Yesterday, the Scottish Law Commission (“the SLC”) published its eagerly awaited (in legal circles anyway!) Report on Cohabitation. As anticipated, the report recommends fairly significant reforms to the law relating to cohabitants’ claims on separation. Here, some of those recommendations are highlighted.
Change to the definition of cohabitant
The current in law in this area is contained within the Family Law (Scotland) Act 2006 (“the 2006 Act”). In terms of existing legislation, a cohabitant is a member of a couple living together as if they were spouses. In determining whether a person is a cohabitant the court must consider the length of time the parties were living together, the nature of the relationship when living together and the nature and extent of their financial arrangements.
The SLC’s report is very clear that the comparison to spouses is no longer appropriate and that the current definition should be replaced with something more modern and bespoke. SLC’s recommendation is that a cohabitant be defined as a member of a couple who are, or who were, living together in an enduring family relationship.
The SLC also recommends that legislation should contain a list of matters that the court must consider when determining whether a person is a cohabitant. Those matters are:
- the duration of the relationship;
- the extent to which the couple live, or have lived, together;
- the extent to which the couple are, or were, financially interdependent; and
- whether there is a child of the couple or a child accepted as a child of the family.
The test for financial provision
Currently, a separated cohabitant can make an application to the court for an order that the other cohabitant either pay a capital sum or make payment in respect of the economic burden of caring for a child of the couple. The SLC report highlights that the court is given no guidance as to the basis for deciding what, if any order, should be made. This has caused difficulties for advisors, decision makers and separated cohabiting couples.
In an attempt to rectify that, a new two part test is proposed by the SLC. In terms of that test, the court would first decide whether an order for financial provision is justified by reference to specified guiding principles. The guiding principles proposed by the SLC are:
- where one cohabitant has derived an economic advantage from the contributions of the other, the economic advantage should be fairy distributed;
- where one cohabitant has suffered an economic disadvantage in the interests of the other or a relevant child, the party suffering economic disadvantage should be fairly compensated;
- a cohabitant who is likely to suffer serious financial hardship should be awarded reasonable financial provision for short term relief of that hardship; and
- there should be a fair sharing of economic responsibility for childcare.
As well as these four guiding principles, the SLC recommends that a list of relevant factors is laid out in legislation. The court must take these factors into account in determining the question of financial provision. The stated aim of such a list is to provide clear guidance to the courts.
Orders available to the court
Currently, the court can only order payment of capital to a cohabitant following separation. The SLC recommends that, going forward, the following remedies should also be available:
- a property transfer order;
- an order for payment for the relief of serious financial hardship for a period of up to six months;
- incidental orders, such as to regulate occupation of the family home or to value a property;
- interim orders; and
- ancillary orders, such as to provide for payment in instalments.
Time limit
As the law stands, a separated cohabitant must apply to the court for a financial remedy within one year of separation. This has without doubt caused problems for advisors and separated cohabitants. There has been much speculation about whether the SLC would recommend that this arbitrary one year time limit be extended. The SLC was not persuaded that the only (or best) solution was to extend the one year time limit. Instead, it is recommended that the courts should have discretion to allow late claims. A court could only allow a late claim only on special cause shown. A late claim could not be allowed any later than two years after separation, regardless of the reason for the lateness.
The SLC also recommends that it should be open to the separated couple to agree to extend the one year time limit by up to six months. Such an agreement would have to be in writing, in a specified form.
Cohabitation agreements
Many cohabiting couples enter into cohabitation agreements. Such agreements can be entered into in contemplation of a cohabitation or to regulate financial matters upon separation. Unlike an agreement between spouses, a cohabitation agreement cannot be set aside by the court on the basis that it was not fair and reasonable at the time it was entered into.
The SLC report highlights a need to strike a balance between preserving the rights of cohabitants to order their own affairs (including in a contract) on the one hand, and the need to protect unaware or vulnerable cohabitants on the other. An appropriate balance, according to SLC, would be struck by allowing a cohabitant to apply for the variation or setting aside of a cohabitation agreement on the basis the agreement was not fair and reasonable at the time it was entered into.
What next?
The report contains, as an appendix, a draft Cohabitation (Financial Provision) (Scotland) Bill. It remains to be seen whether – and to what extent- the Scottish Parliament will support the proposed legislation.
Kirsty McGuinness, Senior Associate: kmg@bto.co.uk / 0141 225 4848
