Co-habitation agreements

Posted: 11th June 2012

modern houseA recent case in the Court of Appeal illustrates clearly why it is beneficial for couples who are living together to enter into a co-habitation agreement.
Christopher Chapman, an accountant, moved in with his partner, Mrs Jaume, and her three daughters in 2001. Following her divorce from her estranged husband the following year, Mrs Jaume became the sole owner of the house in which the couple were living. Shortly afterwards, Mr Chapman paid for substantial work to be carried out to the house, including the installation of fireplaces, refurbishment of the bathrooms and the building of an extension.
The couple’s relationship broke down in 2006 and in 2009 Mr Chapman claimed repayment from Mrs Jaume of the amount that he had spent on the house, plus interest. Mr Chapman alleged that he had agreed with his partner that the money spent by him on the house would be repaid by her when it was sold or when the youngest of her daughters reached 18. Mrs Jaume denied any such agreement and claimed that the money was spent by Mr Chapman ‘in lieu of a contribution to the running costs of the household’.
The London County Court found that the money was not a contribution towards household expenses. Mr Chapman’s claim failed, however, because he was unable to prove the precise conditions of the loan. Mr Chapman appealed.
The Court of Appeal overturned the County Court’s decision on the basis that there can be no presumption of a gift between unmarried partners; thus the money was a loan and the judge at first instance should have found that it was repayable within a reasonable period after demand. As the house had now been sold by Mrs Jaume, the Court found that a reasonable period had indeed passed and the money was repayable.
The costs of such a case, involving a Court of Appeal hearing, will undoubtedly be high. If Mr Chapman and Mrs Jaume had entered into a cohabitation agreement when they began living together, such issues as financial contributions towards the house in which they were living could have been clearly addressed and a great deal of subsequent stress, and legal fees, could have been avoided.