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11 January 2024

Cohabitation: What are the Financial Pitfalls and Protections?

As cohabitation is an increasingly popular bedrock of a modern family, our family law expert Evelyn Collins explains the ‘watch-out’s when it comes to legal protection of assets and child arrangements.  Cohabitation: What are the Financial Pitfalls and Protections? is the first of a two-part series.


Cohabitation is an increasingly popular bedrock of a modern family in England and Wales. In 2021, around 3.6m couples cohabited in the UK, an increase of over 2 million from 1996. Despite this and the pervasive myth of ‘common law marriage’ in England and Wales, cohabiting couples do not have the same protections upon the breakdown of their relationships as married couples.

Couples who marry only religiously would also legally be considered a cohabiting couple for these purposes (if they never entered into a subsequent legal marriage), despite considering themselves married.

In 2022, the House of Commons Women and Equalities Committee recommended that the Government should reform family law to protect these couples and their families from financial hardship in the event of separation, including through the introduction of an ‘opt out’ cohabitation scheme. The Government rejected this recommendation. Therefore, cohabiting couples should be alive to the key distinctions in the legal protections between unmarried and married couples as the Government does not seem to have an appetite to reform these laws at present.

During Cohabitation

Cohabitation Agreements

Some couples choose not to marry to protect their assets in the event of divorce. However, other cohabiting couples may wish to agree the financial arrangements formally upon separation to allow for clarity, and in the case of the financially weaker party, for protection. This can be done by way of cohabitation agreement.

This is a bespoke agreement detailing how the finances and other assets will be divided and/or for the financial provision of any children. This can also formally record the ownership of any assets to save an expensive argument in future.

Express Trusts

Property is held legally and beneficially and these are two separate estates. The legal estate must be held by joint owners as joint tenants. However, the beneficial estate can be held differently and couples can choose to hold the property as joint tenants or tenants in common. This can be declared in the transfer deed or by way of a Declaration of Trust.

Joint tenants each own 100% of the property as an indivisible share. Property held by co-owners as joint tenants exists under the law of survivorship. Therefore, following the death of one of the co-owners, the other co-owner will retain 100% of the equitable estate in the property after this death.

Tenants in common, however, each have a separate divisible share and the parties can declare these shares in a Declaration of Trust. For example, some couples wish to declare that they each own a half share of the beneficial interest of the property, whereas others, especially perhaps after an unequal contribution to the purchase price or mortgage, declare that one party owns a greater share than the other.

The law of survivorship does not apply to tenants in common, and so following the death of a co-owner, their beneficial share in the property forms part of their estate to be distributed. If a party dies intestate, this means that that equitable share in the property could pass to a member of their family rather than their cohabiting partner. If the couple were not married, the survivor will not benefit from the same protections as a surviving spouse. Therefore, it would be sensible to execute a Will to ensure that your cohabiting partner will inherit from your estate, if that is your wish.

It is possible to sever a joint tenancy at a later date, i.e. convert it into a tenancy in common. Therefore, if, at the outset of the relationship, a couple chose to hold the beneficial interest in their property as joint tenants, upon the breakdown of the relationship, the parties can sever the tenancy and have their own distinct shares in the beneficial ownership of the property.

Many couples cohabit before marriage, and some will buy property during this period. If co-owning cohabitants marry, the express Declaration of Trust is unlikely to have much legal effect on divorce if it was not made in contemplation of marriage or to address claims upon the breakdown of marriage. The Court is, therefore, unlikely to give this as much weight. These Declarations of Trust cannot oust the jurisdiction of the Court and the Court must consider all the circumstances in the case, including the parties’ needs and the financial resources. In this situation, if the couple would like the trust to persist after the marriage, a couple may wish to enter into a pre-nuptial agreement. Couples should note, however, that pre-nuptial agreements are not strictly binding but the Courts will uphold a pre-nuptial agreement if it is fair to do so, following Radmacher v Granatino.

Upon Relationship Breakdown

As cohabitants, couples do not have a guaranteed right to the property of the other, nor can they bring as many claims for a financial remedy as married couples upon divorce. There is no claim for the equivalent of spousal maintenance, for example. Moreover, other financial remedies, such as pension sharing orders, are not available to separating cohabitating couples.

If a property is legally held in the sole name of one partner, the other partner must prove that they have a beneficial interest in the property. Cohabiting couples can enter into a Declaration of Trust to determine the beneficial interest of the property, including the shares in the property which each partner holds. This would reflect how the equity in the property would be divided between the parties upon sale and is available for property held in joint names too.

However, many couples will not have entered into a Declaration of Trust. Disputes can arise where there is no formal declaration of ownership, but the non-owning partner has been contributing to the mortgage. In certain cases, for example, where the property was owned in one partner’s sole name, the non-owning partner must show that (i) there was a common intention that the beneficial ownership of the property was to be shared, which was relied upon by that partner to their detriment, or (ii) evidence of a direct financial contribution to the property’s acquisition, which would enable the court to infer a common intention. It can be difficult to establish a common intention without written evidence.

Cohabiting couples should be aware of the limitations of the legal protections on separation and should not assume that they will have acquired rights by virtue on a long relationship. At Payne Hicks Beach, we advise on the legal implications of separation, cohabitation agreements, and disputes following separation, including the available financial remedies.

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Evelyn Collins
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