. This is incredibly subjective, and doesn’t take into account the fact that courts who deal with misconduct on a regular basis may have a much higher bar for what provokes a gasp than people with more typical life experience.

As a result, domestic abuse is often left out of considerations, and in a relationship where an abuser has deliberately run down the assets of the couple, the split may continue to leave the victim-survivor in an incredibly difficult position financially. The settlement can also be used to continue economic abuse, especially where there is meant to be ongoing maintenance.

The solution isn’t going to be straightforward, because the government is keen not to prolong proceedings. It has highlighted that fact-finding hearings around the abuse could mean more time and money, and could mean the victim-survivor ends up with conflict, stress, higher legal costs and a longer wait for a settlement. However, the consequences of abuse ought to fall on the abuser rather than the victim-survivor, so finding a balance between the right process and the right outcome will be essential.

There are an awful lot of positive steps in this call for feedback, but this is just the next phase of a very long process. At this stage, we have no idea how long the rest of the process might take, and given that it refers to passing legislation when the time allows, we could be in for a long wait. It means anyone living with their partner needs to understand their rights as they stand. At the very least cohabiting couples should draw up a will and consider a cohabitation agreement, to get some protection before the government steps in.

Mortgage rules set to ease

The FCA is consulting on making it easier for first-time buyers, older borrowers and the self-employed to get a mortgage. As part of the consultation, it will explore how to help lenders offer flexible repayments for people with variable incomes – like the self-employed. It’s also going to consider rule changes to encourage lenders to look at people’s full situation – instead of automatically excluding those with past credit issues. And it could update affordability guidance for retirement interest-only mortgages.

Developing products to better suit people’s lives makes perfect sense. It’s also trying to identify the right balance between risk management and flexibility, so it opens the door for more sensible lending, without opening the floodgates to more questionable arrangements.

But mortgages are just one part of the picture. A healthy housing market also needs enough affordable properties, plus tax rules that don’t distort buyer behaviour and put people off. The flow of first-time buyers also depends on people being able to build healthy deposits, which can be a huge challenge when they’re also having to cover the cost of sky-high rents.