Cohabitation law reform: a significant shift on the horizon?

While the proposals are still under consideration, they would introduce a new legal framework for certain unmarried couples on separation, potentially giving qualifying cohabitants access to financial remedies that are not currently available.

For professional advisers, the implications extend beyond family law. Any reform could affect wealth preservation strategies, property ownership structures, estate planning, and succession arrangements, making it an issue that private client, tax, financial planning, and family advisers should monitor closely.

Why reform matters

A common misconception among clients is that long-term cohabitants acquire the status of a “common law spouse.” In reality, no such legal status exists in England and Wales. When unmarried couples separate, disputes are generally determined by property and trust law principles, rather than by a broader assessment of fairness or financial need.

The consultation seeks to address this gap by creating a statutory framework that would allow certain cohabitants to bring financial claims following separation. If introduced, it would represent a fundamental shift in how the law treats many cohabiting relationships.

Who would qualify?

The proposed regime would apply to couples living together in an enduring relationship for at least three years. However, the three-year requirement would not apply where the couple have a child together or where there is a child of the family.

The proposals are not intended to cover short-term relationships, casual arrangements, flatmates or siblings. Instead, they focus on committed relationships that mirror many of the characteristics of marriage or civil partnership.

A new needs-based framework

One of the most notable features of the consultation is its departure from the current reliance on ownership-based principles.

Under the proposed framework, courts could consider the parties' financial needs following separation, with the welfare of any children remaining the court's first consideration. Relevant factors could include:

• Housing needs
• Income and earning capacity
• Capital and other financial resources
• Pension provision
• Standard of living during the relationship
• Age, health and disability
• Length of the relationship.

The objective is not to replicate the financial outcomes available on divorce, but to provide a mechanism for meeting reasonable needs where appropriate.

Potential financial remedies

The consultation envisages courts having the power to make a range of orders, including:

• Property transfer orders
• Lump sum payments
• Pension sharing orders
• Ongoing maintenance in exceptional circumstances.

Although narrower than the powers available in divorce proceedings, these remedies could nonetheless have a significant impact on asset protection and financial planning for unmarried couples.

Estate planning considerations

The proposals also consider reforms to the intestacy rules to recognise cohabitants. Our article on how cohabitation reform will bring inheritance law closer to modern family life considers this in more depth. Advisers may wish to review whether current structures remain appropriate for their clients.

The growing importance of cohabitation agreements

The consultation proposes an opt-out system under which qualifying couples would automatically fall within the new regime unless they choose otherwise. To opt out, parties would be expected to exchange financial information, obtain independent legal advice and enter into a formal agreement.

As a result, cohabitation agreements could become even more important. For clients seeking certainty around financial arrangements, they may provide a valuable mechanism for managing risk and reducing the scope for disputes in the future.

Practical steps for advisers

Although no legal changes have yet been introduced, advisers may wish to:

• Review whether cohabiting clients have up-to-date cohabitation agreements.
• Consider whether property ownership arrangements reflect clients' intentions.
• Revisit wills, trusts and succession plans involving unmarried couples.
• Discuss the potential implications of reform with high-net-worth individuals and blended families.
• Ensure advice remains under review as the consultation progresses.

Looking ahead

The consultation reflects the reality that family structures have evolved considerably in recent decades. Whether these proposals ultimately become law remains uncertain, but they signal a clear direction of travel. 

For advisers, now is a good time to ensure clients understand the current legal position while preparing for the possibility of a more comprehensive framework governing the rights and responsibilities of cohabiting couples in the future.