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Cohabitation and Co-ownership

Whether you are a couple buying a house or flat to live in, family members lending money to assist with a purchase, beneficiaries acquiring a share of property under a will, or business partners buying property as an investment or as premises from which to trade, issues of co-ownership need to be considered.

Although for the majority the purchase of a property is a positive experience, as your professional advisers, we need to plan for when the property is sold or what happens if  circumstances change in the future. For example, relationships break down, people pass away, parties can go bankrupt, or simply change their minds and “want out”.

It is important to consider, and document, the intention and agreement between the parties at the time of the transaction to avoid costly disputes at a later stage.

Where two people own a property jointly, they may agree that when one dies, the survivor should automatically become owner of his or her share. This is known as a right of survivorship and it operates independently of any Will that the deceased person may have made. Alternatively, they may agree that when one dies, his or her share should be inherited by the persons he or she has named in his or her Will. It is for the couple to decide which of these alternatives they want.

Where a couple are married or in a civil partnership, if one dies having failed to make a Will, then there are statutory rules governing the inheritance of their property. These rules benefit the surviving spouse, children and other relatives.

However, where a couple are not married and one dies having failed to make a Will, although the laws in relation to married couples do not apply to cohabitees, they can still make provision for their financial security by entering into Cohabitation Agreements and Declarations of Trust in relation to properties that they either both own or one of them owns, avoiding the risk of complex and often costly legal disputes.

A Cohabitation Agreement is a comprehensive legally binding agreement which covers not only the parties obligations towards one another in sharing the property and its outgoings but also their legal interest in any property they occupy,  the contents of that property, personal belongings, savings and other assets.

The Cohabitation Agreements drafted by us will clearly specify the parties respective interest in the property in which they cohabit whilst they remain cohabitees and their interest in the event that their relationship ceases. The Cohabitation Agreement also assists cohabitees in relation to the day to day financial running of their home, stating what financial contribution each party makes with regard to mortgage repayments as well as utility bills, maintenance and improvements to the property and whether such contributions should in any event alter either party’s interest in the property.

Cohabitation Agreements also stipulate what happens in the event of a relationship breakdown or if one of the parties passes away ensuring that in either event there is a clear pathway to a resolution of the parties finances negating the requirement for costly legal disputes.

Cohabitation Agreements should ideally be accompanied by a Declaration of Trust if the property is owned by either party, to the agreement or both parties. A Declaration of Trust will set out each party’s entitlement to the equity in the property when it is sold and can also set out other rights, obligations and agreements between the parties in order to avoid uncertainty or dispute at a later date. Further both parties should ensure that they update their Wills to make reference to the provisions made in the Cohabitation Agreement.

Our property and / or family department will be able to advise you as to the points to consider and the appropriate form of documentation to evidence the intention of the parties. We also have a dedicated private client department who specialise in tax and estate planning who can also be called upon to provide advice upon trusts and co-ownership where circumstances dictate.

For further advice on any co-ownership matters please contact one of the team today to see how we can help.