Buying A Home Together? You Might Need A Cohabitation Agreement
Are you considering buying a home with your partner? Does one of you have more money to put in than the other? If so, think about a cohabitation agreement
Why a cohabitation agreement?
If you buy a property and tell your solicitor to put it in joint names, the legal effect is that you own the properly jointly. If it were sold you would both be entitled to 50% of the proceeds. If one of you has contributed more money, most of the money, or perhaps even all the money, this hardly seems fair.
Whether you are married or not, but especially if you are not married, you should think about how to deal with this situation. If no provision has been made for unequal contributions, then on separation and sale of the property you may be left with only 50% of the proceeds, no matter what your contribution.
Are you unmarried?
If you are married or in a civil partnership there is more scope for arguing for a bigger share. It’s much more difficult for unmarried, cohabiting couples. If you can’t reach agreement, you may be left having to litigate.
What’s the best solution?
Address the problem when you buy the home! Consult solicitors at the time of purchase and enter into a cohabitation agreement which will regulate the division of the sale proceeds if you subsequently separate and sell the home.
This will put both of your minds at rest – you’ll both know what will happen in the event of separation.
What’s the next best solution?
If you don’t have a cohabitation agreement and you do separate, you and your partner should separately consult family law solicitors at an early stage. This means you can be clear about your position and take action within the strict time limits if appropriate.
When would I have to litigate?
An action has to be raised within a year of the date of separation. There’s no flexibility: if court proceedings are not raised within a year, you miss your opportunity for making an argument for a greater share of the proceeds. We have seen several cases recently where people would have had a claim had they acted quickly, but didn’t seek legal advice fast enough.
A year seems a long time now, but in the aftermath of a breakup you might not feel like talking to a solicitor straight away.
What can go wrong without a cohabitation agreement?
In a recent case, our client’s previous partner felt he had a claim for more than a half share of the proceeds of sale. However he had consulted his solicitor late and quickly became time barred from making any claim. He must now accept that he will likely receive only 50% of the proceeds of sale.
What can go right?
In another recent case our client paid all the deposit. The home was bought by the couple using another solicitor, without any cohabitation agreement. We had to negotiate an agreement about the division of proceeds quickly, backed up with the threat of legal action. We were successful and an agreement was reached and signed within the one year time limit.
However, if this agreement hadn’t been reached our client would have been forced to raise a court action. Court actions are expensive and stressful and should be avoided wherever possible.