There are currently two major social-economic shifts in play which are resulting in more people needing to understand the effects of a Cohabitation Agreement or a Declaration of Trust, specifically:
- Cohabitees are now the fastest growing family type in the UK, and
- An increasing number of young people are relying on the bank of Mum and Dad to fund their first-home purchase.
As a result of these changes, our family law team have observed an increase in questions being asked about Cohabitation Agreements and Declarations of Trust in relation to property. To help, we have created this FAQ blog to assist you to understand this often complex area of law.
What is the difference between a Cohabitation Agreement and a Declaration of Trust?
A Declaration of Trust is a legal document which states how the proceeds of a sale will be apportioned should a property be sold. If you are buying a property with a friend or a relative, having a Declaration of Trust ensures each of you knows how much money you will receive out of the sale.
Cohabitation Agreements are put in place between couples living together who are not planning to enter into marriage or a Civil Partnership. Contrary to popular belief, there is no such thing as a ‘common law’ marriage under English law, and cohabitees have few legal rights if the relationship breaks down. A Cohabitation Agreement can set out not only how property and assets will be divided should a couple separate, but how bills are to be paid whilst they are living together, and any other financial matters the pair may need to address in the event of a separation.
Are Declaration of Trusts and a Cohabitation Agreements legally binding?
A Declaration of trust will be legally binding so long as it is drafted and executed correctly. To ensure all legal requirements are complied with, make sure you have a solicitor advise you on the effect of the declaration and ensure accurate procedures are followed.
Like Pre and Post-Nuptial Agreements, cohabitation agreements are not legally binding. Not so long ago, Cohabitation Agreements were deemed to be void on the grounds of public policy, i.e. they undermined the sanctity of marriage. However, this is no longer the case, as illustrated by Lord Justice Bridge in Dyson Holdings Ltd v Fox  3 All ER 1030, who stated:
“There has been a complete revolution in society’s attitude to unmarried partnerships of the kind under consideration. Such unions are far commoner than they used to be. The social stigma that once attached to them has almost, if not entirely, disappeared”.
The courts are likely to uphold a Cohabitation Agreement (and a Pre or Post-Nuptial Agreement) providing it complies with the general rules of contract law, i.e. offer, acceptance, consideration, and intention to create legal relations. Both couples should seek independent legal advice, and it is best practice for each parties’ solicitor to attach separate signed documents stating that advice has been received.
If I am moving into my partner’s house, do I need a Declaration of Trust as well as a Cohabitation Agreement?
Given that a Cohabitation Agreement is not strictly binding on the parties, if you are moving into your partner’s house or buying a house with them but your name will not appear on the title, you should have a Declaration of Trust drawn up.
Consider this: imagine you and your partner live in a house for 15 years. You contribute to the mortgage payments, pay for re-decorating, perhaps even an extension, making the house your home. However, you are not registered as a joint owner of the family home. If you separate and do not have a Deed of Trust in place, you will have to rely on the provisions of the Trusts of Land and Appointment of Trustees Act 1996, known as (TOLATA). This can result in legal fees, not to mention the stress of having to fight your former partner for a share in the place you have called home for over a decade. By having both a Cohabitation Agreement and a Declaration of Trust in place, you can be confident any relationship property and assets are divided according to your pre-determined wishes.
Do I need to update a Cohabitation Agreement?
Your Cohabitation Agreement should be updated as your relationship changes. You may acquire an overseas property for example, or go on to have children. These types of events can result in the original agreement being unfair to one or both parties. It also poses the risk of not being upheld by the court because it fails to take all relevant circumstances into consideration.
Until the government legislates to protect the interests of cohabitating couples when they separate, it is up to individuals to look after their own interests. A Declaration of Trust and/or a Cohabitation Agreement provide the vehicle to achieve this goal.
Breaking up is hard to do. It is even harder if it means you and your children risk homelessness.
At Hart Reade, each of our family law solicitors are members of Resolution. In addition, many of our team are Collaborative Lawyers. Both organisations advocate for using non-confrontational methods for resolving family law disputes.
We can provide you with a wealth of information, advice and support regarding Cohabitation Agreements and Declarations of Trust. To talk to any of the family law team, please call us on 01323 727 321.
Please note, this article does not constitute legal advice.