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Cohabitation: The Law Commission's Recommendations for Reform of the Law

Stuart Bridge, Law Commissioner overseeing cohabitation law, picks out some of the key points in the recently published proposals for reform

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Stuart Bridge, Law Commissioner

The social context
The 2001 Census recorded over two million cohabiting couples in England and Wales, an increase of 67% from the previous Census. The number of cohabiting couple households with dependent children doubled from the previous Census, and over 1,250,000 children were dependent on cohabitants. Recent forecasts from the Government Actuary's Department predict that by 2031 there will be 3.8 million cohabiting couples.

The fact that more people are cohabiting and that more are forecast to do so in future is not in itself a reason for law reform. But if it is accepted that the current law is inadequate and gives rise to unwelcome consequences, the fact that these consequences potentially affect a significant and increasing proportion of the population is highly relevant.

The cohabitation project
The Law Commission Report on Cohabitation: The Financial Consequences of Relationship Breakdown (Law Com No. 307) makes recommendations for reform of the law. It is the product of two years' work by the Law Commission and builds on a Consultation Paper published in May 2006. The Commission was asked to consider this area of the law by the Ministry of Justice, but was not asked to draft a Bill.

The Cohabitation project has examined the financial consequences of the termination of cohabiting relationships by separation or death. Other aspects of the law governing cohabitants such as tax, social security, insolvency, next of kin rights, child support and parental responsibility were excluded from the terms of reference. The project has been concerned only with couples who live together. The Commission was not asked to consider relationships between other home-sharers such as relatives, carers and dependants, and commercial relationships.

The problems being addressed
Research indicates that a majority of cohabitants believe in the "common law marriage myth": that unmarried couples who are living together are, after a certain length of time, treated for all purposes by the law as if they were married. This belief is of course false. In particular, whereas married couples and civil partners have access to special statutory remedies to deal with the financial consequences of their relationships ending, cohabitants do not.

But it is equally wrong to say that existing law ignores cohabitants altogether. A patchwork of legal rules (property law, trusts law, contract and estoppel) applies, sometimes providing cohabitants with interests in their partners' property. However, consultation has confirmed the Commission's provisional view, as expressed in the Consultation Paper, that the current law is unsatisfactory. It is complex, uncertain, expensive to rely on and, as it was not designed for family circumstances, often gives rise to outcomes that are unjust.

The inadequacy of the current law extends to its treatment of the children of cohabiting couples. Schedule 1 to the Children Act 1989 gives the courts power to make certain financial orders for the benefit of children, whatever the nature of their parents' relationship. However, the lack of specific statutory remedies between cohabiting parents on separation hampers the effectiveness of those powers, particularly where assets are relatively limited. In order to make full use of limited assets, the courts need power to adjust the adult parties' property rights. Such power could not be provided even under a reformed Children Act, since that legislation is concerned exclusively with making provision for the benefit of the child.

The net result is hardship for many cohabitants on separation and, as a consequence, their children. This comes at a great personal cost to those involved. And in many cases relationship breakdown may lead to reliance on the State in the form of claims to welfare benefits and social housing.

The case for reform
Recent results of the British Social Attitudes survey indicate that a substantial majority of people in England and Wales think cohabitants should have access to financial relief on relationship breakdown. However, many people would say that law reform is unnecessary. They would argue that it would be enough to improve public information and education about the true legal position to enable individuals to make informed choices.

While improved public awareness of the law is essential, recent evidence suggests that this strategy is not sufficient, by itself, to deal with the hardship that can arise when cohabitants separate. There will always be reasons why cohabitants do not or cannot take steps to protect themselves. In particular, it is often not feasible for a person simply to "get married" as his or her partner may not agree to do so. In such circumstances the only alternatives are to put up with the existing position or to leave the relationship. It is not obviously in the interests of the couple, any children involved or society generally for a family to break up in such circumstances.

