Cohabitation reform:
What property professionals need to know
The ground is shifting for common law partners. Christopher Maulkin of Family Law Partners considers the myth of the common law marriage and what recent proposals would mean for unmarried couples.
Many people still do not realise that when a couple separates, a completely different legal framework applies depending on whether the couple are married or unmarried. The myth of the common law marriage continues to endure. It often comes as a real shock to couples to discover that they are not afforded the same status and protection as they would have been provided if married. One of the frustrations of this type of situation is that it could be avoided with the benefit of early advice.
For many years, family lawyers have been trying to educate the public about this situation, so that people can make informed decisions about how they choose to live and their relationship status. However, judging by the number of people I meet who still believe in common law marriage, it seems that we have largely failed.
There are several reasons for this, but high among them is that no one thinks to see a family lawyer when things are going well. Therefore, our opportunity to get in front of people purchasing a property and make them aware of the legal situation is limited.
As a result, property professionals such as agents, conveyancers, mortgage brokers and financial advisers are often the key people able to flag this to their clients. This is particularly relevant because this is an area of change. The government has recently announced a consultation considering financial remedies on divorce, cohabitants on separation and cohabitants on intestacy. For obvious reasons, the consultation on the law surrounding cohabitants on separation is likely to be highly relevant to anyone who is involved with the buying or selling of property.
Why should this be on a property professional’s radar?
There are a number of reasons for this:
• Cohabiting couples are now the fastest-growing family type. Quite simply, you are more likely to be dealing with a cohabiting couple than a married couple.
• The current legal position is that property disputes between unmarried couples are decided under land and trusts law (Trusts of Land and Appointment of Trustees Act 1996), not family law. These are completely different processes with different rules and different outcomes.
• Advisers who don't flag this at the point of purchase are leaving clients exposed later. The benefit to clients who are properly advised at the point of purchase is substantial. It allows them to make informed decisions – whether that be protecting assets or sharing assets.
Therefore, making your clients aware of this represents an opportunity to potentially add substantial value to your clients with relatively little effort.
What is actually being proposed?
As above, there are three areas which are currently being considered for reform:
Reforming how finances are addressed in divorce
The proposed reform in this area is probably the least radical of all the reforms. The intention appears to be to codify the current law rather than to make a complete change.
Probably the most relevant area to property professionals is the proposal that pre/post-nuptial agreements be binding (providing certain criteria are met). The current status of pre/post-nuptial agreements is that, depending on the circumstances under which they are entered into, they carry significant weight but are not automatically binding.
Therefore, if enacted, this will strengthen the position on pre/post-nuptial agreements.
Reforming the law for cohabitants on separation
The intention is that the proposed reforms would apply on the following basis:
It would apply to adults (i.e. those over 18 years old).
It would apply automatically to qualifying couples unless they both choose to opt out.
The couple would need to be in a committed relationship and have lived together for at least three years or live together and share a child.
There would be a two-year time limit for bringing a claim after separation.
If this is met, then the starting point would be that each person keeps what they own but the court could depart from this if necessary to meet one person’s need.
This is completely different from the current position in the law, where (if a couple are unmarried) the court cannot change how assets are held, regardless of whether someone would be left homeless.
Reforming the law for cohabitants on intestacy
The proposals are that rights would be extended to qualifying cohabiting couples and allow them to automatically inherit if their partner dies without a valid will (subject to certain criteria being met).
Proposed reform
It must be said (again) that these are only proposed reforms. They are not in place yet. Currently, the legal framework does not provide the court with this flexibility.
Successive governments have resisted reform despite recommendations from the Law Commission in 2007; the current government has revived the issue through its A Fairer End to Relationships consultation, which proposes a new statutory framework for qualifying cohabitants on separation and death.
Why the need to keep correcting the common law marriage myth?
All professionals should continue to make their clients aware that there is no such thing as common law marriage for several reasons:
• Even if reform takes place, the protections that it will offer are likely to be narrower than those provided for on divorce.
• The consequences of people (mistakenly) believing that they are protected by common law marriage are truly devastating. I have met clients who have been in long-term relationships and have suddenly found that they no rights over a property at all and are left with nothing. For those clients (who often experience this later in life) this is a frightening prospect and there is no safety net for them.
What can property professionals do?
The key is education.
• If your clients are jointly buying a property, then ask them if they know the difference between joint tenants and tenants in common.
If they don’t, then it is crucial that get advice on this.
• Check whether they believe that they are/will be protected by common law marriage and if they are under the impression that they will, disabuse them of this notion and suggest that they get advice.
• Make them aware of documents that can prevent a dispute from arising, such as a cohabitation agreement or a declaration of trust.
It is always easier to sort things out while people are on good terms.
It appears that reform is likely to be coming and this will impact cohabiting couples on separation. What that will actually look like and how it actually applies, we will have to wait and see.
However, the prospect of reform does not mean that couples should wait and see what happens. The benefit of early advice is the ability to make informed decisions.
What could the proposed reform for cohabitants on separation mean?
At this stage, it is impossible to know with certainty what the proposed reforms could mean but let’s imagine a couple of different scenarios and what it could mean.
Potential scenario A
Jack meets Jill. They purchase a property (12 Made Up Street) but the property is bought in Jack’s sole name and Jack provides the deposit. They have a child together and Jill looks after the child while Jack goes to work. Their relationship ends and their child is 3 years old (they have never married).
12 Made Up Street has equity of £600,000. In order to purchase a suitable property Jack and Jill would each need £300,000.
If the law is reformed then potentially the court would be able to order that, even though the property is in Jack’s sole name, Jill should receive £300,000 to allow her and their child’s housing need to be met.
Potential scenario B
Gavin meets Stacey. They jointly purchase a property for £300,000 when they are aged 21. Stacey provides £250,000 and Gavin provides £50,000. They record their unequal contributions when they purchase the property.
At aged 65 they separate (having never married) by which time the property they bought is worth £900,000. In order to purchase a property Gavin needs £300,000 (and Stacey’s needs could also be met with a property at £300,000).
If the law is reformed then potentially the court would be able to order that, even though they recorded their contributions to the purchase of the property, Gavin receives £300,000 to allow him to house.