Declaration Of Trust And Cohabitation Agreement- What Is The Difference?

  • Author: Teresa Barnett
  • Posted on: 25th June 2019
  • Posted in: Blog

Fifty years ago it was normal for men and women to meet, fall in love, get engaged, get married and by their first home together. Fast forward a few decades and times have changed: house prices have increased at a faster rate than salaries. The struggle to get a toehold in the property market is apparent with some parents giving their children a helping hand onto the property ladder. The cost of weddings has also increased which may go some way to explaining why more couples are choosing to cohabit rather than get married.

Purchasing a property with another person or as part of a cohabiting couple raises a number of questions that centre mainly on protecting one’s investment particularly if the financial contribution to the property is unequal this factor alone makes it even more essential to ensure that there is documentation in place to protect the parties respective interests in the property. This begs the question as to what a person can do to protect their interest.

How can a person protect their interest?

This can be done in one of two ways, by signing documentation in the form of a cohabitation agreement or a declaration of trust.

What is the difference between a declaration of trust and a cohabitation agreement?

A deed or declaration of trust usually records the proportions in which property is held and dictates how any proceeds of sale will be divided if the property is sold for whatever reason. The declaration of trust can record your initial contributions to the purchase and it can take into account who pays the mortgage or any increase in value attributable to one party i.e by improving the home (a new kitchen or windows) or DIY (loft conversion, building an extension). If a property is purchased as an investment then a declaration of trust should be sufficient. Cohabitation or living together agreements tend to be quite comprehensive.

Cohabitation agreements usually govern what will happen should the relationship (or friendship) break down. Not only can they cover the way and proportions in which the property is to be held, they also cover day-to-day matters such as responsibility for paying the mortgage, the household bills, other property expenditure such as SKY TV, having overnight guests, partners moving in and how the costs of repairs or improvements to the property are to be dealt with. They can cover the minutiae of living together such as whether smoking should be allowed in the property and what pets if any can move in.

If there have been any third party contributions such loan loans can be detailed in the agreement as can items purchased on finances of with a credit card. A cohabitation agreement can also cover unfortunate eventualities such as the breakdown of a relationship and all that entails such as what happens when one wants to move out, should there be a notice period, can one party buy the other out? Who keeps the furniture?

Are declarations of trust and cohabitation agreements binding?

A declaration of trust will be binding providing that it complies with the requisite formalities and is executed correctly. A cohabitation agreement will be enforceable provided it complies with the principles of contract law and there has been no duress, undue influence, misrepresentation, fraud or mistake. The agreement will be signed as a deed and be contractually binding.

Parties to a cohabitation agreement should think carefully before entering into one and take independent legal advice on the agreement to ensure that they understand the nature of it; we would also advise that there should be financial disclosure to protect against it later being held to be unfair.

Want to learn more?

For more information on this subject or to discuss a Family Law matter with a qualified solicitor, please do not hesitate to contact our Family Law team on 01273 734 600 or email advice@crosbywoods.co.uk.