We explain why a cohabitation agreement in Scotland can be extremely valuable to a cohabiting couple.
Cohabitation laws in Scotland
Unlike in England and Wales, Scotland has specific legislation to protect the interests of cohabitants who are parties who are living together as if a husband and wife or in a civil partnership but who are not married or in a civil partnership, when cohabitation ends and they separate. This is governed by the Family Law (Scotland) Act 2006.
In terms of section 25 of the Family Law (Scotland) Act 20006, a cohabitant means “either member of a couple consisting of:
- A man and a woman who are (or were) living together as if they were husband and wife; or
- Two persons of the same sex who are (or were) living together as if they were civil partners”
In considering whether parties are cohabitants the court will have regard to the length of the time they have been living together, the nature of their relationship while living together and the nature and extent of any financial arrangements that were in existence when they lived together.
The Act provides certain rights to cohabitants in respect of money, household belongings, and joint accounts or savings they may have accumulated during their relationship.
Most notably, the 2006 Act provides cohabitants with a right to make a claim on separation for a capital sum from the other party to try and redress any imbalance financially arising from contributions made by either party to the other during the relationship. For example, where they may have been left financially disadvantaged as a result of the relationship or may have financially advantaged the other party.
A lesser known provision provides that cohabitants can seek an amount in respect of any economic burden of caring, after cohabitation ends, for a child of whom the cohabitants are the parents.
Fairness
The test is one of fairness based on the individual circumstances of the particular case. The courts have a wide discretion to decide what is fair but they can only award a capital sum or an amount for caring for a child in the future. They cannot order a transfer of a house or other property, or a pension split, as they could in a divorce or dissolution case.
Strict time limits
If a party to a cohabitation considers that they have a claim under the Family Law (Scotland) Act 2006, they must lodge an action with the court and serve this action on their former cohabitant within one year of the date of the parties ceasing to cohabit with each other. Any claim made after that will be time-barred and therefore it is important that in a cohabitation situation legal advice should be sought as quickly as possible after any separation.
Cohabitation agreements in Scotland
Given that cohabitant claims in Scotland can be for substantial sums, couples contemplating cohabiting have to consider whether it might be prudent to enter into a cohabitation agreement to regulate what should happen if they later separate.
What is a cohabitation agreement?
The cohabitation legislation in Scotland specifically recognises that a cohabitation agreement might be entered into. Such agreements can specifically exclude cohabitant claims and so provide certainty of outcome for the parties if a relationship ends.
As with prenuptial agreements in Scotland, these types of agreement are becoming increasingly popular. A well-drafted cohabitation agreement will provide considerable protection for any person considering, or currently, cohabitating.
Possible issues to include in a cohabitation agreement
What do you and your partner need to think about for your cohabitation agreement? Here are 10 issues to consider.
- Children
Do you have, or plan to have, children? How will they be provided for if you separate?
- Property ownership
How do you want to own your house or other property? Will it be owned solely by one of you or jointly? If jointly, will you both contribute equally to the purchase price/deposit for the property? What will happen to the property if you separate ? A cohabitation agreement could provide for a transfer or option to transfer in the event of separation.
- Running costs and repairs
What about contributions to the upkeep and repair of the property? Who will pay the mortgage? If one of you pays more towards the property or contributes to improvements, is it agreed that they should be reimbursed or gain a greater share of the property?
- Timing
What happens if you separate? Will you sell the property or will one of you buy the other out? If the property is owned by only one of you, how soon would the other person be expected to move out
- Contents and belongings
What about the household contents? Who will keep them, particularly those jointly purchased or given to you as a couple?
- Business ventures
Are you in business together? Will you continue to run the business together if you separate? Or will one of you buy the other out?
- Joint accounts and investments (and
debts)
Will you operate a joint account or other joint investments? If so, what are the arrangements and how will you separate your finances on relationship breakdown? Have you any joint debts? If so, are you jointly and severally liable for the debt, whoever runs it up?
- Death and wills
What about the death of one of you while you are a couple? How will you provide for the survivor? Will they have the right to remain in the home or receive anything from the deceased's estate? Do you need to make a will to put your wishes into effect? Section 29 of the Family Law (Scotland) Act 2006 does provide some limited provisions re a claim which can be made if a cohabitant dies but only if they die intestate (without a Will).
- Plans to marry
Are you engaged and/or planning to marry? Do you need a prenuptial agreement as well as a cohabitation agreement?
- Third parties
Is it just you and your partner who will live in the property or will you allow others to do so? If so, what will be the arrangements?
The importance of cohabitation agreements
A cohabitation agreement can provide certainty from the start of the cohabitation as to what will happen should the couple separate. In the event that the couple do not have a cohabitation agreement, parties can become involved in lengthy negotiations as to how matters should be divided at the end of the relationship which may be a particularly acrimonious time for one or both parties or a court action. Spending time at the start of the cohabitation can save time and money at the end when relations have broken down.
How to make a cohabitation agreement
Your first port of call will be to speak to a solicitor who specialises in this area of law. A cohabitation agreement is a contract between you and your partner providing for an eventuality neither of you want to occur, nor is it in contemplation when the agreement is being entered into.
A solicitor in Scotland can only act for one party and it is preferred that each party take their own independent legal advice to ensure that the agreement is fair and reasonable.
Where both parties understood and agreed the terms of the cohabitation agreement when it was entered into, and they took independent legal advice, there is little prospect of having such an agreement set aside at a later date. It is therefore extremely important that parties receive independent legal advice and are not rushed or pressured into signing the agreement.
Concluding thoughts
The Scottish Law Commission recently published a Report on Cohabitation which contained recommendations and proposed reforms to the current legislation. This was met with favour. However, it may be some time before we know whether the Scottish Parliament bring in all of the proposed changes and before any changes become law.
In the meantime, as more couples and families decide to live outwith traditional parameters, it is important that they regulate the arrangements until there becomes available more effective remedies when the family relationship breaks down.
With some forethought, a cohabitation agreement can be prepared which should address many of the questions which commonly arise during cohabitation or when cohabiting couples separate and help to avoid much pain, cost and uncertainty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
