Cohabitation: The Financial Consequences of Relationship Breakdown

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Cohabitation The Financial Consequences of
Relationship Breakdown

• Law Com No 307
• Stuart Bridge

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Chronology

• Referred by Government to the Commission.
• Consultation Paper (with Overview) May 2006.
• Report (no Bill, as none requested) published 31
  July 2007.

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Terms of reference

• Project to focus on financial hardship suffered
  by cohabitants or the children on termination of
  relationship by breakdown or death.
• To consider only opposite-sex or same-sex couples
  in clearly defined relationships.
• Particular attention to be paid to
• Capital provision where dependent child/ren
• Capital and income provision on relationship
  breakdown
• Intestacy and family provision on death
• Cohabitation contracts and separation agreements
  between cohabitants.

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Problems of the current law

• Patchwork of statutory rights
• Children Act 1989, Sch 1 (capital provision for
  children)
• Child Support Acts 1991 and 1995 (income
  provision for children)
• Family Law Act 1996, Part 4 (protection from
  domestic violence)
• Family Law Act 1996, Sch 7 (transfer of certain
  tenancies)
• But no personal remedy at end of relationship
  (outside marriage or civil partnership).
• Reliance therefore placed on property rights
  (beneficial entitlement under the law of trusts)
  in the shared home.
• Widespread misconception as to true legal
  position the common law marriage myth.

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We do not recommend

• That there should be an opt-in remedial scheme
  available to cohabitants who register their
  relationship.
• That amending Schedule 1 to the Children Act 1989
  provides an adequate response.
• That the divorce regime contained in the MCA
  should be applied to or adapted for cohabiting
  couples.

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Financial relief for cohabitants

• A scheme of general application whereby
  cohabiting couples may apply for financial relief
  on separation
• Provided they satisfy eligibility criteria
• But not where they have reached an opt-out
  agreement disapplying the scheme (in which case
  their own financial arrangements would apply)

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The definition of cohabitants

• Persons should be cohabitants for these purposes
  where
• They are living as a couple in a joint household
• They are neither married to each other nor civil
  partners of each other

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Eligibility criteria

• Cohabitants who are by law the parents of a child
  (born before, during or after cohabitation)
  should be eligible to apply.
• Other cohabitants should not be eligible unless
  they have lived as a couple in a joint household
  for a specified duration, to be set by statute
  within a range of 2 to 5 years.

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The nature of the financial relief claim

• The courts should be given a discretion
  structured by principles which determine the
  basis on which financial relief is to be granted.
• Claims should be brought within 2 years of the
  parties separation, subject to a general
  discretion to extend (to be exercised in
  exceptional circumstances only).

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The ingredients of a claim

• An eligible cohabitant must prove that
• The respondent has a retained benefit or
• The applicant has an economic disadvantage
• as a result of qualifying contributions the
  applicant has made.
• A qualifying contribution is any contribution
  arising from the relationship to the parties
  shared lives or to the welfare of their families.
• Not limited to financial contributions.
• Future contributions are included.

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Definitions

• Retained benefit may take the form of capital,
  income or earning capacity that has been
  acquired, retained or enhanced.
• Economic disadvantage is a present or future
  loss, including
• Lost future earnings
• The future cost of paid child-care
• Diminution in savings as result of expenditure or
  as result of earnings lost prior to separation.

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The operation of the scheme

• The court may make an order to adjust the
  retained benefit (if any) by reversing it in so
  far as reasonable and practicable.
• If, after reversal of any retained benefit, the
  applicant would still bear an economic
  disadvantage, the court may make an order sharing
  that loss equally between the parties, in so far
  as reasonable and practicable.
• The court should be entitled to make orders
  similar to those available on divorce, with the
  exception of periodical payments orders.

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Opt-out agreements

• An opt-out agreement should be enforceable in
  place of the scheme of financial relief
• Where it is in writing, is signed by the parties,
  and makes clear their intention to disapply the
  statute.
• The court should be entitled to set aside an
  opt-out agreement if its enforcement would cause
  manifest unfairness having regard to
• The circumstances at the time it was made or
• Circumstances at the time the agreement comes to
  be enforced which were unforeseen when it was
  made.

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Succession

• No reform of intestacy rules
• But consequential reforms of Inheritance
  (Provision for Family and Dependants) Act 1975
• Definition of cohabitants
• Apply separation analogy
• Power to bar future application under 1975 Act on
  making order for financial relief on separation

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