Guest blogger Rick Barrow of Jackson Barrett and Gass Solicitors has collaborated with James Maguire on the pit falls of Common law:
By way of background, Jackson Barrett and Gass have just completed a leasehold sale & purchase for a client in London. The client was selling a property in his sole name & using a significant equity uplift to assist buying a new property with his girlfriend. JBG advised him to sign a Declaration of Trust which would ensure the unequal deposit contributions would be reflected when the property was eventually sold.
However, on taking his instructions, it became apparent that the continuing contributions to mortgage payments & maintenance would also be unequal. This cannot be satisfactorily reflected in a Declaration of Trust and therefore the client was referred to James Maguire & Co for specialist advice.
Common Law Marriage
This is one of the biggest, if not the biggest, urban myths around. A Common Law marriage has not existed since 1753! A study conducted by the charity, One Plus One in 2013 found that 58% of people were not aware of the fact that cohabiting couples do not have the same rights as married couples.
This is very worrying as there has been sharp increase in the number of cohabiting couples over the past 15 years or so. In turn, this has led to a rise in complex and often expensive legal disputes when they split up.
However, virtually nothing has changed in how the law treats cohabiting couples and their property.
This can affect you whether you are looking at tax planning, owning property, making a Will or splitting up.
What if we separate?
In England and Wales, when married couples divorce or civil partners break up (known as dissolution rather than divorce), both parties have a legal right to maintenance and a share of assets, including property and pensions. The courts have a complete discretion to take all the circumstances into account in order to decide on a fair division.
Cohabiting couples have, however, no such rights, regardless of the number of years they have been together and whether or not they have children.
Where cohabiting couples jointly own their family home, the property is likely to be divided 50:50 – even if one partner contributed more to its purchase – unless they made a written legal agreement at the time of purchase saying in what proportions they own it.
As the law stands, the only solution for cohabiting couples who want legal protection is either to marry or enter a civil partnership, or to draw up a Cohabitation Agreement.
What is a Cohabitation Agreement?
A Cohabitation agreement sets out who owns what, in what shares and clarifies how you will split your property, its contents, personal belongings, savings and other assets should the relationship break down. It can also cover how you will support any children as well as bank accounts and debts.
The agreement can also look at the interim arrangements for you and your partner, for example, who will manage your day-to-day finances whilst you live together, how much each is to contribute to rent or mortgage and bills and so on.
For any such agreement to carry weight it is very important that each of you seek independent legal advice. This is to avoid allegations later on that someone was forced to sign it or they did not know what they were signing! Before seeing a solicitor you can discuss this together and set out what the agreement is to look like. This can then be drafted and the other partner invited to agree with his or her own solicitor.