Cohabitation: Know your rights

As part of Resolution’s Cohabitation Awareness Week, we are raising awareness about the rights of cohabiting couples. According to a recent survey carried out by Resolution, cohabiting couples are the fastest growing family type in the UK, with more than 3.3 million people living in these sort of relationships. It also revealed that 3 in 4 unmarried couples who separate are often surprised to find they have no legal rights. Nearly two-thirds reported this lack of legal protection sees women lose out more often than men.

The myth of the ‘Common Law Marriage’

Many people incorrectly assume that they acquire legal status and therefore legal rights, by virtue of living with their partner, often referring to their relationship as a ‘common law marriage’.  Contrary to popular belief, there is no such thing as a ‘common law marriage’, regardless of how long the co-habiting couple have been living together or whether there are children involved.  The legal rights available to co-habiting couples are invariably limited in comparison to those who are married or in civil partnership.  For a start, there is no single piece of legislation which governs the rights of co-habiting couples on separation.  Instead, we have to look to different areas of law to help deal with each issue that may arise on separation or death.  Typically, these are:  property rights; children; inheritance; pensions and taxation. Consequently, many of those living together unmarried are unaware of their lack of rights and, if the relationship breaks down, it comes as a surprise that they are not legally protected.

In 2007, the Law Commission recommended affording rights to cohabiting couples yet the situation remains unchanged.

How can you protect yourself?

There are ways in which cohabiting couples can protect themselves, mainly these are through:

• A Cohabitation Agreement;
• A Declaration of Trust, particularly where you are acquiring joint property;
• Taking out life insurance; and
• Making a Will

What is a Cohabitation Agreement?

A Cohabitation Agreement contains the arrangements between two or more people who have agreed to live with one another, as a couple or otherwise. The Agreement contains each party’s rights and responsibilities in relation to the property where they live or plan to live together, the financial arrangements between the parties and the arrangements should the parties decide that they wish to terminate their cohabitation.

In addition, a Cohabitation Agreement can be used to record the ownership of personal possessions, which may be enjoyed by all cohabitees during the cohabitation, but will be retained by the owner should the cohabitation end.

Who is allowed to enter into a Cohabitation Agreement?

Cohabitation Agreements are usually entered into by cohabitees who want to regulate their financial and living arrangements during cohabitation and establish what will happen if the cohabitation was to come to an end. Often, such agreements are entered into by couples who have decided not to marry nor enter into a civil partnership, but have decided to live with one another.

When to enter into a Cohabitation Agreement

Cohabitation Agreements can be executed before or after the cohabitation begins. However if you intend to purchase a property jointly, then it is advisable to have a cohabitation agreement in place prior to completion of your purchase.

Having said, this a cohabitation agreement can be signed after the cohabitation has commenced, although it may be a little more difficult to broach the subject.

The most important thing to consider is that whilst timing is not sensitive, it is more important to ensure that the cohabitation agreement is not signed at a time when one party feels under undue pressure to sign the document, or when they are in vulnerable position. Otherwise, this could result in the cohabitation agreement being voidable.

What are the advantages of having a Cohabitation Agreement?

There are several advantages to having a Cohabitation Agreement, including:

• Helping to avoid the costs and uncertainty of litigation should any disputes arise in regards to the parties’ respective beneficial interests in a property;
• It allows one the freedom to arrange their financial affairs as they wish. Under current law, a cohabitee does not have a right to make a claim for maintenance or for a share of their former’s partners assets. However, a Cohabitation Agreement allows you to make arrangements to financially support a former partner should a relationship breakdown, which is particularly important if there are children involved; and
• Helping preserve and protect your assets.

What are the disadvantages of having a Cohabitation Agreement?

