A while ago, I contributed to an article written by the Financial Times on the legal differences between cohabitation and marriage. The differences are striking and what is also striking is how many more people are choosing cohabitation over traditional marriage. Cohabitation is the fastest growing family type with almost 7 million individuals (or 3.5 million couples) choosing that path over marriage. Sadly, there is no concept of common-law marriage or safety net for those who did not tie the knot. It is simply a myth, a bit like the Loch Ness monster, although perhaps even more terrifying if you are one of the unlucky ones who after years of living together can find yourself homeless and penniless if the relationship breaks down.
How vulnerable are clients who are cohabiting compared to those who are married in terms of financial and legal protection?
Cohabiting parties are very vulnerable compared to married parties because there is no overarching legal framework or protection in place for cohabiting couples if their relationship was to breakdown, even if it has been a long cohabiting relationship and children have been born. The problem is exacerbated by the fact that nearly 46% of cohabiting couples wrongly believe they are common-law spouses and enjoy all the protections enjoyed by spouses or civil partners (British Social Attitudes Survey). To put this in context, that is over 3.2 million people of the circa 7 million who are cohabiting, who are blind to the true facts. A significant proportion of these people could find themselves homeless and helpless on separation. Some of the stats are a little old or unclear but on average cohabitation can last less than 2 years before breaking up or converting to a marriage with less than 4% of cohabitating relationships lasting for 10 years or more. Regardless of the outcome, surely you would want an insurance policy of some description and that’s the point I would make about cohabitation – what is the plan if it goes wrong? You have to think about it carefully since it’s a journey that requires proper planning, especially if children are involved or money is put into property or career sacrifices are being made. Family lawyers alongside financial advisors and their private client colleagues are particularly good at helping clients to put together Cohabitation or Living Together Agreements or perhaps a Declaration of Trust to protect money going into property or indeed an appropriate Life Insurance policy or Will for the unexpected challenges.
Does marriage automatically guarantee rights to matrimonial assets such as property?
Marriage does automatically guarantee you a right to make a claim against matrimonial property even if the marriage is short and childless. The strength of the claim would depend on a number of factors set out in section 25 of the Matrimonial Act 1973. I have never acted for a client who did not succeed in achieving an outcome that gave them at least a share of matrimonial assets (subject to assets/income existing at all) to help them with their capital or income needs on separation. The same cannot be said of cohabiting couples on breakdown of the relationship since they do not have an equivalent legal safety net. There is no automatic right to claim a split of relationship capital or property or pension or even maintenance. Although there are some complex trust rules to assist and a possible route to make financial claims for children under 18 years of age as per the Child Maintenance Service (CMS) or under schedule 1 of the Children Act 1989.
Does marriage guarantee a 50/50 right to matrimonial assets?
Married couples can make a claim to matrimonial assets on divorce and often the starting position is 50/50 even if the final split ends up somewhat differently. The court considers a number of factors when considering the split. The court gives first consideration to the welfare of any children of the family under the age of 18 years old and the factors (called the s.25 factors) are as follows:
a) The income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which it would be, in the opinion of the Court, reasonable to expect a person to take steps to acquire.
b) The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
c) The standard of living enjoyed by the family before the breakdown of the marriage.
d) The ages of each spouse and the duration of the marriage.
e) Any physical or mental disability of each spouse.
f) The contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
g) The conduct of each spouse, if that conduct is such that it would, in the opinion of the Court, be inequitable to disregard.
h) The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).
The ultimate aim of the court is to achieve fairness.
How is the split of assets different under cohabitation?
On cohabitation breakdown, the concept of 50/50 split of relationship assets does not exist and complicated property principles and case law comes into play which is largely looked at through the prism of whether property is jointly owned in the first place or the legal estate is in the name of one of the parties only.
In terms of joint ownership cases, the situation should be clearer if the correct procedure is adopted and the couple’s intentions as to ownership is clearly stated in the purchase deed or declaration of trust. Even when no clear declaration of trust exists, the Supreme Court has helpfully established the guiding principle that where a family home is in the joint names of a cohabiting couple and both are responsible for the mortgage, without any express declaration as to beneficial interests:
(i) they are joint tenants in law and, on presumption, equity;
(ii) this presumption may be displaced by a different common intention expressed when the home is purchased, or at a later stage;
(iii) otherwise, a common intention may be deduced objectively (inferred) from their conduct, as in Gissing v Gissing  1 AC 886 at  and Stack v Dowden  UKHL 17;
(iv) where there is no evidence as to their joint intentions at the outset or that intention has changed but it is not possible to determine the new intention, each is entitled to such share as the court considers fair, having regard to the whole course of their dealings with regard to the property. This was further clarified and expanded on in Jones v Kernott  UKSC 53 where the following principles were set out:
a) the starting point is that they are joint tenants in law and equity;
b) presumption can be displaced by showing that they had a different common intention when they acquired the home, or they later formed the common intention that the shares would change;
c) their common intention is to be inferred or deducted objectively from their conduct;
d) where it is clear the parties did not intend a joint tenancy at the outset, or had changed their original intention, but it is not possible to ascertain by direct evidence or inference what they intended their shares to be, each party will be entitled to the share the court considers fair in relation to the property. Thus the court will impute an intention to the parties as to their beneficial shares (quantification) and 2 stage process is used as follows:
In sole registration cases, the situation is more complicated when a property is registered in the name of one party only. The presumption is that the person who owns a property is also the sole beneficial owner. In this situation, the other party will have to establish a claim in equity. This will involve establishing a resulting or constructive trust or in rare cases, proprietary estoppel. The court cannot alter an unmarried partners share to reflect the s.25 factors outlined above as it is able to do with a married couple.
