Co-habitation – Update April 2008

There is no such thing as a "common law" spouse despite many believing to the contrary, often to their detriment.

Financial Claims (none akin to divorce)

Co-habitants (both heterosexual and same sex couples) have no financial claims against each other  for themselves during lifetime in "family law" on the termination of a relationship. They may, in some circumstances, have claims in respect of property (but see below).

Proposed changes to the law – an update

In August 2007 the Law Commission produced a report looking into this area of the law. It contained a number of recommendations, including a proposal for a statutory scheme to allow co-habitants to make financial claims against each other on the termination of the relationship and for the court to have powers to make orders similar to those made on divorce subject to certain conditions.

However, in March 2008 the Government announced that before reaching a decision on the recommendations they would await the outcome of the Scottish Executive's research into the cost and efficacy of the Family Law (Scotland) Act 2006 (which came into effect last year) which has provisions similar to those recommended by the Law Commission. Once again it is a case of watch this space!

Currently the only financial claims that co-habitants have available to them against each other are through the law of equity and property which is complicated, uncertain, often problematic and also expensive. The law is that of constructive, implied and resulting trust and proprietary estoppel. To establish such a trust there must be either an express agreement or common intention in respect of the beneficial title and detrimental reliance.  Once such a trust is established the court will decide the proportion of the equity which each cohabitant should retain.

The first port of call is to check the proprietorship register at the Land Registry and the transfer form signed on purchase (TR1 form). The general presumption as set out by the House of Lords in the case Stack v Dowden (2005) is that whoever owns the legal title (and in whatever percentage) is entitled to that percentage of the beneficial title and therefore the net proceeds of sale.  The onus falls on the other party to show that they have any beneficial interest in the property and, if so, the extent of that interest.

In very unusual circumstances there can be a departure from these presumptions and there are a number of points set out for the Court to consider in those circumstances based on the parties' intentions and financial dealings and the individual facts of the case. This was previously stated in Oxley v Hiscock (2004) which set out the principle that the court had to identify the share that they considered fair "having regard to the whole course of dealing between them in relation to the property".

In the circumstances and given the complexities of this area of law the parties should consider at the outset of the relationship discussing such issues and if possible make arrangements to hold such properties as joint tenants or as tenants in common with a Declaration of Trust setting out the shares in which they own the property.

Do I need a Cohabitation Agreement?

It is also open to the couple living together to enter into a Cohabitation Agreement, which not only sets out the terms on which they hold any real property but also attempts to regulate a wide range of financial matters between the parties, should they later separate.

Although not binding a Cohabitation Agreement can be persuasive evidence for the court in a dispute in what is a complex and uncertain area of law.

Financial claims for children – Children Act 1989

If an unmarried heterosexual couple have children or a same sex couple adopt then the co-habitant caring for the children can make financial claims against the other under Schedule 1 of the Children Act 1989.  The court has the power to order the provision of a home or child maintenance (to the child or to the applicant): periodical payments either on a secured or unsecured basis, a lump sum, a transfer of property or a settlement of property on trust for the benefit of a child. Although married couples and civil partners can also use these provisions they also have other options under the Matrimonial Causes Act 1973 and the Civil Partnership Act 2005, and our Family Group will be able to advise you on those various options.

When making any order under Schedule 1 the court is directed to have regard to a list of criteria including all the parties' financial resources and needs, a child's disability and the manner in which the child is expected to be educated and trained.

There is an important proviso that these orders must be in favour of the children rather than the co-habitants.  Therefore if the court orders one party to provide a home, the obligation is only to provide a home until the child concerned reaches 18 or perhaps until the child finished university when it reverts to the other party. Such a home is often provided on trust, it is not given to the parent with care.

Applicants can only have one bite of the cherry with regard to the provision of housing (i.e only one order for settlement of property, no subsequent transfer of property and no housing "by the back door" by way of a lump sum - Phillips v Peace (2005)).  Recent case law in Schedule 1 cases (starting with the Court of Appeal case of Re P (2003)) have "raised the bar" with regard to the funds that an applicant might hope to achieve.  This line of case law has also established that in addition to the budget required by the child, a "carer's allowance" could also be awarded to pay the applicant's expenses.  It was also made clear that the children should be housed and maintained with the applicant in circumstances that bear a resemblance to the lifestyle of the other party.

Child Support Agency

There is also the option of applying to the Child Support Agency (soon to become the Child Maintenance and Enforcement Commission and these figures will be changing in 2010/2011 and will be based on gross rather than net income).

In order to qualify the children need to fall within the CSA jurisdiction and then currently the basic formula is a percentage of net income which varies according to the number of children.  For one child it would be 15%, for two 20%, three or more 25%.

Claims on Death – Inheritance (Provision for Family and Dependants) Act 1975

A dependant can apply for provision from a deceased's Will in the event that reasonable provision has not been made either through the Will or under the rules of intestacy subject to certain conditions. If this affects you please speak to our Contentious Trusts and Probate Team.