Cohabitation reform: a long-overdue shift in the law or an attack on family wealth?

The Law Commission published its report recommending reform as long ago as 2007 so, after nearly 20 years, campaigners are heartened by the Government’s attention. But is it sensible reform or a charter to trap the unwary?

The case for reform

For generations, the legal choice for English families has been clear. Either marry and accept the court’s powers to redistribute capital and income in the event of divorce or avoid marriage altogether and retain family wealth intact, subject to meeting the financial needs of children.

The problem with it all is that survey after survey revealed the majority of respondents actually believed in a quite fictional doctrine of common law marriage and were shocked to learn that, at the end of cohabiting relationships, they might be entitled to no share of the assets or income that they had worked hard to build.

At the heart of this reform agenda is the clear policy concern as to the economic consequences of how society’s families are changing. One in four adults who have a partner are not married and nearly half of children do not live with both their biological parents throughout childhood. Our society sees marriage as optional whilst believing, quite erroneously, that the law will always provide.  

Cohabiting couples currently have no equivalent to the Matrimonial Causes Act framework that allows courts to redistribute financial resources between divorcing couples to achieve fairness. Instead, disputes between unmarried couples whose relationships come to an end are governed by a complex series of property and trust laws, focusing on establishing legal ownership rather than fairness.

The Children Act allows limited financial claims to be made for the benefit of children. But it pointedly excludes providing for the needs of the parent that cares for the children, the overwhelming majority of whom are women.

Generally, women are disproportionately affected by current cohabitation law as they are more likely to reduce working hours or take lower-paid roles to undertake childcare, leaving them economically vulnerable at separation. Many women find themselves at the end of a lengthy relationship, having looked after their own children and, in some cases, their partner’s children from previous relationships, only to realise that the myth of the common law marriage is just that – a myth that leaves them without any capital or income to rely on in later years.

Other nations have responded sooner.  New Zealand, Australia and parts of Canada, for example, recognise cohabitants in both separation and succession law and have done so for years. These systems provide statutory rights based on relationship duration and interdependence.

The proposed model

The Government proposes a bespoke statutory framework for cohabitants in England and Wales similar to, but deliberately narrower than, divorce law.

The scheme would apply to couples in committed, interdependent relationships who have either lived together for at least three years or share a child.

The starting point is that each party retains what they legally own. The court would only depart from that position where necessary to meet defined needs. Of course, we know from divorce law that needs is an elastic concept and a highly subjective one at that. So, this will likely be fertile ground for litigation.

Children’s needs would take priority, and there is a strong emphasis on achieving a clean break.

Importantly, discretionary or lifestyle needs are excluded, creating a clear distinction from divorce law and maintaining an incentive in favour of marriage.  Indeed, cohabitants would specifically not be entitled to a more favourable outcome than spouses.

Opt-out provisions

A defining feature of the proposed scheme is that it includes an opt-out facility similar to nuptial agreements within divorce. 

For those wishing to protect family wealth, this provision will be critical.  Any such agreement will need to be signed before the minimum cohabitation duration is reached (currently proposed to be three years) or before the first child is born. 

This may seem a particularly unromantic provision, but we have grown used to a similar rule in relation to pre-nuptial agreements, which have become a popular game-changing development in divorce law. The key for those wishing to protect wealth in a cohabiting relationship, particularly if the plan is to have children will be to take advice early and start the conversation sooner rather than later.

Conclusion

The direction of travel is clear. The debate now turns on how far reform should go, and how robustly the law should respond to economic disadvantage arising from relationships.

Should you have any queries, please contact Alex Davies, partner and head of the family team. Alex regularly advises on both cohabitation agreements and nuptial agreements. For a no obligation consultation, he can be contacted on adavies@wedlakebell.com or 07827 961826.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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