Proposed legal changes for cohabitants – are they for me?

It may be a long time, if ever, before the Cohabitation Rights Bill currently making its slow and laborious passage through parliament actually becomes law.

Most, of course, welcome the reforms it proposes. The Bill aims to help cohabiting couples achieve a clean break if they split and although it will not provide the same range of remedies available for married couples, is seen by many as a step in the right direction.

Yet not all cohabiting couples agree. For a range of different reasons they do not welcome automatic rights for cohabitants protesting that those who want this can enter into a marriage or civil partnership.

Legislators have decided that the default position should be that couples are automatically opted in and those who wish to exclude themselves from the framework of the Cohabitation Rights Bill must expressly opt out.

So if you are poised to set up a cohabitation agreement with your partner, now is the time to consider whether you want to opt out so you can include the relevant clause in the paperwork.

Opting out

A decision to opt out means that a financial settlement order (FSO) will NOT be available to you if you split up so it is something to be considered very carefully.

The right to apply for a FSO is one of the key reforms of the Cohabitation Rights Bill for cohabiting couples with children, or those without children who have cohabited for two years or more.

This could include transferring a property into one of the cohabitant's names, a payment of a lump sum by one party to the other or pension sharing.

For the court to make an order, an applicant would need to show that the other party received some sort of financial advantage from the relationship and that they suffered a financial disadvantage as a result of the relationship.

How to opt out

Couples can consider entering into a specific opt out agreement or alternatively including a clause within their cohabitation agreement.

And although it could be many years before the Cohabitation Rights Bill becomes law, if you are considering entering into a cohabitation agreement it would be wise to deal with the issue of opting out sooner rather than later.

In order to make the agreement and more specifically the "opt out" clause binding, both parties must have received independent and separate legal advice and understand the consequences of entering into an opt-out agreement, crucially that an FSO will not be available to them on the breakdown of their relationship.

There are currently no formalities or requirements to be fulfilled in entering into a cohabitation agreement although it is always wise to seek independent legal advice in order to secure the best chance of the agreement being enforced and avoiding a variation or revocation by the court.

Couples wishing to "opt-out" of this proposed legislation must have both received independent legal advice and their legal representatives provide a certificate in respect of this advice.

Opt out agreements can be varied or revoked by the court, although only in circumstances where the court views such an agreement as manifestly unfair to the applicant due to the circumstances in which it was entered into or an unforeseen change in circumstances.

• For help and advice on this area of the law, please contact Wards Solicitors' cohabitation and cohabitation disputes specialist, Lucia Mills.