Cohabitation In Scotland: Why It Matters For Financial Advisers

Scotland’s Census 2022 recorded 292,250 cohabiting couples across the country, an increase of 25.2% since the 2011 census. Just under 36% of cohabiting couple households (103,972) had dependent children. It appears that more couples choose either to marry later in life, after a period of cohabitation and the birth of children, or not to enter into a marriage or civil partnership at all.

It can be a common misconception either that cohabiting couples have no rights on separation, or that they have the same rights as married couples. Neither of these statements are true. Clients may believe in “common law marriage” but the Scots law status of marriage by cohabitation and repute was abolished for relationships which commenced after 4 May 2006.

Legal framework

Scots law defines a cohabitant as a member of a couple consisting of a man and a woman who are (or were) living together as if they were husband and wife; or two persons of the same sex who are (or were) living together as if they were civil partners. There is no minimum time limit for the parties to reside together to constitute a cohabitation.

The financial implications of a cohabiting relationship are distinct from those of a marriage, and if cohabiting parties separate distinct legislation applies.

The Family Law (Scotland) Act 2006 governs the termination of a cohabitation by separation. Under that Act a former cohabitant may be able to ask the court for financial provision when a relationship ends. There is no automatic entitlement to financial provision on separation (unlike in a marriage).

Any claim for financial provision must be brought within one year of the parties’ separation. This can give rise to legal disputes regarding the date of any separation, and whether the one-year timebar has been breached.

To make a financial claim, the cohabitant must establish that they have suffered economic disadvantage as a result of the relationship (either in the interests of their former cohabitant or their child) or that the other party has been economically advantaged as a result of the cohabitation. The court must consider to what extent any economic advantage is offset by economic disadvantage(s) experienced during the relationship, and vice versa. The only remedy is an award for a payment of money – there is no provision allowing for the transfer of property or for a pension share.

The 2006 law has been the subject of criticism, and in 2022 the Scottish Law Commission recommended changes, including revising the definition of cohabitant, a specific reference to fairness and serious financial hardship and the introduction of a range of remedies which are not currently available as part of a cohabitation claim. It remains to be seen what, if any, of these recommendations will be enacted into law.

The law in England and Wales differs from Scots law on cohabitation. There is no specific statutory framework for cohabitants in England and Wales. The UK Government has also been consulting on whether the law in England and Wales should provide better protection for cohabitants.

Practical guidance for advisers

• Encourage good record keeping – cohabitation claims can succeed or fail based on clear evidence of who contributed what by way of capital and payments. Paper trails and records of who owns what, contributions, transfers and payments can assist any future claim

• Encourage clients embarking on cohabitation to consider whether a legally drafted cohabitation agreement is required to ringfence separate contributions and establish what will happen in the event of future separation

• Encourage parents gifting money to children (whether assisting with house deposits or as part of tax planning) to be aware that cohabitation agreements may be helpful future-proofing

• If consulted by a separating cohabitant, be aware of the need to seek advice on a different regime of law and that strict time limits will apply
• Have an awareness that on separation of cohabitants there is no right to pension sharing

• Advise clients entering into a cohabitation or separating of the need to consider updating or making a will.

All clients’ circumstances are, of course, different, and clients (or their children) embarking upon cohabiting relationships, or finding these relationships coming to an end, ought to be encouraged to seek specialist family law advice at an early stage.