Up front agreements about relationship impact on personal property

If you are getting married or you are in (or considering) a serious relationship, you may want to think about whether you want to keep your own personal property (that was acquired before your relationship began) as separate from that of your partner.

PrenupsThe Property (Relationships) Act 1976 permits partners or spouses to contract out of the normal 50:50 asset split by signing a contracting-out agreement, which is also known as a section 21 agreement or pre-nup.

The most common reason for wanting to contract out of the Act is to protect a family home that is owned by one party to the relationship when a couple are contemplating moving in together. The family home and chattels are always considered relationship property and to be divided evenly when the relationship has lasted for longer than 3 years. This is regardless of who brought the assets to the relationship. If you want to avoid this, you must contract out.

A common issue is what to do about the mortgage and how to treat the contributions of the party that doesn’t own the home. Treating a partner’s contribution as rent is not a successful strategy. We have a variety of ways to answer this question, and one of these will generally be accepted as fair by both parties to the relationship. In our experience, the best methodologies acknowledge the respective parties’ contributions to the asset in the proportions they are made.

In addition, the potential for change in circumstances should always be contemplated, and agreements should allow for eventualities – for example, a new child and the time out of the workforce one partner may need to care for the child.

The Court does have a power to overturn agreements that are seriously unjust, so it is often preferable to make some allowance within an agreement that the parties consider fair. Taking a very hard line is misguided. Formulas that scale as the relationship progresses and recognise contributions ensures that an agreement will be considered to be just and outside of the Court’s ability to change it.

Bringing this topic up with your partner is likely to be rather sensitive, so you may want to talk with us before you raise it with them. We can help you give valid sensible reasons so you can explain these easily and comfortably to your partner.

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