As with everything, there are some disadvantages associated with Cohabitation Agreements, which include:

• An uncertainty as to whether the Agreement will be upheld in Court. However, the general view is that the Agreement is enforceable as long as it is considered lawful, following which it is subject to the rules of contract law. To help give your Agreement the best chance of being upheld, it should always include a severability clause, so that any provisions held to be unenforceable can be removed without affecting the validity of the remaining provisions; and
• Introducing the subject of a Cohabitation Agreement to your partner can be difficult, but ultimately, in the long run, the benefits outweigh the negatives.

 What is a Declaration of Trust

If you are thinking about purchasing a home with your partner or perhaps moving into a property which is in your partner’s sole name, you should think about how you would like that property to be owned.  There are two ways in which you can legally own a property, either as “joint tenants” or “tenancy in common”, we can help you understand which is best suited to your circumstances. If you are acquiring joint property, you will need to ensure that both of your names are registered on the deeds. Where you acquire property jointly, but you intend to hold the property in unequal shares, say for example, because you have not made equal contributions to it, then you will need a Declaration of Trust to confirm how the property is to be held and in what proportions.

Making a Will

In the absence of a Will, cohabiting couples do not have any automatic rights under the intestacy rules to inherit any part of his or her partner’s estate. The surviving partner might be able to make a claim against the estate under the Inheritance (Provision for Family & Dependents) Act 1975, if no provision has been made, or on the basis that inadequate provision has been made under a Will or by operation of the intestacy rules. However, when making this sort of claim, it is important to note that a co-habitee is not treated in the same way as a spouse.

Should you require any further information or help regarding Cohabitation Agreements, please contact Priya Dhokia, Head of Family & Private Wealth by telephone on 020 7625 6003 or by email p.dhokia@fgdlaw.co.uk 

From Monday 27 November until Friday 01 December is Cohabitation Awareness Week. We will be supporting Resolution’s call to find a better way for unmarried couples living together.

Currently there are 3.3 million cohabiting couples in the UK – one family in five. Many believe that they have acquired the status of a ‘common law marriage’.  However, there is no such thing as a ‘common law marriage’. Living together does not provide legal protection regarding property and finances, should the relationship break down.

During the course of this week, we will be providing you with regular updates and tips via our website and our Twitter page:  https://twitter.com/fgdlawuk

You can keep track of these updates by following us on Twitter now.

Do you realise that anything you store online forms part of your digital assets?

There are several reasons why planning needs to be made for our digital assets upon death or the loss of mental capacity. Many of these assets are of financial value such as Bitcoin accounts, Paypal accounts, online businesses and written works. If these are unable to be accessed, then they may disappear into Cyberspace.

Photographs are commonly stored online these days with icloud being the current flavour of the day and if for some reasons the subscription should lapse during probate for example, these memories may be lost forever. In our experience, photographs are the most sentimental of possessions and families are often distraught when the family history is destroyed or missing.

Identity theft is unfortunately becoming even more commonplace nowadays and upon death or the loss of mental capacity, accounts are no longer being monitored so the risk of it happening to you increases.

There is no reason to worry. We advise that you appoint a “digital executor” in your will and prepare a list of all your digital assets with passwords. This should be accompanied by a letter of wishes instructing the digital executor how to handle your digital assets. It is best that the individual appointed is conversant with technology so that they are able to carry out your wishes without problem. For example, you may want your Facebook account to become “In Memorium”, your digital executor will therefore need to be competent with Facebook to carry this out. It is important to note that many of your digital assets may contain private information that you do not wish to be seen by certain people so this should be considered when appointing your digital executor and drafting your letter of wishes.

If you wish to make an appointment to discuss any of the above then please contact our Private Client Department.

The right to extend your lease

A qualifying tenant has a statutory right to extend their lease under the Leasehold Reform, Housing and Urban Development Act 1993 ‘the Act’. Generally speaking, you will be a qualifying tenant if you have owned your flat for at least 2 years. Under the Act you are entitled to an additional 90 years in addition to the remaining term at a nominal ground rent. For example if there are 95 years remaining on the existing lease you will be entitled to a new lease of 185 years in total.

