Moving In With Your Partner? Future you may thank you for a Cohabitation Agreement!
It sure is exciting to take the next step in your relationship and move in with your partner, but you should consider a Cohabitation Agreement when planning your move. We know that you don’t want to think about breaking up with your partner, but it is important to consider how you can protect yourself emotionally and financially if it does happen. Moving in together has a lot of legal and financial implications, so here is what you need to know about Cohabitation Agreements.
What is a Cohabitation Agreement?
A Cohabitation Agreement is also known as a living together agreement and is a type of Binding Financial Agreement (BFA). A Cohabitation Agreement is a financial agreement made under Section 90UB and 90UC of the Family Law Act. It indicates how the parties will distribute their property, assets, and superannuation if the relationship breaks down. It can be entered into before or during a de facto relationship or marriage. In the case of de facto relationships, it essentially acts like a de facto pre-nuptial agreement.
Cohabitation Agreements are used to protect financial assets by either party. For example, one partner may enter the de facto relationship with more property and want to ensure it will remain theirs if separation occurs. They are also important if you or your partner have children of previous relationships, and can be important if you are older and need to deal with future aged care.
The goal of a Cohabitation Agreement is to contract out of how the court will divide property (according to the Family Law Act). This means that the parties get to negotiate and decide how to divide property on their own terms.
Are Cohabitation Agreements legally binding?
Cohabitation Agreements become binding when they are signed by both partners who have individually received independent legal advice on their rights, obligations, and concerns. It is required that the couple have signed statements from their legal practitioners confirming the provision of legal advice. These statements are exchanged between the parties.
This means you should not write your own Cohabitation Agreement. Cohabitation Agreements are formal, complex and require considerable effort and planning. Make sure to get legal advice to draft your agreement so that the correct amount of caution is exercised.
An agreement will be invalid for reasons such as fraud, duress, undue influence, unconscionable conduct, or a change in circumstances where it becomes impracticable to carry out the terms of the agreement. The decision of the High Court in Thorne v Kennedy highlights this point very well – and, as explained here, is a reminder that the law of contract and equity underpins family law agreements dealing with financial matters.
Parties can also complete a Termination Agreement if they both agree not to be bound by the Cohabitation Agreement.
What should be in a Cohabitation Agreement?
Cohabitation Agreements should be suited to the circumstances and requirements of the parties. They will outline how to deal with the following:
- Separate assets that will remain separate from the other party’s assets
- Future inheritances such as a family member’s business
- Joint assets and how it may be divided or sold. For example, the proportion of title in the initial joint ownership is the proportion of dividing the asset or another formula if ownership is for tax purposes
- A provision that addresses future change in circumstances such as birth of a child, death of a party, or one party being unable to make decisions
If you’re in a situation where you move in together and one person owns the house or maybe one person has more money, they can protect and decide how the property will be treated should the relationship break down. Contracts are negotiated and it is not uncommon that there is a financial imbalance between two partners.
What property rights do you have compared to a married partner?
Under Australian family law*, the rights between married and de facto couples are similar. However, the major difference is that de facto couples must be able to prove their relationship in order to make a claim for property settlement. The only proof a married couple will need is a marriage certificate.
A de facto relationship recognised by the Family Law Act (Section 4AA) is where the persons are not legally married, not related by family, and they have a relationship as a couple living together on a genuine domestic basis. The Family Court will consider a variety of factors to determine the relationship, including:
- the duration of the relationship
- the nature and extent of common residence
- existence of a sexual relationship
- degree of financial dependence and financial support arrangements
- ownership of property
- degree of mutual commitment of their shared life
- care of children
Living under one roof is not necessarily critical, so your property could be at risk even if you aren’t living together.
Can your ex make claims on your property?
People who were in a de facto relationship can make a claim for a property settlement if one of the following are met:
- the relationship existed for a minimum of two years
- there is a child of the two parties and failure to make the order would result in serious injustice
- substantial contributions were made to property by a party and failure to make the order would result in serious injustice
- the relationship is registered
However, a property settlement is a long and stressful process. The court will determine contributions, identify property and assets, and divide property according to the Family Law Act. This means you may not get much of a say if your division of property is brought to court, possibly leaving you unfavoured or unhappy with the outcome. Cohabitation Agreements will help you avoid much of this and can be updated if your circumstances change. Negotiating and agreeing with your partner while things are happy is always a better outcome than a protracted court case.
Contact us today at Divorce Hub to get started on your Cohabitation Agreement and know your legal rights when moving in with your partner.
Disclaimer: This is general information. For specific legal advice, please get in touch.
*Note: the law for de facto relationships in Western Australia is different from the other states and territories. If you live in WA, please seek advice from a specialist lawyer in WA.