Contrary to popular belief co-habiting, living together as a ‘common-law’ couple does not automatically provide you with the equal legal rights as married couples, or those in a civil partnership.
Co-habiting can cause particular difficulties when it comes to the ownership and division of property.
Married couples and those in a civil partnership are ascribed certain automatic property rights, regardless of how much each of them contributed to its cost or maintenance. However, for cohabiting couples, the situation can be more complicated if a property is not jointly owned or they do not have a declaration of trust in place.
A declaration of trust details each party’s share in a property, and can be used as a way to protect the investment should you separate in the future, or if one of you dies. As cohabitants, unless both parties are named on a deed of trust, one or other may not automatically inherit or claim a portion of the property.
A declaration of trust is particularly useful if one of you has invested more in the property than the other, or if you would like to stipulate a specific division of its assets. It can also set out guidelines for who is responsible for particular bills, renovations or mortgage payments, and suggest a procedure for dividing up your assets.
If contributions are uneven and fixed amounts do not seem fair, there is also the option of choosing a ‘floating’ kind of agreement which uses a formula to calculate appropriate shares at the point of sale, based on individual contributions. This is a useful way to determine percentages when one of you has paid a greater amount towards the deposit, mortgage payments, or home improvements. It also means you do not have to draw up a new agreement each time one of you makes a significant contribution.
In addition to a deed of trust, it’s important to draw up a cohabitation agreement (a legal document similar to a prenuptial agreement) which you can use to set out expectations for household responsibilities and bills, responsibilities for joint investments and debts, instructions for the division of assets should you separate, intentions for passing on inheritance, and any other details that will help to safeguard your relationship and assets.
If you are embarking on the purchase of property as an unmarried couple, protect your property rights by making sure you know your housing rights as a cohabitant by drawing up a cohabitant agreement and making sure both of you are named on a declaration of trust.