The Importance of Cohabitation agreements in the Cayman Islands – the Rights of Unmarried Couples

By David Lewis-Hall, associate, Priestleys 

“I do” – two small words that have big legal consequences. Even without knowing the legal intricacies of the Matrimonial Causes Law, most couples entering into a marriage will have a reasonable understanding that, in wedding their beloved, they are consenting to an intermingling of financial resources. This may even form part of the marriage vows – the traditional Episcopal and Methodist vows include a promise to ‘keep’ the other in sickness and in health and Lutheran vows to ‘share all that is to come’.

This explicit consent to sharing resources and assuming responsibility for the other is not so easily found when looking at unmarried cohabiting couples. Many couples may drift into living together without any formal consideration of their legal rights and the potential consequences of such a decision (if indeed it can even be called a ‘decision’). Some may simply assume that their partner will acquire no property or financial rights, whereas others proceed on the mistaken belief in ‘common law marriage’ – i.e.  that if you cohabit in a romantic relationship for long enough you will have the same rights as a married couple.

The present state of the law in the Cayman Islands is that cohabitation does not give an unmarried couple any of the legal rights of a married couple in terms of being able to claim a share of the other’s property (e.g. if one party owns the home is his or her sole name) or a claim for maintenance (regular payments) upon the breakdown of the relationship. Similarly, there is unlikely to be any straightforward way to claim that any debts accrued during relationship should be shared between the separating parties if the debts are not held in joint names. This can leave couples with no remedy at all at the end of a lengthy relationship or, alternatively, the only option may be to fall back on complex property law rules involving allegations of constructive trusts and proprietary estoppel. These types of disputes are generally fraught with risk and, if fought all the way to trial, will necessarily involve high legal costs. 

Changes to the law

The Law Reform Commission, as part of its family law review, has recommended that the law in the Cayman Islands be changed in this area. The proposed legal changes are set out in The Family Property (Rights of Spouses) Bill 2018 in draft form. This Bill seeks to“regulate property rights of persons in common law unions, similar to countries such as Jamaica, Australia and New Zealand”. If this Bill were to become law in the Cayman Islands, it would amount to a tectonic shift in the way in which unmarried couples are treated as it would essentially be a statutory recognition of the hitherto mythical ‘common law marriage’. The current proposals would, amongst other things, potentially grant a cohabitee a 50% share of the family home, even if it is legally owned by the other cohabitee in their sole name. Although the Court would have the power to vary this entitlement, this type of litigation is likely to be complex, lengthy and expensive (see for example the Australian case of Gissing Sheffield[2012] FMCAfam 1111 in which there were affidavits from 11 witnesses in this type of case). 

Perhaps the most astonishing aspect of the proposed reform is that it would likely have retrospective effect – i.e. it would apply to couples who have been cohabiting since before the law comes in to force. Therefore, a cohabiting sole property owner, who has perhaps spent years believing that his or her asset would be safe if the relationship broke down, may find themselves suddenly potentially liable to giving up to 50% of that property to their partner if the Family Property (Rights of Spouses) Bill 2018 were to become law.

Planning ahead

How then do unmarried couples who intend to cohabit or are already cohabiting set about protecting their interests? The answer is to enter into a cohabitation agreement. This is a document that is carefully negotiated between the couple and agreed to record the financial (and potentially non-financial) arrangements between the couple – both during the subsistence of the relationship and in the event of its breakdown. It is essentially a pre-nuptial agreement for unmarried couples and could be vital for protecting both parties. A cohabitation agreement could record the following, for example:

Crucially, the proposed Family Property (Rights of Spouses) Bill 2018 – mirroring similar statutory regimes in other countries – includes the right for cohabitees to ‘opt out’ of its consequences by entering into a cohabitation agreement to that effect. The draft Bill sets out a number of legal requirements which must be satisfied in order for the agreement to be enforceable, – e.g. it must be witnessed by a justice of the peace or an attorney-at-law. The question of whether the potential effects of the proposed legislation can be avoided in advance is a difficult one and future cohabitation agreements will need to be very carefully drafted in order to ensure that they record the intention to avoid the Bill’s consequences and to overcome the likely legal hurdles that may arise out of legislation in this area.

Legal advice

Importantly, a cohabitation agreement is highly unlikely to be binding unless both parties have received independent legal advice as to its meaning and effect. It is therefore unwise to attempt to draw up these agreements without the involvement of experienced attorneys. Further, just as each relationship is different, so must each cohabitation agreement be unique to the particular couple. These are valuable documents that may be used to protect incredibly valuable assets and to define important agreements and understandings regarding the management of any relationship breakdown, including arranging for the needs of any children of the relationship. An ‘off the shelf’ cohabitation agreement runs a very serious risk of failing to comprehensively cover all aspects of the particular relationship and may be more likely to be deemed unenforceable in the event of legal proceedings.

Finally, cohabitation agreements are not just for couples in a romantic relationship. As property prices continue to increase, it is becoming increasingly common for friends or family members to buy and share a home together. A cohabitation agreement can be a vital document in this context, clearly setting out the obligations and rights of each cohabitee. Given that the relationship between the parties is not the ‘standard’ cohabitee relationship, it is perhaps even more important in this context that a carefully considered and tailored cohabitation agreement is produced.

Given the Law Commissions proposed reforms and the fact that the current international climate appears to be moving towards governments imposing rights and obligations on cohabitees without their consent, it has never been more important to seek sound legal assistance in this area. At Priestleys, we can advise you as to your potential rights and liabilities in any form of cohabitee relationship. We can help you to ensure that valuable assets are properly protected from potential future claims in the event of the breakdown of the cohabitation relationship. We can assist you to formally record the way in which you as cohabitees or potential cohabitees have chosen to share the expenses and resources of that relationship. We can advise you as to possible changes in the law and to ensure, as far as possible, that any cohabitation agreement is future proofed. 

Nobody has a crystal ball. In our experience, it is better to think ahead and plan practically now, rather than waiting to see if the proverbial horse bolts before trying to close the stable door.

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