Cohabitation agreements (living together agreements) -10 things you need to know and how to get started

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There are many reasons to sign a cohabitation agreement – whether you are already living together as a couple, or plan to in future – it is never too late. They are useful, not only for those couples who wish to avoid the cost of litigation should the relationship falter, but also for those who seek autonomy and clarity about how to arrange finances whilst living together, maybe protecting their own assets, and for those who are pooling resources to get on the increasingly high housing ladder.

If you are living together as a couple, you need to be aware that your 'legal' cohabitation rights are seriously limited should the relationship break down. Cohabitation laws have not evolved in the same way as laws for married couples and so if you are living together or plan to, you need get informed and get protected. A cohabitation agreement will help you both understand your rights and inform the way to 'run' your relationship from the outset. This will give you peace of mind and is especially important if children come along. Here is how to do it.

The first step

Sit down with your partner and have a frank discussion about how you are going to manage your relationship going forward. This need not be as uncomfortable as it may sound. Make it a date night, but know that from a legal point of view, you need to cover these issues:

1. How do you or how are you going to own/rent your home? In equal shares? In unequal shares? This is really important because you will not have the right that married couples have to make a claim against the home if the relationship fails. Everything will depend on how you legally own/rent the property. If the property is owned, there are two different ways you can share it: as tenants in common (where you each own a specific share) or as joint tenants (where you own the whole together and if one of you dies, the other becomes the owner of the whole property, regardless of what you say in your will).

2. Are you making a direct contribution to the purchase of the house or making any contributions to the mortgage? You might think that both would be enough to give you a share in the property. You would be wrong. The legal ownership is what counts and if that does not reflect the true position, you may need to take your case to court to try to prove that you should have an interest. This can be expensive and unpredictable and the court looks at contributions to the purchase price and to mortgage payments and bills differently. This is why a cohabitation agreement is so important – it sorts these issues out from the outset.

3. How are you going to pay for outgoings in your home (mortgage, utility bills, food)? It is important to work out who is paying for what so that each of you is clear about the financial contribution you are making and whether you are going to set up joint bank accounts for joint expenditure, or keep your accounts separate.

4. What about children? If you already have children or are planning to have them one day, it is essential to talk about what this means/ will mean for your lifestyle together and your respective careers. What support would be needed for the children and for the parent with their day to day care, should the relationship go wrong? Tough to talk about it but vitally important. There no such thing as a common law spouse when it comes to cohabitants' claims.

5. And finally, talk about the most fundamental issue - what is to happen if the relationship fails? If one of you has put more money into the home, would she/he be entitled to the same percentage on sale? Would this change if you had children and if one of you had taken a different career path or stopped working to look after them? It might be that one of you would like the option to 'buy out' the other's share in the home, for example. Have a chat about what your best and most realistic case scenario would be.

The second step

Speak with a solicitor who can help you draw up the agreement. You will each need your own solicitor and they will draft the agreement so that you both are happy with it. This is what will be involved:

1. The process should not require many meetings. You will have independent advice about the different ways in which you can legally own the property so that you can agree which model suits you best. A declaration of trust is likely to be drafted so that each of your shares in the property are legally protected.

2. Expenses during the relationship. Your solicitor will also give you advice so that you can include terms which record what you have decided to do concerning the payment of household bills and expenses and how you intend support each other financially (or keep your finances separate) during the relationship and financial support for any children. The important thing is to keep talking throughout the process to iron out any sticking points.

3. The 'what if it all goes wrong clause'. Your solicitor will also give you advice to help you reach agreement about what financial support there should be between you both and in respect your children during and, crucially, after cohabitation. This is key. The cohabitation agreement will not include arrangements of a personal and domestic nature – it does not have to delve too deep.

4. You will receive advice about making a will. Remember - cohabitants do not have an automatic entitlement to share in their partner's estate on death and it can be a good opportunity to appoint guardians for your children.

5. Recording and reviewing your agreement. You will each have copy of the agreement and a record of the declaration of trust to give you peace of mind for the future. You can review it at any time – important to do if you do have children and things have moved on in your relationship – but you can then file the agreement away and get on with enjoying life. The prevailing view is that cohabitation agreements regulating the financial and property affairs of cohabitees are enforceable if they are validly entered into. That is why it is best to seek advice from a solicitor to ensure that it is done properly, saving time and litigation costs in the long run.