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To share or not to share: the importance of cohabitation agreements

Date:16 SEP 2019

With cohabiting families totalling 3.3 million, they are the fastest growing type of family over the last 20 years. If you are advising a cohabiting family, it is important that you make them fully aware of their rights.

You may or may not be surprised to read that 46% of people in England and Wales believe in a 'common law marriage'. This suggests that they believe that just because you are essentially living 'as man and wife' you assume the rights afforded to married couples.

As you will know, there is no such thing as a 'common law marriage': cohabiting couples do not have the same legal rights as married couples.

Within this article, we explore the importance of having a cohabitation agreement for people who are living with a partner and are not married.

What is a cohabitation agreement?

A cohabitation agreement formalises arrangements made between cohabiting couples. In the event that the relationship breaks down, the agreement could address how the following will be split:

  • property and contents
  • joint savings, bank accounts and financial liabilities
  • other assets owned by the couple
  • payment of household and living expenses post sale
  • child arrangements and financial support

Preparing a cohabitation agreement can also be an opportunity to formalise and put down on paper day to day arrangements such as how rent or the mortgage will be paid and how bills will be split (if at all).

The beauty of a cohabitation agreement is that it is a flexible document. Within reason, it can include whatever the parties need it to.

A cohabitation agreement is legally binding so long as it has been properly effected, i.e. both parties have sought independent legal advice in relation to the agreement.

Why is it important?

Perhaps the easiest way of demonstrating the importance of considering a cohabiting couples' arrangements is by looking at an example of when things may go wrong. This happened in the case of Horn v Chipperfield [2019].

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Mr Horn and Miss Chipperfield were long term unmarried partners. They had two children. Mr Horn held various roles throughout the relationship, including Chief Executive, Managing Director and Vice President of various companies. Miss Chipperfield worked as a midwife, but reduced to part time hours during the relationship and ceased work completely during the early years of the children's lives.

The couple each owned a property in London. The properties were subsequently sold to purchase a property together for £750,00. Mr Horn contributed £255,000 (plus stamp duty) and Miss Chipperfield contributed £39,000. The remainder was paid by way of a mortgage in their joint names.

When Mr Horn and Miss Chipperfield separated, Mr Horn asserted that he was entitled to a larger share of the property by virtue of his larger contribution to the property. Miss Chipperfield stated that the parties had discussed that they would own the property together, and that it was a joint purchase reflecting their committed relationship and status as a nuclear family. Mr Horn is stated to have said "Well that’s it Chip, we are now 50/50 owners but that means you owe half the debt as well".

Further, it was alleged that instructions were given to the couple's solicitor that indicated that the property should be held under a joint tenancy. This would indicate an intention that the property should be held in equal shares and automatically transferrable to the other on death.

At first instance, the court disagreed with Mr Horn and declared that they held the property in equal shares as tenants in common.

The appeal

The appeal centred around the conversation in the pub and the instructions to the solicitor. On appeal it was argued that:

  • the conversation and instructions were inconsistent with the 'presumption' (as set out in Stack v Dowden [2007]) that the beneficial interest follows the legal title
  • that HH Judge Berkely erred in failing to find that the 'presumption' was displaced by the fact that Mr Horn paid the net purchase price, stamp duty and costs out of his own resources
  • the instructions to the conveyancing solicitor were provided on the basis of the division of the property on death - not whilst the parties were alive.

On appeal, the initial findings of HH Judge Berkely were upheld by Mr Justice Freeman. Interestingly, Mr Justice Freeman referred to the following facts as reinforcing the 'presumption':

  • the conversation in the pub
  • the decision to have joint ownership of the house
  • the joint mortgage
  • the fact that the home was a family home for the family including the children
  • the financial contributions of Miss Chipperfield
  • the sacrifices of Miss Chipperfield
  • the overall characterisation of the relationship

What does this mean?

This case provides a good example of when a discussion regarding a cohabitation agreement may have been helpful.

For one, it would have been an opportunity for the parties to have discussed their understanding of the situation and cleared up any uncertainty.

Secondly, had the parties agreed on the position, this could have been formally recorded as evidence of their intentions and perhaps they could have avoided the high legal fees that they undoubtedly incurred in litigating this matter.