Cohabitation
Jessica Pitt, lawyer and member of the Living Together team, explains how the Law Commission’s recommendations for cohabiting couples to have financial rights when their relationship breaks down is far from straightforward.
Contrary to most people’s beliefs cohabiting couples have no rights if their relationship breaks down. The Law Commission has recommended that new laws should give some cohabiting couples financial rights when a relationship is over. The recommendations are part of a paper published this week called Cohabitation: The Financial Consequences of Relationship Breakdown
At the moment, the law only provides protection and assistance for people who have been married, or have been in a civil partnership. For these couples, the Matrimonial Causes Act, and all the subsequent case law, can suggest what is a fair and reasonable division of the marital assets.
The current law for cohabitees is entirely different – there is none. This can create unfair and unjust results for someone who has been in a long term and committed relationship but has no right for ongoing financial support from their ex-partner when the relationship breaks down – there is no such thing as a ‘common law spouse’.
The new proposals suggest that when a couple has been in a cohabiting relationship for somewhere between 2-5 years, or they have children together, they should, in some circumstances, become eligible to make a financial claim against their ex-partner if the relationship breaks down. This is not the same as the rights available to a spouse, but will go some way to bridge the gap between the rights available to married couples and for cohabitees who have no legal rights at all.
The new rights would allow cohabitees to make a financial claim against their ex-partner only if they can show that they had suffered an economic disadvantage as a result of the relationship; or their partner gained a financial benefit. There is also likely to be a minimum time period before the rights will crystallise. An example provided by the Law Commission is if a couple has a child, and one party gives up work to care for the child, then they have put themselves at an economic disadvantage which should enable them to qualify for financial assistance from their ex if the relationship subsequently broke down. The Law Commission doesn’t quantify this financial assistance, other than the value of any sum awarded will depend on the extent of the benefit or disadvantage.
The failings of the Law Commission proposals are that these new rights would create a different class of relationship, leading to even more confusion between people on what their rights are when a relationship breaks down and even worse, failing to quantify the level of financial responsibility, if indeed a couple qualifies for assistance under the proposals in the first place.
Under the proposals there will be three classes of relationships: the married/civil partners; cohabitees that will qualify under the eligibility criteria; cohabitees that don’t qualify, or who have opted-out of the scheme. Each class of relationship will have a different set of criteria to be applied in assessing a financial settlement.
In all cases people will have to rely on the advice of a solicitor on what may, or may not, be awarded by a Judge who, if the matter went to the Court, has a wide ranging discretion to place a value on the settlement award. This will increase the need for solicitors when a relationship breaks down and most probably increase the number of Court hearings. Both of these will cost money with the knock on effect of reducing the amount available for the eventual settlement.
The ideal, surely, would be an open system which would be clear to all concerned on who may recover what, and from whom, when a relationship ended. Couples could settle their finances directly between them, without the need to refer to a legal adviser to assist in applying the law to their case. .
It is well known that the law relating to matrimonial cases involves a high level of uncertainty. The Judgment in a recent high profile case, Charman v Charman, suggested that there was a lot of confusion in matrimonial cases and very little certainty on what a spouse may recover when their marriage broke down. Mr Justice Coleridge suggested that a fixed system, including tariffs and percentages, would create a lot more certainty for all involved on what they may recover as part of the ancillary relief (the financial aspect of a divorce process).
If the Law Commission’s proposals are implemented by the Government then cohabiting couples face further uncertainty – which is exactly what the proposals were supposed to solve. They also suggest a Court would have a wide discretion to put a value on what the benefit or economic disadvantage of a cohabitee should be worth. This will make it almost impossible for parties to assess themselves and what the other partner may be entitled to when the relationship breaks down.
The Law Commission should have followed the suggestion of Mr Justice Coleridge and taken a bolder step to create a fixed and easily definable system of rights and responsibilities for cohabiting couples, including the tariffs and fixed percentages. This could then have paved the way for a reform of the law relating to financial settlements after marriage breakdowns and given people the ability to move forward, with a high level of certainty and awareness of their financial obligations and responsibilities towards their partners.
The criticism levied at the existing arrangements, and part of the reason this issue was referred to the Commission, was because very few people understood the rights of cohabiting couples. The new system will only take us half way to a solution because it will still not be clear, to most people, exactly what their financial rights and responsibilities are towards their partner.
Thursday, 17 May 2007