Resulting trusts can be established only by a direct contribution to the purchase price by the partner who is not the legal owner. However, a direct contribution to the purchase price will not establish a trust if given by way of a gift or loan. The successful claimant will be awarded a share to reflect the initial contribution made (this is in contrast with the position under constructive trusts outlined below where, as in the absence of any express agreement as to the size of the share, the court will decide what shares the parties intended by looking at the whole of the course of conduct in relation to the property). Resulting trusts are generally less popular for cohabitee disputes and are no longer considered the appropriate approach. It is preferred that cases will be decided under the constructive trust principles below.
Constructive trust principles were considered in detail in Lloyds Bank plc v Rosset  2 FLR 155 and subsequently applied by the Court of Appeal in Oxley v Hiscock  2 FLR 669. For a constructive trust to arise the claim must show there was a common intention to share ownership and the claimant acted in reliance on this to his or her detriment. Common intention can be established by an express agreement and if there is no evidence of an express agreement, a common intention to share the property can be inferred from the parties’ conduct. Conduct such as repayment of mortgage instalments and financial contributions to improvements to the property can be used to infer the common intention to share the property. Contributions by labour may also count although in the case of Lloyds Bank it was pointed out that a common intention by the parties to renovate a house as a joint venture did not throw any light on their intentions with respect to the beneficial ownership of the property. Generally, contributions to household expenses other than the mortgage is also much less likely to establish a trust. In addition to common intention, detrimental reliance is also required. The court appears to take a far wide view on this and should include some conduct of a sacrificial nature although the performance of a woman, for example, of normal household duties and the purchase by her of household items were quite consistent with a man’s absolute ownership of the house as was stated in the case of Midland Bank v Dobson & Dobson . If a constructive trust is found, there is still the problem of determining the size of the share. In Jones v Kernott as already mentioned above, the court said that in situations where the property is in the sole name of one party, the first issue is to determine whether the other party has any beneficial interest in the property at all. If that is established and the court has to decide what that interest is. There is no presumption of joint beneficial interest. The parties’ common intention had to be deduced objectively from their conduct, but if this is not possible then the court will impute an intention to the parties, who will receive a share the court considers fair having regard to the whole course of dealing between them in relation to the property.
This quest for fairness is opaque and trust principles are complex for both the lawyer and the client alike. Many give up and do not even embark on the expensive litigation pathway often required to establish what type of trust, if any, exists.
Court Orders available under Schedule 1 to the Children Act 1989
Schedule 1 to the Children Act 1989 is intended to make limited financial provision for the children of unmarried parents when they separate. If agreement cannot be reached then the court has the power to make some or all of the following financial orders:
These are similar to child maintenance payments and the court’s power to order these is limited to circumstances in which:-
– Children are over the age of 20 years but are still in education or where other special circumstances apply;
– One of the parties and/or the child are not habitually resident in the UK;
– Periodical payments are required for educational expenses of the child;
– Periodical payments are required to cover the costs attributable to a child’s disability;
– A top-up order is considered appropriate on top of existing CMS calculated child maintenance (for example where the paying parent’s gross annual income exceeds £156,000); or
– The parties both agree to the order being made.
A parent can apply to the court at any time and on any number of occasions for a lump sum to be paid from the other parent in favour of the child. These are usually made to fund specific expenses such as furnishing and equipping a house, hospital costs or nursing expenses. However, the courts have broad discretion when it comes to making lump sum orders for the benefit of a child.
Where a father is only paying nominal child maintenance through the CMS and this is inadequate to meet day-to-day expenses in relation to the child, the court is entitled to provide for such expenditure by way of capital provision. A lump sum order can therefore be appropriate in circumstances where a CMS calculation is unsatisfactory due to the nature of the paying parent’s wealth and/or income.
The court must however also consider the net effect that a lump sum order will have upon the paying parent.
The court can also make an order requiring the settlement or transfer of property to be made for the benefit of a child. Such orders should ordinarily only be made to provide accommodation for the child for the duration of the child’s dependency, i.e. until the child reaches 18 years or completes full-time tertiary education including a gap year, whichever is later.
In contrast to lump sum orders, the court only has the power to make one property adjustment order against the same parent.
The above orders can only be made for the benefit of a child who is under 18 or is still in full-time education unless there are special circumstances, for example, a child with a disability.
It is also worth noting that where there is a property dispute between cohabitees with children, an application may be made under the Trust of Land and Appointment of Trustees Act 1996 in conjunction with a Schedule 1 application.
Many practitioners agree that reform to laws governing cohabitation is long overdue due to the confusion, uncertainty and unfairness that can arise. In July 2007, the Law Commission published a report recommending that a new statutory scheme of “financial relief” on separation be introduced. This would be based on “qualifying contributions” each partner made to the relationship, giving rise to certain enduring consequences at the point of separation. Such qualifying contributions might be financial or otherwise such as care for the parties’ children. In more recent years, Lord Mark’s Cohabitation Rights Bill had a second reading in 2019 but no real progress has been made and seems even more unlikely to be made in the gloomy pandemic landscape. In which case, prepare for the worst and hope for the best is the best legal advice I can give. Take the time to prepare a Cohabitation Agreement and talk it through as a couple. If nothing else, common intention and a clear understanding of the direction of travel and the sacrifices you are making to get there can count for a lot in the murky swamps of trust law.
To discuss putting together a Cohabitation or Living Together Agreement with one of our specialist Family Solicitors, please contact us.
Farhana is a Director, Solicitor, Collaborative Lawyer and Mediator in our London office.