Co-habitation rules are risk to the farm
Beware of new law that gives your other half a right to business assets upon separation
The mention of weddings bells might have mother in tears with excitement but equally could have father in tears at the thought of putting part of the farm in jeopardy should things not work out with the happy couple.
However, wedding bells do not even have to sound anymore and part of the farm could be at risk thanks to new legislation which came into force in January this year.
As part of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, if John, for example -- to whom the farm was transferred last year -- invites Mary to live with him and the relationship breaks up after five years, Mary could be entitled to part of the farm. If Mary and John had a child, Mary could be entitled to part of the farm after just two years.
So how come we did not hear of this until now? This provision came in with legislation allowing for same-sex couples to register their civil partnerships and, thus, a lot of the limelight has been diverted to the recognition of civil partnerships. However, all people who live together as a couple in an "intimate and committed relationship" now have legal rights under this new piece of legislation.
So how could Mary prove that she was living with John in an "intimate and committed relationship"? The court will take into account all the circumstances of the relationship, such as:
- The duration of the relationship;
- The basis on which the couple live together;
- The degree of financial dependence of either adult on the other and any agreements in respect of their finances;
- The degree and nature of any financial arrangements between the adults, including any joint purchase of a house or lands;
- Whether there are one or more children;
- Whether one of the adults cares for and supports the children;
- The degree to which the adults present themselves to others as a couple.
As well as proving that she was in an "intimate and committed relationship", Mary will also have to satisfy the court that she is financially dependent on John and that financial dependence arises from the relationship or the ending of the relationship. Factors which the court will look at include:
- The financial circumstances, needs and obligations of each person;
- The rights and entitlements of any spouse or former spouse;
- The rights and entitlements of any dependent child;
- The duration of the parties' relationship;
- Basis on which the parties entered into the relationship;
- The degree of commitment of the parties to one another;
- The contributions made by either of them in looking after the home;
- The effect of the earning capacity on each of them.
If the court is satisfied that it is fair to do so, it can make various orders. These orders are much the same as the ones that a court can make in separation or divorce proceedings, such as:
- John to make weekly cash payments or lump sum cash payments to Mary;
- Property adjustment orders so that John would be ordered to transfer part of the farm or the house to Mary;
- Pension adjustment orders giving Mary a right to share in any pension that John may have;
- Provision for Mary from John's estate when he dies.
So what should John do to protect the farm? Let's assume John and Mary are still in a loving and committed relationship. John should suggest that they write their own rules. The legislation encourages couples to set out what is to happen if the relationship ends. However, a word of warning: the courts can disregard a couple's own rules where it feels that the rules are biased. So I would suggest that John and Mary should get independent legal advice before writing up their own rules -- it could save a fortune in the long run.