In today’s property market, it’s common to hear about the challenges of purchasing a property. With soaring prices, many individuals find it nearly impossible to buy a home on their own. As a result, more and more people are pooling their resources and purchasing property together, whether it’s with a romantic partner or a friend.
The prospect of buying property with someone else is undeniably thrilling and can make you feel like an unstoppable team. However, amidst the excitement of house hunting and attending viewings, it’s easy to overlook the fact that you’re embarking on a serious financial commitment together.
There are several crucial considerations that must be addressed and agreed upon, which unfortunately many people overlook while caught up in the whirlwind of the property search and purchase process.
What is a cohabitation agreement?
A cohabitation agreement sets out the arrangements between two or more people who have decided to live together. They tend to be used by partners in a romantic relationship but they are just as effective for friends who have decided to combine their finances to purchase a property together.
Although we’re focusing on how a cohabitation agreement can be used when you’re buying a property with someone else, you should also know that the property concerned can in fact be rented, owned solely by one cohabitee, owned by one or more cohabitees together or with a third party, or owned jointly by cohabitees in equal or unequal shares. Whatever the situation, it can be written into the agreement.
Why you need a cohabitation agreement when you’re buying a property with someone else.
A cohabitation agreement will make life easier for you and your fellow buyer, both when you’re looking to buy, whilst you’re living together and if you go your separate ways in the future. It’s the sensible thing to have and in the future you will be thanking yourself for avoiding a lot of wasted money on legal battles if disagreements happen.
The drafting of a cohabitation agreement is tailored to your individual situation – there’s no one size fits all. It can record the financial contributions made by both parties for the purchase of the property and stipulate the financial arrangements, for example, setting out who is to pay the mortgage and the bills etc. Having those financial arrangements formally recorded is invaluable and saves any unnecessary confusion when it’s time to pay-up. A cohabitation agreement will clearly record your legal and beneficial ownership of the property, so both of you fully understand how the property is owned.
When the situation changes
Sadly, we all know that both relationships and friendships can turn sour, especially when finances are involved. How many times have you heard the phrase ‘they moved in together and it didn’t work out’? When you live with someone, you see their true colours. Likewise, when you become financially involved with someone, you share a meaningful responsibility and, without a formal arrangement in place, working out where the finances are up to can become confusing and can often be a point of contention.
A cohabitation agreement will set out what is to happen to the property and the proceeds of sale in the event of a separation either:
- When the relationship comes to an end; or
- When one of you is ready to move out of the property
If you’re bringing significant items of furniture with you to the property, a cohabitation agreement can confirm what belongs to you, so it’s clear from the outset that whatever you bring with you will also be leaving with you… the grandparents would be gutted if you let go of that antique table that’s been in your family for the last century!
If you’re a couple with children, a cohabitation agreement can set out financial provision to be made for the little ones during and at the end of the relationship. This avoids the need for potentially costly and lengthy legal arguments over who pays for what.
Ultimately, cohabitation agreements ensure everyone knows what’s theirs, what they need to pay for and what they can expect off their partner.
**Please note that this is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.**
