I have written at length about the benefits of prenuptial agreements in building a strong marital foundation. While many couples seek the benefits that a prenup can provide, there is an increasing number of couples that choose to live together for the long term without getting married. Although they may not choose to marry, these couples often want the same (or similar) protections that are sought through a prenup. While certain benefits and protections come only with marriage, there are certain issues that can be addressed in a written agreement.
Like prenups, cohabitation agreements are intended to provide safeguards for each party in the event of a breakup. If this occurs, one party may be left with additional debt or liabilities in the absence of a cohabitation agreement. While laws surrounding unmarried couples’ rights differ by state (e.g., New York does not recognize common law marriage), cohabitation agreements may provide some security and benefit regardless of location. Below are some benefits to cohabitation agreements.
Outline each party’s financial obligations and responsibilities. As is often the case when living with someone, the line between each person’s finances and responsibilities, if any, may be blurred at times or inconsistent. In a cohabitation agreement, the parties may choose to outline how financial obligations will be shared related to the residence (or related expenses such as utilities).
Establish ownership/entitlement to the residence and fixtures. If you are purchasing a property together, ownership rights and responsibilities should be clearly outlined in advance by a written agreement and supported by how title to the property is held. If you move into a home that your partner owns, you will have no legal ownership to the property, regardless of any contributions made to the mortgage or related expenses unless there is a clear, written agreement signed and acknowledged with the appropriate formalities for a deed to be recorded. Parties may define ownership interests and entitlements in the cohabitation agreements so that if one person contributes his or her separate property to the acquisition or capital improvements, each party’s rights are clear if there is a breakup. It is common for parties to purchase and share expenses related to furniture, appliances, or electronics. This can sometimes create issues upon a breakup. A cohabitation agreement can provide a plan for how these items will be split if there is a breakup. The agreement can alternatively provide a plan for one party to have first right of refusal to purchase the items from the other party, provided the parties can agree on the value. This can be challenging on personal property items but allows for the opportunity. Another option is to alternate the choice for any disputed items after a coin toss for the first pick or selling the property and splitting the proceeds in an agreed upon manner.
Reduce potential conflicts while living together. While the benefits outlined above apply when parties break up, they are also beneficial during the relationship and while the parties are living together. For example, having a clear picture of how rent/mortgage and utilities are split can reduce stress and friction because the parties have clear expectations outlined. Additionally, cohabitation agreements can include “lighter” topics such as quiet hours, general guidelines around overnight guests (such as family members or children from a prior relationship), etc. Perhaps one party has a job with demanding hours or responsibilities, in which case the agreement might include certain times of day as “quiet hours” to ensure the opportunity for rest. The parties may also want to clearly outline expectations and guidelines around having overnight guests, such as how many nights at a time someone can stay over, the party responsible for preparing the home for the guest, etc. Addressing these types of everyday items can help the parties build a respectful and open relationship.
Much like a prenup, a cohabitation agreement works best when tailored specifically for the parties seeking the agreement. Having open conversations about expectations and guidelines will help to create a durable agreement that makes sense for the parties. Like any other contract, an experienced attorney should prepare the Cohabitation Agreement to make sure it is enforceable.