LOVE AND THE LAW

RMT helpline 0800 376 3706 :: february 2015 :: RMTnews 23 LEGAL LOVE AND THE LAW Sarah Henderson from RMT’s legal department outlines the pitfalls of cohabitation It is a common misconception that couples who cohabit for a certain length of time have legal rights similar to that of married couples. With the ONS releasing data this month that cohabitating couples grew by 29.7 per cent between 2004 and 2014 and is the fastest growing type of family in the UK, it is important that cohabitants understand where they stand legally. The reality is cohabitants have significantly fewer rights than married couples. Last month the Cohabitation Rights bill passed its second reading in the House of Lords. The Bill provides certain protections for persons who live or have lived together as a couple by, for instance, allowing a right to apply for financial settlement on relationship breakdown. The Bill has a long way before achieving Royal Assent to become law and has already been met with some resistance in the Lords, being equated to “forced marriage”. Below is a brief outline of where cohabiting couples currently stand legally in relation to property rights and steps that an individual can take in order to protect their position in the event of their relationship breaking down. If property is held as joint tenants, then it is owned jointly and equally. On sale it will usually be divided equally between the couple, regardless of how much each party contributed to it. One party may be able to buy the half share of equity owned by the other. Alternatively, the property may be sold with each party retrieving a half share of the proceeds. If one of the couple dies, the other will automatically inherit their share. Owning a property as tenants in common means each party owns a specific share e.g. 40/60 which they can dispose of as they wish. In the event of death, that share will go to the beneficiary named in the will, or to the estate where an individual dies intestate. Problems can arise where property is held in the sole name of one partner. Regardless of whether the other has contributed financially to the property (by making mortgage payments, home improvements etc.) the starting point is that the owner retains full ownership. The burden is then on the other party to seek to demonstrate that they are entitled to a share of that property. This is complex area of law involving constructive trusts and beneficial interests, and can often involve solicitors and going to court. A deed of trust which sets out the beneficial interest of each partner in the property can ensure each party’s interests are legally protected in the event or relationship breakdown. If only one person is named on the tenancy of a rented home, that person can evict the other if the relationship breaks down. Where the sole tenant decides to leave the property, the landlord is not obliged to transfer the tenancy to the remaining party (unless ordered by the court). A cohabitant not named in the tenancy should consider joining as a named tenant. In all cases if there are children a court can order the transfer of the home to the parent who is mainly looking after them to ensure that child is housed. If part or all of the home is owned by the other partner, it will revert to them when the youngest child reaches 18. For bank accounts, savings and investments, the law treats cohabitants as two separate individuals’ i.e. they remain in the ownership of the person whose name they are in. Neither party can access money held in the other’s account. If one party dies the balance will be the property of their estate. Where an account is held jointly, funds will generally be divided equally on the death of one partner the other partner automatically becomes entitled to the balance subject to tax considerations on the deceased’s estate. An increasingly popular solution to the issues highlighted is to sign a cohabitation agreement. These can clearly sets out cohabitants’ rights and obligations towards one another and children of the family e.g. rights to the home and other shared assets, arrangements for children etc. A court is able to ignore the agreement but will generally uphold its terms if satisfied it is indicative of the parties’ intentions. Finally, cohabitants should have a valid will, property and assets will follow intestacy rules without one.