Cohabitation agreements – what are they and when to use them?

November 22, 2023

What is a cohabitation agreement?

A cohabitation agreement is an agreement between two or more people who have decided to live together as a couple or otherwise. The agreement provides a record of each party’s rights and responsibilities in relation to the property where they live/ intend to live together, financial arrangements for during and following the cohabitation and the arrangements to be made if they no longer want to live together.

By ensuring a cohabitation agreement is in place parties, can avoid litigation costs if the cohabitation comes to an end by recording former cohabitees’ respective beneficial interest in the home they shared. It can also be used to record ownership of personal property, including items such as cars, furniture or art which may be used to enjoy by both cohabitees whilst they live together, but are retained by the owner if cohabitation ended.

Who can enter into a cohabitation agreement?

Cohabitees frequently enter into cohabitation agreements in order to regulate their financial and living arrangements both during and following cohabitation. An increasing number of couples are choosing cohabitation over marriage or civil partnerships. This is because, if a couple purchase a property together, problems could arise if the couple decides to separate therefore the agreement provides clarity and oversight. A cohabitation agreement is essential for unmarried couples who have purchased a property together.

Cohabitation agreements are also used by people who have shared their financial resources in order to purchase property to live in together. The property that they occupy can be rented, owned solely by one cohabitee, owned by one or more cohabitees together or with a third party or owned jointly by cohabitees in equal or unequal shares. The agreement can be executed before the parties begin living together or after cohabitation has begun.

A well drafted agreement provides information about each party’s legal and beneficial interests in the property to reduce the possibility of dispute about ownership if the cohabitation ended. The agreement includes clauses about how the property is to be dealt with at the end of cohabitation, for example they may agree to sell the property. The agreement documents this and includes clauses which may control the following:

Occupation of property and payment of household and living expenses pending sale
How and by whom the property is to be valued
How the costs of sale are to be paid and by whom
How the proceeds of sale are to be divided.

Cohabitation rights and agreements

When unmarried couples cohabit, they may share financial responsibility for things such as mortgages, debts and estate planning. If in the unfortunate event one partner dies without a will in place, the surviving partner will have no claim over their estate unless they co owned the property. Therefore a cohabitation agreement can clearly assert rights and protections in the event of death or the breakdown of a relationship.

A cohabitation agreement can avoid the cost of litigation about the cohabitees’ beneficial interest in the home they shared when cohabitation ends, as the rights and agreed clauses will have been discussed and represented through the signed agreement.

As mentioned previously, the agreement can be used to record ownership of personal property.

Advantages and disadvantages of cohabitation agreements

Advantages	Disadvantages
Avoid the cost and uncertainty of litigation – helpful way to record cohabitees intentions about legal and beneficial ownership of their personal property when they decide to live together. Also provides clauses for what happens if cohabitation ends to avoid any dispute.	Uncertainty about enforceability – there is uncertainty about whether the agreement will be upheld and enforced in court. They are historically void on the basis of public policy but as more people choose to cohabit this may change.
Individual autonomy – provides cohabitees with flexibility and freedom to organise their financial affairs as they wish, both during and following cohabitation.	Cost – depending on the circumstances and complexity of the terms agreed, the agreement can be expensive. Despite the benefits the agreements offer, many cohabitees do not want the additional cost.
Preservation of assets – rising house costs have made it difficult for first time buyers to get onto the property ladder. Therefore they are having to save for a longer time to accumulate a suitable deposit or choosing to purchase a property jointly. Having struggled to save a deposit, cohabitees are less willing to risk a future dispute regarding ownership of the property as they are increasingly entering cohabitation agreements.	Risk of relationship breakdown – cohabitees in a couple often find it difficult to raise the question of entering into the agreement with their partner, particularly where the couple will be living together in a property that is solely owned by one of them. Some feel contemplating what should happen at the end of cohabitation, before even living together, indicates doubts of the permanence of the relationship.

Cohabitation agreement or declaration of trust?

A declaration of trust should always be executed where legal title to the property is held as tenants in common or where the beneficial interest in jointly owned property differs from legal ownership. A declaration of trust will simply record the parties’ respective beneficial interests in the property. In contrast, a cohabitation agreement can include not simply a declaration of trust but go on to deal with a wider range of issues including:

How the mortgage and other household expenses are to be paid, by whom and what proportions
What should happen if a co owner wants to sell the property and realise their investment and the other does not
The arrangements for one party to buy the other’s share
How and when the property is to be sold
Ownership of joint and separate property, if cohabitation comes to an end
Financial support between cohabitees during and after cohabitation ends
The living arrangements and financial provision to be made for the parties’ children if cohabitation ends.

If you would like to discuss your matter, please call 0121 705 7571 and speak to a member of our Family Team.

Amun Sunner
Paralegal – Family and Litigation Departments

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.