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Family case study: Cohabitation and pre-nuptial agreements

01 May 2008

Our experienced and respected family solicitors continue with their fictional case studies to illustrate real and familiar issues faced by couples in today's society. This month we focus on the importance of cohabitation agreements, as well as highlighting key factors surrounding pre-nuptial agreements.

Following his divorce, Lord Greystoke had enjoyed summer in New York with his friends, Ross and Rachel. On their return to England he was able to help the new couple with their imminent move to Surrey and also recommend solicitors for advice about cohabiting and their possible marriage. Not one for paperwork, Rachel believed it was a waste of time having a pre-nuptial agreement because she had heard they were not enforceable in England, nevertheless they decided to set up a meeting.

The couple were told that although pre-nuptial agreements are not binding under English law, there has recently been a move by the courts to consider them as an important factor when deciding the outcome of a divorce. Notably, in the case of Crossley in 2007, it was said that if ever there was a case where a prenuptial agreement should be taken into account, then that was it. As the marriage was short, the existence of the agreement meant that the issues to be addressed were very narrow and would not extend to looking at all the assets as would normally be the case where there was no pre-nuptial agreement. The court therefore agreed that the normal financial disclosure requirements for a trial hearing could be dispensed with. However, Ross and Rachel were cautioned that this did not mean all such agreements would be binding, but that they are increasingly regarded as one of the circumstances to be taken into account on divorce.

The Law Commission made proposals in 1998 that pre-nuptial agreements could be enforceable if: both parties knew what the other had in terms of assets before signing the agreement; that they had independent legal advice before signing it; the agreement is signed at least 21 days before the wedding; and the terms had to be reasonable.

This has led to a situation where prenuptial agreements are entered into more frequently in an attempt to preserve the assets which either party brings in to the marriage.

Though Ross and Rachel had not set a date for the wedding, they had found an idyllic cottage in Surrey and were keen to move in and begin their new life together. Rachel was going to put down the deposit on the house to be bought in their joint names, and she was therefore advised to have a deed of trust drawn up reflecting her contribution. At present, cohabitees do not benefit from the same discretionary approach which the courts apply towards spouses. If a property is bought by cohabitees then strict rules of property law apply. Ross and Rachel should be very clear about their intentions at the time of purchase as to how the property was to be owned. For example, is Rachel going to get back what she put in to the property, together with any corresponding increase in value?

Rachel and Ross were also advised by their solicitors to consider a cohabitation agreement. This contract could provide for things such as which of them would pay any bills or the mortgage on a property and what should happen if their relationship breaks down. If they were to have children, then this would influence the enforceability of a cohabitation agreement. As with a pre-nuptial agreement, a cohabitation agreement should be regularly reviewed to see if it remains fair to both parties, if for instance one of them had to reduce their working hours or their circumstances changed for any other reason.

In light of these facts, Rachel began to wonder whether it may be more straightforward for her to buy the property in her sole name. She also secretly worried whether the high level of debts Ross had run up throughout his overspending bachelor days could affect her. Now they were to marry and purchase a property together, would she be responsible " for the money he still owed?

Is Rachel getting cold feet? In our next case study we will be looking at these concerns in more detail and examining the implications of Ross and Rachel living together as a couple in a house owned solely by her.

If you need to speak in confidence to a family solicitor concerning any of the issues covered in this story, or with any other matrimonial affairs, please contact the family practice on 01753 279045 or email familylaw@bpcollins.co.uk.