Extending your lease

You can extend your lease informally by agreeing terms with the freeholder or, if the freeholder is unwilling to negotiate, then you can serve statutory notice under the Act. By serving notice this obligates the freeholder to grant a lease extension and it sets a time frame for the application process.

How much will a lease extension cost?

There is no set answer to this. It is usual for a qualified surveyor to carry out a valuation which will generally take in to consideration the market value of the flat, the remaining term left on the lease and the annual ground rent payable. In brief, the lower the remaining term left on the lease, the higher the premium payable so the sooner you act the better when it comes to lease extensions.

Advantages

There are several advantages to extending your lease. Usually the flat value will diminish as the lease term gets shorter, so prompt attention to this could save you money when extending. It can also be difficult to secure funding for flats with lower lease lengths and, as a result, flats with lower leases can be less desirable to prospective purchasers.

Finally, if you are thinking about extending your lease then be aware that ‘marriage value’ is applicable for leases of 80 years or less, i.e. the extra value that a lease extension will add to your flat will be payable. It can be more expensive when it comes to extending a lease of this length so it is important to be conscious of the 80 year mark.

If you are thinking about extending your lease or if you have any conveyancing queries in general please do not hesitate to contact our property team.

Contacts:

Property Department

Ben Gardner: b.gardner@fgdlaw.co.uk

Gary Green:   g.green@fgdlaw.co.uk

There is no doubt about it, the musician Prince amassed a huge amount of wealth during his lifetime, yet he died intestate at the age of 57. Given all that Prince accomplished, you might be thinking, why didn’t he make a will? Perhaps he thought he was too young to make a will; perhaps he did not want to think about his own mortality; or perhaps he thought, as most of us do, that he would deal with it tomorrow.

Whatever the reason, in all likelihood, Prince probably did not anticipate dying at a relatively young age. So, if Prince did not make a will, then why should you?

If you die without making a will, then your estate will be distributed in accordance with the rules of Intestacy and the results of that may not be what you imagined.

In addition, your loved ones will be left to resolve your financial affairs, facing uncertainty and confusion, at a time when they are grieving. Of course, it goes without saying that the bigger the estate, the more complex the process becomes. The value of your estate might not be in the same category as Prince’s estate, but making a will ensures that your estate is distributed according to your wishes. This is particularly important if you have children or other dependants who may not be able to care for themselves.

One point to note is that under the Intestacy rules, there is no provision for co-habiting couples. It is, however, possible for the surviving partner to bring a claim against the estate, but as with all litigation, it is an expensive and stressful procedure. The Office of National Statistics recently released a bulletin which confirms that marriage rates, in England & Wales, have decreased for the first time since 2009. This is, in all likelihood, due to an increase in the number of couples opting to co-habit rather than marry (for more guidance on co-habitation rights, Priya Dhokia, in our Family Department, explores this here).

If you are married then, under the Intestacy rules, your spouse would only be entitled to the first £250,000 of your estate (plus half of what remains thereafter). This means that if your house is worth more, then technically, it would have to be sold and divided up in accordance with the Intestacy rules, or trust is imposed.

Making a will provides certainty for your loved ones. It can be daunting experience, but actually, the process is relatively straightforward. It is always advisable to instruct a solicitor to advise you and draft your will, but here are some points that you will need to consider:

• What assets you have;
• Who you would like to leave your assets to;
• Whether there are any potential family members who could argue you have not adequately     provided for them;
• If you have infant children, you should decide who you would like to appoint as their guardian(s);
• Any specific wishes that you might have, for example if you wish to leave money or items (known as legacies) to specific charities, friends, other family members etc.;
• Who you would like to appoint as the Executors of your will. These are the people who carry out the administration of your will after your death. This could be anyone – friends, family, your solicitor, but ideally, someone who is comfortable dealing with financial matters. It is also common to name two executors so that the responsibility is shared.

