Why draw up a cohabitation agreement?

Why You Should Establish a Cohabitation Agreement

Why You Should Establish a Cohabitation Agreement

Table of Contents

• Introduction
• The joint ventures
• Important Reasons for Establishing a Cohabitation Agreement
• Practical example
• How do you establish a cohabitation agreement?
• Advantages and Disadvantages of Cohabitation Agreements
• Common misunderstandings about cohabitation agreements
• Legislation and Legal Aspects
• Important Considerations When Establishing a Cohabitation Agreement
• Conclusion

Introduction

A cohabitation agreement is a legal document that regulates how cohabiting parties' joint property is to be distributed in the event of a possible separation. It is particularly important because cohabitants do not have the same rights as married couples according to Swedish law. A cohabitation agreement can prevent future conflicts and uncertainty, as well as provide clarity regarding ownership relationships. This article explores why a cohabitation agreement should be drawn up, with references to legislation and practice.

The joint ventures

Sambolagen (2003:376) regulates cohabitants' joint residence and household goods acquired for joint use. According to the law, these assets must be divided equally in the event of a separation, regardless of who paid for them. This means that one cohabitant may be entitled to half the home and the furniture, even if the other cohabitant alone covered all the costs.

Important Reasons for Establishing a Cohabitation Agreement

1. Protection of Personal Property

Without a cohabitation agreement, cohabitants may have to share equally in common housing and household goods, which can lead to the person who invested the most losing significant values. A cohabitation agreement can specify that certain property is to be exempt from property division.

2. Predictability and Security

A cohabitation agreement provides clarity on how assets and liabilities are to be distributed in the event of a separation. This can reduce the risk of disputes and legal conflicts.

3. Distribution of debt

A cohabitation agreement can regulate how joint debts are to be handled, which is important if the cohabitants have joint loans or credits.

4. Cash contributions and Housing rights

If the cohabitants have paid different amounts in cash investment for a home, a cohabitation agreement can make it clear that the distribution must take place proportionally according to the size of the investment.

5. Protection in case of Death

Even if cohabitants do not inherit from each other by law, a cohabitation agreement can be supplemented with a will to ensure that the surviving cohabitant gets to keep the home or other property.

Practical example

In several legal cases, it has been shown that the absence of a cohabitation agreement can lead to difficult disputes. A well-known case is NJA 2008 p. 49, where the Supreme Court determined that one cohabitant was entitled to half the home even though the other cohabitant paid the entire purchase price. This shows the importance of having a clear cohabitation agreement to avoid unfair distributions.

How do you establish a cohabitation agreement?

1. Discussion and Agreement

Cohabitants should have an open and honest discussion about their financial situation and how they want the property to be distributed.

2. Written Agreement

The agreement must be in writing and signed by both parties to be valid. It is recommended that both parties retain a copy of the agreement.

3. Legal Advice

Consulting a lawyer can ensure that the agreement is fair and legal. The lawyer can also help to draft the agreement so that it meets all legal requirements.

4. Regular Update

It is important to update the agreement in the event of major changes in the living situation, such as the purchase of a new home, the birth of a child or major financial changes.

Advantages and Disadvantages of Cohabitation Agreement

Advantages:

• Clarity and Security: A cohabitation agreement provides clarity regarding ownership and distribution of property, which can reduce the risk of conflicts.
• Flexibility: The cohabitants can decide for themselves how they want the property to be distributed, which gives greater freedom compared to following the standard rules of the Cohabitation Act.
• Protection for Investments: The person who has invested more in shared housing or household goods can protect their investments by specifying this in the agreement.

Disadvantages:

• Complexity: Drawing up a cohabitation agreement can be experienced as complicated and time-consuming, especially if the parties do not agree.
• Cost: Hiring legal help to draw up the agreement can be costly, but this is often a necessary investment to ensure the agreement is valid and fair.
• Changed Circumstances: A cohabitation agreement may need to be updated in the event of changed life circumstances, which may involve additional costs and work.

Common misunderstandings about cohabitation agreements

A common misunderstanding is that a cohabitation agreement can regulate inheritance. In fact, cohabitants must make a separate will to ensure that they inherit from each other, as cohabitants do not automatically inherit by law. Another misunderstanding is that a cohabitation agreement automatically applies to all assets. In fact, the agreement covers only the property specifically mentioned in the document.

Legislation and Legal Aspects

According to Sambolagen (2003:376), shared residence and household goods must be shared equally unless otherwise agreed through a cohabitation agreement. This can mean that a partner who has invested significantly more in the home may be forced to share the value with their partner in the event of a separation. Therefore, it is important to carefully specify in the agreement which property is individual and which is shared.

Important Considerations When Establishing a Cohabitation Agreement

• Specification of Property: Clearly specify which property is to be considered individual and which is to be shared.
• Housing rights and property: If the cohabitants live in a condominium or property, clarify who has the right to the housing in the event of a separation.
• Joint Investments: Regulate how joint investments, such as renovations or furniture purchases, are to be handled.
• Debts and Loans: Specify how joint debts and loans are to be distributed in the event of a separation.

Conclusion

Drawing up a cohabitation agreement is an important measure to ensure fairness and clarity in cohabitation relationships. By clearly specifying how property and debts are to be distributed in the event of a separation, cohabitants can avoid future conflicts and legal disputes. A well-formulated cohabitation agreement, supplemented with legal advice, provides security and predictability for both parties. It is a wise investment to protect both financial and personal interests in the cohabitation relationship.

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