A cohabitation agreement is a type of agreement between two partners who want to live together. This agreement applies to married couples or couples in a de facto relationship. Cohabitation agreements basically outline the rights and responsibilities of each partner and also make provisions for asset division in case the couple separates.
The idea of moving in together as a couple may sound practical and fun. However, they should ensure that they have a safety net to rely on in case of a relationship breakdown. Indeed, some couples avoid the topic of breaking up since they want to do their best to stay together. But other couples discuss the pragmatic parts of their relationship such as a cohabitation agreement.
Married Couples vs De Facto Couples
The rights of married and de facto couples are similar under Australian family law. However, de facto partners must demonstrate their connection in order to file a claim for property settlement. Property settlement is the legal process for asset and property division among married or de facto partners. A marriage certificate is the only documentation that a married couple will require.
On the other hand, de facto couples are couples who are not legally married and are not related by blood. Moreover, de facto couples are living on a genuine domestic basis which is recognised under the Family Law Act 1975. Family courts will take into account a number of considerations when evaluating de facto relationships such as:
- How long the relationship has lasted (Courts will recognise a de facto relationship if it has lasted for at least 2 years)
- The kind and size of common residence
- If a sexual relationship is present
- The degree of financial dependency and agreements for financial support
- Property ownership
- Degree of commitment to a shared life
Cohabitation Agreement: Relevant Laws in the Family Law Act
Section 90UB and 90UC of the Family Law Act are the relevant laws that govern financial agreements. These sections state that de facto couples have the choice to enter into a binding financial agreement (BFA) to secure their assets. A cohabitation agreement is similar to a binding financial agreement which formalises the distribution of a couple’s assets, property, and superannuation when their relationship breaks down.
Prenuptial agreements are created prior to marriage. Financial or marital agreements are common names for agreements formed during a marriage. Section 90B of the Family Law Act permits a prenuptial financial agreement. Section 90C permits financial arrangements made during a marriage. The issues covered by financial agreements subject to sections 90B and 90C include:
- How assets (including money) will be split up in the event of divorce,
- Each spouse’s obligation to assist the other throughout the marriage, and
- The obligation of either spouse to provide spousal maintenance to their ex-spouse in the event of a divorce.
Creating a Cohabitation Agreement
1. Basic Details
Partners should provide their basic details like:
- Full legal names
- Where they are living together
- The shared property’s address
- When did they start moving in together
2. Household Expenses
Household expenses may include:
- Mortgage or rent
- Television subscriptions
- Property tax
Note: It’s important for couples using a joint bank account to indicate how much they will contribute to the account.
3. A List of Separate and Shared Assets/Debts
In a cohabiting partnership, only one partner has separate assets or obligations. In the event of a breakup, the owner continues to be in charge and accountable for it. This means that it will be clear who is responsible for the debt or asset and whether the other party has a right to it. On the other hand, shared assets or debts are items that spouses jointly own or are responsible for such as:
- Real estate
- Banks accounts
- Inheritances (If the person who provided the inheritance intended both couples to use the inheritance)
- Furniture and/or appliances
- Other relevant belongings
Couples who are going to break up may either split the debt or assets equally or one of them pays the other half of the value. Even if they don’t have any joint debt at the moment, it’s a good idea to indicate how they should divide it.
Parents have a legal obligation to support and care for their children whether they are adopted, biological, or born through surrogate arrangements. Couples who have children should also mention any dependent children that they had together or from a previous relationship. A cohabitation agreement should also include these children’s basic details.
5. Provisions for Spousal Maintenance
One partner may have a better financial standing in the event of a relationship breakdown. This means that the partner with less earning capacity may suffer financially. However, higher-earning partners have a duty and obligation to provide spousal maintenance for their lower-earning ex-spouses. This allows the lower-earning partner to meet their reasonable expenses.
Just like with other relevant legal documents, cohabitation agreements need to be signed in front of qualified witnesses. This includes lawyers or the court. It’s highly advisable that couples who sign a cohabitation agreement seek independent legal advice to ensure the agreement’s legal enforceability. This way, witnesses and lawyers may prevent legal matters from escalating to court.
Importance of Seeking Independent Legal Advice
It’s important to receive independent legal advice before couples decide to split their assets and property. After all, some couples tend to end in dispute since they may want a bigger share of their asset pool.
Another reason for the dispute is child care and who gets to have custody over their child. This results in couples taking legal matters to court and spending thousands of dollars just to settle their legal disputes.
However, with JB Solicitors, disputed couples don’t need to seek costly court proceedings. Our team of family lawyers can aid in property settlement matters and parenting arrangements for disputed couples.
We can also aid in making legally binding and fair binding financial agreements. Our mediation and arbitration services can help disputed parties to make out-of-court arrangements.
Contact us today if you want to make a financial agreement.