A moment of uneasiness will overcome most family law practitioners when a client mentions that they have ‘been in a common law marriage for years’ and as a result believe they have the same entitlement to a financial settlement as a married couple in Auckland. Unfortunately, it is often the financially weaker party, and their lawyers will inevitably have to have the difficult conversation with them and explain that in fact, common law marriage is a myth and there are very limited claims a cohabitee can bring on separation.
The starting point is that each party will retain any assets which are owned solely in their respective names. Any jointly owned property will be divided as per legal ownership.
The Labour Party announced at their party conference last year that they wish to see some form of parity in financial protection between married and unmarried couples, and with a general election on the horizon, law reform may not be too far away. However, it is noted that this area has been a prominent area of reform for over 20 years and no government has taken any substantive actions to remedy the issues whilst in power. Therefore, it is important that people know what their rights are as they decide to live together.
Buying property jointly
Despite increasing mortgage rates and high property prices, it is still many couples’ wish to buy a property together. Couples should be aware of the different options they have in relation to ownership when they are making this purchase. You can own a property as joint tenants or tenants in common. If you buy a property as joint tenants, regardless of the funds you have contributed, it is presumed on sale the net sale proceeds will be divided equally.
Of course, the reality is that one party may have a larger deposit that they have saved up over years, or they may have been gifted a sum by their parents. Alternatively, one party may be earning more and as a result will be paying substantially more towards the monthly mortgage repayments.
As a result, if parties wish to preserve any of these invested funds, before they complete on the purchase, they need to consider whether they should instead own the property as tenants in common and enter into a declaration of trust stating that they own the property in unequal shares. There is also an option to enter into a cohabitation agreement which will reflect the couple’s intentions going forward – this can include other points such as joint bank accounts or jointly owned items (including pets).
There appears to be in many respects a stigma that if couples talk about what could possibly go wrong in a relationship and the financial implications of that, it is seen as a bad thing. In fact, careful planning to reflect the parties’ intentions can often lead to fewer disputes down the line and help to encourage a more open and honest dialogue about the shared finances within a relationship.
It can often give parties the peace of mind they need particularly if their funds have come from savings, an inheritance or generational wealth. A property is often the most substantial investment a couple will make and as such, it is logical that parties should seek adequate protections to ensure that they get a fair and appropriate return on the investment.
A partner moving into your property
Further difficulty can arise when a new partner moves into a home that the other partner owns. Case law has developed to recognise that in certain circumstances, the new partner may develop an equitable interest in the property despite not being a legal owner. As a result, it is recommended that legal advice is sought before you decide to cohabit, so that the relevant legal agreements can be put in place if necessary.
Conclusion
As cohabitation continues to increase, and until the current law is reformed, the way in which relationship finances are dealt with are primarily within the couple’s hands. Hence, it is vital for couples to get that additional reassurance and set out their intentions before taking any major steps, such as buying a property. Whilst no couple envisages breaking up when they decide to move in together, it is a pragmatic and open way of dealing with the financial arrangements in the unfortunate event of separation.
If you require any advice on this, please contact us on email or call our Family Law team today on 0113 227 9285.