Many people think that cohabitants should have access to exactly the same remedies as married couples and civil partners. We do not agree. Although some cohabitants have relationships that many would regard as being similar to those of spouses, there is a broad range of cohabiting relationships, exhibiting different degrees of commitment and interdependence. And cohabitants have not made the distinctive legal and public commitment that marriage entails.

We have therefore devised a scheme entirely distinct from that which applies between spouses on divorce, that would apply specifically to eligible cohabiting couples who separate. It would help individual cohabitants and their children. It would provide economically vulnerable members of society with the private means to rebuild their lives and to ensure a fairer division of assets on relationship breakdown.

Key features of the scheme
Not all cohabitants should be able to obtain financial relief in the event of separation. A remedy should only be available where:

- the couple satisfied certain eligibility requirements;
- the couple had not agreed to disapply the scheme; and
- the applicant had made qualifying contributions to the relationship giving rise to certain enduring consequences at the point of separation.

Eligibility requirements
The recommended scheme would apply only to cohabitants who had had a child together or who had lived together for a specified number of years (a "minimum duration requirement"). The Report does not make a specific recommendation as to what the minimum duration requirement should be, but suggests that a period of between two and five years would be appropriate.

Disapplying the scheme
We reject an "opt-in" scheme, which couples would be required to sign up to in order to be able to claim financial remedies on separation. Consultation confirmed our view that an opt-in scheme would not deal effectively with the problems of hardship created by the current law. Vulnerable individuals would be no more likely to protect themselves by registering than they are currently to marry. Introduction of an opt-in scheme would effectively create a new status of "registered cohabitant". This would jeopardise the support of many who have expressed support for reform, but who are concerned to protect the institution of marriage.

Instead, we recommend that, as a default position, the scheme should be available between all eligible cohabitants. However, we understand the strongly-held view that it is wrong to force cohabitants who have not chosen to marry or form a civil partnership into a particular legal regime against their will. We agree that it is very important to respect the autonomy of couples who wish to determine for themselves the legal consequences of their personal relationships. We therefore recommend that a new scheme should allow couples to disapply the statute by means of an opt-out agreement, leaving them free to make their own financial arrangements.

Such agreements would have to be made in writing, be signed by both parties, and clearly express the parties' intention to disapply our recommended scheme. Agreements that comply with these formalities would then be binding. However, it would be possible for an opt-out agreement to be set aside if to enforce it would be manifestly unfair in light of the circumstances at the time that the agreement was made, or in light of unforeseen circumstances in existence at the time that the agreement is enforced.

Qualifying contributions and their consequences: the basis for remedies
It would not be sufficient for applicants simply to demonstrate that they were eligible for financial relief and that the couple had not made a valid opt-out agreement disapplying the scheme. In order to obtain a remedy, applicants would have to prove that they had made qualifying contributions to the parties' relationship which had given rise to certain enduring consequences at the point of separation.

The regime would therefore be very different from that which applies between spouses on divorce and civil partners on dissolution. Simply cohabiting, for however long, would not give rise to any presumed entitlement to share in any pool of property. Nor would the scheme grant remedies simply on the basis of a party's needs following separation, whether by making orders for maintenance or otherwise.

In broad terms, the scheme would seek to ensure that the pluses and minuses of the relationship were fairly shared between the couple. The applicant would have to show that the respondent retained a benefit, or that the applicant had a continuing economic disadvantage, as a result of contributions made to the relationship. The value of any award would depend on the extent of the retained benefit or continuing economic disadvantage, as well as the operation of a series of discretionary factors. In making an award, the court would have to give first consideration to the welfare of any dependent children of the couple. It would also have to consider:

- the financial needs and obligations of both parties;
- the extent and nature of the financial resources which each party has or is likely to have in the foreseeable future;
- the welfare of any children who live with, or might reasonably be expected to live with, either party; and
- the conduct of each party, defined restrictively but so as to include cases where a qualifying contribution can be shown to have been made despite the express disagreement of the other party.