Once this has all been drawn up in a clear document, all that is left to execute it is your signature. Many wills are deemed invalid due to the fact they have not been signed correctly which is why as mentioned it is always advisable for a solicitor to oversee this process.

If you would like to discuss your will or plan how you would like your estate to be handled, please contact our Private Client Department.

Contacts:

Private Client Department                                                        Family Department:

Roger Crouch: r.crouch@fgdlaw.co.uk                                    Priya Dhokia: p.dhokia@fgdlaw.co.uk

01 April 2016, heralds the introduction of the National Living Wage (NLW) and according to the Government, it will mean an increase in pay for 900,000 women and £500,000 men. The National Living Wage will apply to all working people aged 25 and over and the rate is at £7.20 per hour. The rate will be reviewed annually by the Low Pay Commission, who will then make recommendations as to any future increase.

The NWL is different to the National Minimum Wage (NMW), which applies to those aged under 25. The current National Minimum Wage is also reviewed by the Low Pay Commission, but is subject to change annually in October. The current rates are as follows:

For workers aged between 21 and 24 the rate is £6.70 per hour.

For workers aged between 18 and 20 the rate is £5.30 per hour.

For workers under 18 the rate is £3.87 per hour.

For apprentices the rate is £3.30. The ‘apprentice’ rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the minimum wage for their age.

What does the NWL mean for employers?

Although the NWL will come into force on 01 April, employers will only have to start paying the new rate from the first full pay reference period after the 01 April.

The penalty for non-payment of the NWL will be 200% of the amount owed, unless arrears are paid within 14 days.

The maximum penalty that employers could face will be £20,000 per worker. Failure to pay will result in the employer being disqualified as a company director for up to 15 years.

If you have any queries about how the above changes might affect your business, please contact our Employment Department.

Contacts:

Raj Dhokia: r.dhokia@fgdlaw.co.uk

Last week, the Commons Library published a briefing paper on Co-habitation and the “Common Law Marriage”.  The paper provides general information about the number of co-habiting couples in England and Wales.  It is a useful reminder of how the law applies to co-habiting couples and it also addresses the Law Commissions proposals for reform.  You can read the full report here:

Briefing Paper – “Common Law Marriage”

What Does the Report tell us about the statistics?

The Office of National Statistics has reported a general rise in co-habiting couples, since it started publishing annual data on the composition of families in 1996.  This is hardly surprising, particularly as co-habitation has become more widely accepted amongst society in the past few years.

No legal status for the “Common Law Marriage”

Many people incorrectly assume that they acquire legal status and therefore legal rights, by virtue of living with their partner, often referring to their relationship as a “common law marriage”.  Contrary to popular belief, there is no such thing as a “common law marriage”, regardless of how long the co-habitees have been living together or whether there are children involved.  The legal rights available to co-habitees are invariably limited in comparison to those who are married or in civil partnership.  For a start, there is no single piece of legislation which governs the rights of co-habitees on separation.  Instead, we have to look to different areas of law to help deal with each issue that may arise on separation or death.  Typically these are:  property rights; children; inheritance; pensions and taxation.

A summary of the key areas of dispute on separation

Property Disputes

On separation, the courts do not have the power to override the legal ownership of property and divide it in the same way that they might do on divorce or dissolution of a civil partnership.

The outcome of a property dispute will therefore largely depend upon how the property is legally owned.  If the property is owned in joint names, the starting point is an equal division of the equity, but one party can try to establish that they have a greater share than the other party.

If the property is owned in the sole name of one party (as is often the case for co-habitees) the other party has to establish that they have a beneficial interest in the value of the property (equity).

Building a case to establish either claim can be tricky and it will depend upon the individual facts of the case. But mainly a beneficial interest or greater share in the property can be evidenced by direct contributions or a significant financial contribution to the property. It is important to know that the intentions of the parties can also be a relevant factor in deciding the proportions of the property owned by each party, but again this will be fact specific.

