The Cohabitation Rights Bill – Opting out

The Cohabitation Rights Bill (the “Bill”) aims to establish a framework of rights and responsibilities and provide basic protections for cohabitees similar to those available to married couples.

What if you have chosen not to marry because you do not want the rights and responsibilities that come with being a spouse? What if you have deliberately sought to avoid the paperwork, the jewellery and the general fuss of divorce should you decide to separate? Fear not, there is a way out of this new proposed legislation. Legislators have rightly and protectively decided that the default position should be that couples are automatically opted in and so should you wish to exclude yourself from the framework of The Cohabitation Rights Bill you must expressly opt out of it.  Although the Bill is currently at Committee Stage and not yet on the statute book, the proposed legislation gives cohabitees three ways to opt out as follows:

By entering into a…

• Opt-out agreement - there are a number of formalities required, not dissimilar from those which apply to Qualifying Nuptial Agreements (the Government’s vision for an all-English enforceable pre-nup). Both parties must have received independent and separate legal advice and understand the operation and consequences of entering into an opt-out agreement; i.e. that a Financial Settlement Order (“FSO”) will not be available to them on the breakdown of their relationship. The parties can agree that an FSO will not be available under any circumstances or they can apply their agreement to certain assets or situations only, such as a FSO not being available in respect of the parties’ home, or a FSO being available only if the parties have a child together. This certainly seems like a flexible and user-friendly solution. However, opt-out agreements can be varied or revoked by the court, although only in circumstances where the court views such an agreement as manifestly unfair to the applicant due to the circumstances in which it was entered into or an unforeseen change in circumstances.
• Cohabitation agreement - these are a helpful and flexible method of recording a parties’ intentions about the way they will organise their affairs whilst they are a couple and/or when they separate. Litigation brought to investigate parties’ intentions about the legal and beneficial ownership of their property can be long-running and expensive and to have intentions set out expressly in an agreement can save time, money and heartache on separation. A cohabitation agreement may also provide for one party to pay maintenance to the other party upon a breakdown of the relationship, something which is not currently available to unmarried couples.
• Deed of trust - a deed of trust can be used to show who has a legal and/or beneficial interest in a particular asset or property. Trust deeds were historically the main and most popular source of protection for cohabiting couples wishing to protect their interest in a property where they were both living. Where beneficial interests are not clearly and plainly set out in a trust deed, difficulties can arise and the courts are often called upon to infer the parties’ intentions and construct or imply trusts where no formal deed was entered into, often years after those intentions were formed, which can lead to great uncertainty of outcome.

Under the proposed legislation, the court may vary or revoke a cohabitation agreement or deed of trust “in such circumstances and to such extent as the court considers appropriate”. Although there are no formalities or requirements to be fulfilled in entering these latter two types of agreement, it may be wise to follow the formalities set out in respect of opt-out agreements to secure the best chance of the agreement being enforced and avoiding a variation or revocation by the court.

The Cohabitation Rights Bill is currently at the Committee Stage and is not yet law in force in England and Wales.

Further information

For further information on the Cohabitation Rights Bill please see our blog post: Is “move in with me” the new “marry me”? The Cohabitation Rights Bill.

If you have any questions about the issues raised in this blog, please contact a member of the family team.