A cohabitation agreement (also known as a ‘living together agreement’) is a legally-binding signed document that records the financial arrangements between two or more people who have agreed to live together, either as a couple or otherwise.

A cohabitation agreement will usually address:

• who owns (and owes) what at the time of the agreement, and in what proportions;
• what financial arrangements you have decided to make while living together; such as who will pay the rent, mortgage or household bills; and
• how property, assets and income will be divided if the relationship breaks down.

There are various definitions of 'cohabitation’. The most common example is where an unmarried couple live together in the same household as their main residence i.e. their post is directed there and the electoral roll has them registered at living at that address.

However, cohabitation doesn’t have to be a ‘romantic’ relationship – a cohabitation agreement can also be valuable for two people who live together, but who are not in a relationship, for example, friends who live together in the same household.

The cost will depend on many factors, such as how many assets there are and how complicated your financial arrangement and agreements are. It also depends on whether the terms of the agreement are reached easily, or whether they are subject to lengthy negotiations.

It reduces the possibility of a dispute – Having a cohabitation agreement in place can avoid the acrimony, costs and the uncertainty of litigation in the event of a dispute. One of the biggest difficulties when cohabiting couples separate is the disagreement on division of their assets. Having a legally binding agreement from the outset can reduce the possibility of a dispute about ownership and contributions if the cohabitation ends.

Flexibility and freedom - Entering into a cohabitation agreement gives cohabitees the flexibility and freedom to organise their financial affairs as they wish, both during and following cohabitation. For example, current legislation does not entitle a cohabitee to make a claim for maintenance, or to claim a share of their former partner's assets as of right, if cohabitation ends. Therefore, some cohabitees wish to make arrangements to support their spouse financially following the breakdown of their relationship, particularly if they have children together.

Preservation of assets - Where one party wishes to protect property or assets that they already own prior to the cohabitation. This is particularly common in circumstances where parents have gifted, loaned or invested funds to enable a child to make their first property purchase and the child subsequently wishes to cohabit with a new partner in the property. A cohabitation agreement can be a helpful tool in protecting the family money invested in the property.

The best time to put an agreement in place is before moving in together, but it’s never too late to set one up, even after cohabitation has begun - especially if your circumstances change, for example, if you are about to have children or get a mortgage together. Friends buying a property together should also consider entering into a cohabitation agreement before they move in.

As unmarried couples do not have the same legal rights as those who are married or in a civil partnership, cohabitation agreements are a good way of legally recording the financial and living arrangements, both during cohabitation and if cohabitation comes to an end.

It is worth pointing out that both parties should ideally have their own legal representation and take independent legal advice before signing any agreement.

This will depend on the wording of your agreement and if you have stipulated ‘marriage as an event that will terminate the agreement / certain parts of the agreement. If your relationship evolves and you do decide to get married then it might be worth considering drawing up a pre or post-nuptial agreement.

As with the query above around marriage, the length of an agreement will depend on what is recorded as ‘termination events’ within the agreement. The most common examples include:

• The death of either party;
• The parties' marriage or civil partnership to each other (or the marriage of one party to a third part;
• Either party serving a notice on the other; or
• Both parties' written agreement to end the cohabitation agreement.

It is important to discuss and be clear about exactly which termination events you wish to include in your cohabitation agreement.

If you are unmarried, but own assets together, then your legal rights will vary depending on who is named as the legal owner of any property, and what the individual circumstances of your case are. As this is an incredibly complex area of law, we recommend that you obtain specialist legal advice from a cohabitation law solicitor at the outset, so they’re able to advise you on your rights and what steps should be taken to protect your wealth and interests.