We consider that a scheme based on the above principles would provide a sound basis on which to address the hardship and other economic unfairness that can arise when a cohabiting relationship ends. It would respond, more comprehensively than the current law can, to the economic impact of the contributions made by parties to their relationship, and so to needs which arise in consequence. Where there are dependent children, the scheme would enable a remedy to be provided for the benefit of the primary carer, and so better protect those children who share their primary carer's standard of living. By making adequate provision for the adult parties, the scheme would give more leeway to the court than it currently has to apply Schedule 1 to the Children Act 1989 for the benefit of the parties' children.

The position on death
We do not recommend that cohabitants be brought within the range of those entitled to inherit under the intestacy rules. The range of relationships encompassed by cohabitation is too diverse to be appropriately accommodated within the intestacy rules. Moreover, any change in favour of cohabitants would require an appreciation of the overall effect on the intestacy rules as they affect other members of the deceased's family. Such assessment should be made in the context of a comprehensive review of the law of intestacy.

We believe that the better way to ensure that proper provision is made for cohabitants on death is by means of the Inheritance (Provision for Family and Dependants) Act 1975. Individuals who lived with the deceased for at least two years immediately before the death are currently entitled to claim reasonable financial provision. We recommend that the 1975 Act be amended so as to provide the same definition of cohabitant as that used to define eligibility to apply for financial relief on separation, and so as to include cohabitants with whom the deceased had a child. The definition of reasonable financial provision should be amended in the case of cohabitants to remove any requirement that the provision be required for the applicant's maintenance. A "separation analogy" should be introduced whereby the court have regard to the provision the applicant might have reasonably expected to receive had the relationship ended by separation rather than by death;

The impact of reform on marriage
Much of the press comment surrounding the publication of our Report focused on the question of whether providing financial relief between cohabitants on separation would undermine the institution of marriage. We consider that the type of reform we are recommending would not harm marriage. Indeed, the argument that it would do so underestimates marriage by suggesting that legal considerations are uppermost in couples' minds when they decide whether to marry. Research evidence indicates that the law is low down the list of reasons why people get married and that those who choose to marry for family, religious, social, cultural or other personal reasons will continue to do so, whether or not financial relief is made available between cohabitants. In any case, marriage would remain legally distinctive because of its different regime of financial relief. Many are concerned that marriage should be promoted and supported. We do not consider that the introduction of our new scheme of financial relief for cohabitants is inconsistent with supporting marriage as an institution. The latter policy objective can be pursued in other ways.

Other countries have already introduced schemes of financial relief for cohabitants. Some Canadian and Australian jurisdictions did so in the 1970s and 1980s. The Scottish Parliament introduced new statutory remedies last year, based on principles similar to those that we are recommending. Recent research has examined the impact of such reform on marriage rates in Australia: analysis of the available data finds no statistical evidence of a relationship between marriage rates and the introduction of remedies between cohabitants.

Conclusion
For too long separating cohabitants have been forced to rely on a patchwork of legal rules. This has resulted in unfair outcomes at too much expense. The problem will only become more acute with the increasing number of cohabiting relationships and cohabiting families. It is not in anyone's interests for separating cohabitants to have to resort to lengthy and expensive litigation over the application of principles of trust law that are more suited to commercial relationships. Whilst cohabitants have not undertaken the public commitment of marriage, and should not therefore be able to claim the remedies available to divorcing spouses, there should be a legal regime that allows just outcomes to be reached quickly and efficiently. Our recommended scheme provides this, on the basis that the institution of marriage is strong enough to thrive without perpetuating the injustices currently experienced by separating cohabitants and their families. Most importantly, by addressing fairly the financial consequences of relationships our recommended scheme would enable Schedule 1 to the Children Act 1989 to operate to the maximum benefit of the children of separating cohabitants.