If you are thinking about purchasing a home with your partner or perhaps moving into a property which is in your partner’s sole name, you should think about how you would like that property to be owned.  There are two ways in which you can legally own a property, either as “joint tenants” or “tenancy in common”, we can help you understand which is best suited to your circumstances.

Children Matters:

Children Matters are governed by the Children Act 1989, which applies to married couples, those in civil partnership and co-habitees.

On separation, disputes may arise about where and with whom a child will live, or how much time they will spend with each parent.  It is important that you understand how the law deals with these issues.  The Court generally prefers families to resolve their differences privately.  It will not interfere unless it is called upon to do so by one or other parent.  When considering whether to make an Order, the Court will decide whether it is in the best interests of the child (rather than one or other parent) and it views their welfare as being of paramount importance.

Child Arrangement Orders

If an agreement can be reached regarding the children’s living arrangements and how much time they will spend with the non-resident parent, then there will be no need to approach the Court for an Order.

However, if arrangements for the children cannot be agreed, it might be necessary for you to apply to the Court for a Child Arrangements Order.  The Order will regulate those arrangements by setting out where the children will make their primary home and how much time they will spend with the non-resident parent.

It is important to note that it is the right of the child to see their parents on a regular basis and not vice versa.  The Courts have no power to make decisions for children who are 16 years of age or older.  When making a decision the Court will consider the welfare checklist under Section 2 of the Children Act 1989.  This is a checklist of what the Court should take into account when deciding whether an Order should be made.  The Court first considers the ascertainable wishes of the children.  The Courts tend to listen to the wishes and feelings of children who are over the age of 13 as they tend to “vote with their feet” and decide for themselves where they want to live and how often they wish to see the non-resident parent.

Financial Provision for the Children:

If you and your partner have separated and your children live with you, then your former partner has an obligation to pay you regular child maintenance payments, to support the children.  The level of child maintenance is determined by the Child Maintenance Service (CMS) and not through the Court, unless your former partner’s annual gross income exceeds £156,000 then you could apply to the Court for a “top-up” in respect of the level of child maintenance payable.

If you have insufficient capital of your own, the Court can order your former partner to make some capital available to provide you with a home until your youngest child reaches 18 or finishes full time education.  Whether or not your former partner is able to afford this will largely depend upon his available capital and resources.

You can also apply for a lump sum, usually to pay for large items such as a car, if you need it in order to, for example, drive the children to school.  Whether or not you would be successful in this sort of claim would again depend on your former partner’s capital and resources.

Parental Responsibility and Birth Registration

Parental Responsibility is the right and obligation of parents to make decisions for the children of the family, in important areas of their lives and often where they are too young to make decisions for themselves.  By law, mothers automatically have parental responsibility – always.  The position for fathers is different.  A father can only obtain parental responsibility automatically if:

• He was married to the child’s mother at the time of the child’s birth or he married her at a later date; or
• The child was born after 1 December 2003 and the father is named on the child’s birth certificate.
• Alternatively, parental responsibility can be acquired by unmarried fathers by obtaining formal agreement with the child’s mother or an Order from the Court.

Pensions

On separation, the Court does not have the power to order a pension share (essentially splitting one party’s pension fund between the parties) as is available to divorcing couples. This of course could be seen as unfair, particularly if one party has not been able to build up a pension because they have stayed at home to care for the children.

Inheritance

In the absence of a Will, co-habitees do not have any automatic rights under the intestacy rules to inherit any part of his or her partner’s estate. The surviving partner might be able to make a claim against the estate under the Inheritance (Provision for Family & Dependents) Act 1975, if no provision has been made, or on the basis that inadequate provision has been made under a Will or by operation of the intestacy rules. However, when making this sort of claim, it is important to note that a co-habitee is not treated in the same way as a spouse.

