MoJ proposes needs-based cohabitation law reform

The highly anticipated Ministry of Justice consultation paper was released on June 5, entitled ‘A fairer end to relationships’. The case for cohabitation law reform is clearly made out, and this is the biggest step towards achieving that in many years. The question now is what the proposed reforms would actually mean for cohabitees and for those of us advising them.

As anticipated, the consultation paper has many echoes of the Law Commission’s 2007 report, including the definitions and much of the eligibility criteria. The Law Commission suggested a minimum duration of cohabitation of 2–5 years; the paper settles in the middle at 3. Both agree that a cohabiting couple who have a child together do not have to meet this minimum duration. Given that almost half of children are now born to unmarried couples, this is welcome.

One fundamental point, which was somewhat of a surprise, is the inclusion of the ‘guiding principle’ of “needs”. Needs is a concept which is ingrained in the language of the family courts, so it makes sense to bring it into a new cohabitation law. The Law Commission rejected this approach, opting for a compensatory scheme based on qualifying contributions and retained benefit / economic disadvantage, which left lawyers fearing that we would be forever conducting accounting exercises (despite the emphasis against that). Not so in the consultation paper. The concept of ‘needs’ is the clearest example in the paper of the aims emphasised by this Government since its manifesto pledge on cohabitation reform: fair outcomes for children and protection of the vulnerable.

There are, however, some very important details that need further consideration. One example is that maintenance would be limited to ‘exceptional circumstances’, such as ‘serious health issues or disability’. There are many families where this simply won’t produce a fair outcome: those who do not have enough to purchase two homes, or couples who are income-rich but capital-poor, meaning that we could see one partner needing most of the available capital if maintenance is not an option.

Another example is the proposal that, for cohabitees, ‘discretionary’ needs would be excluded. This is a deliberate distinction from married couples but is difficult to apply in practice. What is ‘discretionary’ for one family may be standard for another. This could not only prejudice children of unmarried couples, but it could potentially make a claim under Schedule 1 of the Children Act more attractive, particularly for high-income families, given the wider discretion that courts have in cases which fall under their jurisdiction for top-up maintenance and/or lump sums (the example of a high-end car given in the paper is not at all uncommon in reported HNW Schedule 1 cases).

There are also some practicalities for family lawyers to bear in mind when advising clients if the reforms are passed. The paper is understandably silent on procedural steps, which will be dealt with in due course. However, for the first time, family lawyers would have to grapple with a limitation period, as claims would have to be brought within two years of separation. This is another distinction, given that the paper expressly rejects a limitation period for financial claims on divorce. This is perhaps more understandable in the context of the requirement for a divorce to end a marriage, whereas many couples may not realise that a step is required when they stop living together, and so would unknowingly leave their claims open indefinitely. However, it feels very short for many families. One key addition in our NCDR world could be to allow couples to agree to disapply the time limit, relieving the pressure to issue court proceedings where they are engaging in dispute resolution and preventing unnecessary applications.

Finally, lawyers will need to be ready to advise on the proposed opt-out agreements – both for couples who want to entirely opt out of financial claims and those who want to make bespoke provision (with a question mark over enforceability if, for example, such an agreement provided for maintenance when the law does not). We are also faced with the immediate challenge of advising clients seeking cohabitation agreements now, as those do not require independent legal advice for both parties and often involve limited, if any, financial disclosure, both of which would be safeguards under the opt-out proposals. Advising clients now about the possibility of reform and the need to review existing agreements during any implementation period is essential.

Overall, the proposed law reforms provide far greater protection for vulnerable people and children than what is available for cohabiting couples now, whilst also permitting couples to choose to opt out if they wish. It is clear that a needs-based approach is far preferable to a compensation model. For those reasons alone, these reforms should be supported and pushed forward. Our role now is to help assess the practical implications, including the potential unintended consequences of restricting “needs”, and to support our clients as this goes forward.