Family: Home sums

The laws regarding the financial rights of cohabiting couples are changing, but is the shift significant enough to reflect this sea change in society?

On 31 July 2007 the Law Commission recommended reforming the law for cohabitants when their relationships end by separation or death. Subsequent criticism has attacked the proposal as unnecessary, as another example of the state not allowing individuals to make their own choices, and as undermining marriage. Exactly what reform has the commission proposed?

Commission guidelines
The commission sets out a statutory framework that would govern financial relief at the end of a relationship. The commission is firmly of the view that the remedies available should not be the same as for spouses and civil partners, as there is a broad range of cohabiting relationships exhibiting different degrees of commitment and interdependence. The proposed scheme will be ‘opt out’ and will not be available to all cohabitants.

If cohabitants satisfy the statutory eligibility criteria they would be entitled to apply for financial relief on separation provided they have not reached an agreement that the statutory scheme should not apply – an opt out agreement.

However, mere eligibility would not guarantee financial relief. Eligibility is satisfied if the cohabitants are the parents of a child born before, during or following their cohabitation; or, if there are no children, the cohabitants have lived together for a minimum period (to be determined by Parliament) of somewhere between two and five years. Where just one cohabitant is the parent of a child, the minimum duration requirement should apply depending upon how long Parliament determines that period is. If it is towards the higher end, ie around five years, the commission proposes there should be the option of waiving the requirement.

Assuming the eligibility criteria are satisfied there will be discretion as to whether financial relief is granted. To be successful an applicant must prove the respondent has retained a benefit or the applicant has suffered an economic disadvantage as a result of qualifying contributions made by the applicant. A qualifying contribution is any contribution made to the parties’ shared lives.

It is not limited to financial contributions and could, for example, include childcare. A retained benefit may take the form of capital, income or earning capacity that has been acquired, retained or enhanced while an economic disadvantage is a present or future loss.

In determining the financial relief to be granted, the proposal suggests a number of discretionary factors that must be considered, the most important of which is the welfare of any child under the age of 18. The other factors are the financial needs and obligations of both parties, the extent and nature of future financial resources, and conduct – a factor that the House of Lords has only just buried in ancillary relief proceedings.

The proposed scheme would not see distribution of all the wealth of a relationship, just sufficient adjustment to address the economic disadvantage or retained benefit.

Court orders
So what financial orders can the court make? It cannot order maintenance payments, aside from childcare costs, but it can order lump sums, including by instalments, transfers and settlements of property, orders for sale and pension sharing orders.

The commission believes achieving a clean break is a substantive objective of the proposed new scheme as the arguments in favour that apply to divorcing couples are even stronger for cohabitants who have not entered into any legal commitment to support each other financially.

It is important to note that the proposed scheme applies to relationships that exist at the date of implementation of any new legislation and will therefore be retrospective. The commission does not really address the problems this may cause, but says in effect that there is no other way to be fair.

If the relationship ends by death the commission does not propose reforming the law of intestacy. Therefore cohabitants will continue to be excluded from those who can inherit in the event of death where there is no will. However, the commission does propose altering the Inheritance (Provision for Family and Dependants) Act 1975, not by adding a new class of claimant, but by ensuring that the definition of those cohabitants that could claim is consistent with those eligible to apply under the proposed statutory scheme for financial relief.

Reform fears
Would reform produce a ‘cut-price’ or ‘reduced’ version of marriage, as has been alleged, and discourage people from marrying? The commission believes not, nor does relationship counselling group Relate. Both point out that the law has very little effect on people’s decisions to marry, a decision that is normally made for religious, social, cultural or other personal reasons.

The commission draws on the example of Australia, where there have been statutory remedies for cohabitants in New South Wales since the mid-1980s and where there is no statistical evidence of a relationship between the introduction of those laws and the continuing decline in the marriage rate.

Leader of the Conservative Party David Cameron has recently demonstrated his enthusiasm and support for bolstering marriage. Responding to a report from the social justice policy group, Cameron stated that if “we get the family right, we can fix our broken society”. By ‘family’ it appears he meant ‘marriage’, and it seems the Conservatives aim to end what they see as the anti-marriage bias of the tax and benefits system. That aim might not sit well with the reforms the commission proposes.

There is consensus that the current law is unpredictable, expensive and creates injustice. Seventy per cent of family lawyers recently surveyed by Resolution, formerly the Solicitors Family Law Association, believe the law badly fails cohabiting couples. Some have argued that the law should remain unfair in order to encourage couples to marry or form civil partnerships. That leaves those in relationships where one partner does not wish to marry, or cannot, and particularly where there are children, with no satisfactory remedy.

Regardless of whether reform would affect the marriage rate, cohabitation is becoming more common. The last census, taken in 2001, recorded more than two million cohabiting couples in England and Wales, an increase of 67 per cent from the previous census. By 2031 the Government’s actuaries predict there will be 3.8 million cohabiting couples. Should the law reflect this very significant social change?

Alison Hawes is head of the family team at TLT Solicitors
but is the shift significant enough to reflect this sea change in society? By Alison Hawes