Co-habitation Agreements

Co-habitation or “living together” agreements are becoming increasing popular amongst co-habitees.  These agreements can provide a framework for couples during their relationship and set out what should happen to their assets or the children if the relationship comes to an end.  If you determine this framework at the outset, then you can avoid protracted litigation down the line.

Law Commission’s proposals for reform:

In 2007, the Law Commission recommended the introduction of a new statutory scheme of financial relief on separation, based on the contributions made to the relationship by the parties.

The scheme would have been available to eligible co-habiting couples.  Couples who have had a child together or who have lived together for a minimum period would have been eligible.  Couples would have also been able to opt out of the scheme by written agreement.

In March 2008 the Labour Government announced that it would be taking no action to implement the Law Commission’s recommendations until research on the cost and effectiveness of a similar scheme implemented in Scotland could be studied.  In 2011 the Justice Minister announced that the then government did not intend to reform the law relating to co-habitation in that parliamentary term.

In a separate report, published in 2011, the Law Commission recommended that some co-habitants would have the right to inherit under the intestacy rules on their partner’s death, without having to go to Court.  The coalition government did not implement this recommendation.

Despite the increase in the number of co-habiting couples and the Law Commission’s proposals for reform, we are yet to see the introduction of a single piece of legislation which provides legal protection for co-habitants and deals with any claims that they may have on separation or when a co-habitee dies.

If you have any queries about Co-habitation, please contact Priya Dhokia, Head of Family and Private Wealth by telephone on 020 7625 6003 or by email p.dhokia@fgdlaw.co.uk

If an employee is unfairly dismissed by an employer and intends to bring an action against the employer for unfair dismissal, then both the employer and employee must be mindful of the employee’s duty to mitigate their losses. This is stated under s.123(4) of the Employment Rights Act 1996 where the employee will be expected to explain to the Tribunal what actions they have taken by way of mitigation. This includes looking for another job and applying for available state benefits.

The Tribunal is obliged to consider the question of mitigation in all cases. What steps it is reasonable for the employee to take will then be a question of fact for its determination. The courts have made clear, however, that the standard to be imposed on an employee, who has suffered unfair dismissal, should not be overly stringent. The burden of proof is on the employer, and it is not enough for the employer to show that there were other reasonable steps that the employee could have taken but did not take. It must show that the employee acted unreasonably in not taking them. This distinction reflects the fact that there is usually more than one reasonable course of action open to the employee (Wilding v British Telecommunications Plc [2002]). This point has been explained further in the recent Employment Appeal Tribunal (EAT) ruling of Cooper Contracting Ltd v Lindsey [2015], where the employer argued that there were more lucrative options available to the employee who opted to work as self-employed rather than as an employee following his dismissal. The EAT dismissed the employer’s appeal that awarding the employee three months of losses was unreasonable; the EAT confirming that by the employee accepting lower paid, yet more desirable employment was not an example of him acting unreasonably. The EAT confirmed that the Tribunal will take into account the views and wishes of the employee as one of the circumstances to ascertain whether they have acted unreasonably although it is the Tribunal’s assessment of reasonableness and not the employee’s that counts.

Failure to mitigate is likely to arise in several different circumstances. The most common argument raised by employers is that the employee had not made sufficient effort to look for new work or had confined their search to too narrow a range of jobs. Employees should therefore keep documentary evidence (e.g. job adverts, application letters) to show the steps they have taken to find new work. This obligation is ongoing so therefore the longer the dispute remains, the greater the opportunity for the employer to collate appropriate evidence to counter the employee’s claims as to quantum.

The duty to mitigate only arises after the dismissal. Therefore, where an employee rejects an offer of new terms before the dismissal has taken effect, this cannot be a failure to mitigate, as no duty to mitigate yet exists.

For further information about an employment issue, please contact our Employment Department.

Contacts:

Charles Grossman: c.grossman@fgdlaw.co.uk