Family law for footballers, Part 1: Cohabitation agreements
In our last Reevaldo series, focusing on immigration issues for footballers and their families we were introduced to Carolina, Reevaldo’s long-term girlfriend. Carolina has secured a visa, which has enabled her to move from Rio de Janeiro to join Reevaldo in London. She has settled down in the UK, and is currently studying at university in London.
Reevaldo, naturally, could not be happier. In the space of a few months, he has become a Premier League footballer, purchased a home in west London, and now his best friend and the woman he hopes to marry has moved in with him.
However, Reevaldo has heard horror stories from a few of his teammates about marrying young and divorcing soon after. Reevaldo has been advised to take legal advice to know how he might be able to protect himself, in a sensitive way, against being forced to pay huge sums of money in the unfortunate event that he and Carolina separate.
In this series, we will discuss some key documents that high net worth sportspersons should consider asking their partners to sign – cohabitation agreements and pre- and post-nuptial agreements. While these documents, especially cohabitation agreements, are unlikely to be strong considerations for most couples, they are extremely important for footballers and anyone else in a relationship where the financial situation is likely to be unbalanced between the partners. They aim to protect an individual's wealth in the event that the relationship ends.
As always, don't miss the footnotes --> 1 <-- which contain links to useful documents as well as additional insights.
Cohabitation agreements - an introduction
A cohabitation agreement is a legally binding agreement which can be entered into by people who are, or will be, living together. Cohabitation agreements are often used by couples who choose not to marry (or, who at least, are not planning to marry imminently).
Contrary to popular belief, there is no such legal concept as a “common law marriage” in the UK. As a result, unmarried couples who live together do not have the same legal rights over property ownership and ongoing financial support as married couples.
Mills and Reeve recently commissioned a national survey on this topic. We asked cohabitees if they believed couples, who had been living together for more than a year, had the same rights over their property as married couples. The results confirmed that more than one-third (35%) either believed that they had the same rights or didn’t know. The group that were the least aware were young people aged between 25 and 34. You can find more information about the survey and our findings here.
A cohabitation agreement will record the rights and responsibilities between Reevaldo and Carolina in relation to the following areas during their relationship:
- property ownership and household expenses;
- financial arrangements and bank accounts;
- personal belongings (i.e. furniture, art, cars);
- gifts; and
- life insurance
Importantly, if Reevaldo and Carolina were to break up then the cohabitation agreement would regulate and provide certainty as to how these issues will be dealt with.
Legal advantages of entering into a cohabitation agreement need to be balanced and managed against the potential disadvantages such an agreement can cause to the relationship.
The primary legal advantage is that a cohabitation agreement can provide certainty to both parties. It can reduce the risk of legal costs should they dispute the ownership of property, and it can also be a flexible tool by allowing couples to provide limited financial support to one another to reflect specific circumstances where the law does not provide for such a provision.
It can also protect cohabiting couples where there is a large discrepancy in income. However, it can be costly in itself to negotiate and draft the agreement, and (as we shall see) there can be challenges to its validity should it not be drafted with the utmost care.
However, much like a pre-nuptial agreement, cohabitation agreements are not often seen as the most romantic of gestures, and if broached carelessly, it can come across as one party doubting the longevity of a relationship.
The key, therefore, lies in approaching the subject sensibly and, just as importantly, drafting the agreement carefully.
Should Reevaldo enter into a cohabitation agreement?
As Reevaldo and Carolina are going to live in the house Reevaldo bought in west London,2 it is very important that he and Carolina enter into a cohabitation agreement.
Property ownership has two tiers, the legal ownership and the beneficial ownership. The house in west London is held in Reevaldo’s sole name at the Land Registry and is therefore legally owned by him. Reevaldo paid the full deposit when he bought the house, and he makes the monthly mortgage payments, so he is currently also the sole beneficial owner. However, the beneficial ownership of a property can change over time.
Carolina could gain a beneficial interest in Reevaldo’s home either by making financial contributions to the mortgage repayments or if Reevaldo and Carolina’s shared intentions about the ownership of the property changed.11
Legal cases regarding the beneficial ownership of property are extremely complex and the process can be lengthy. As a result the legal fees are very costly.
A cohabitation agreement would protect Reevaldo and deal with the issue of the ownership of the home. In this case it would record that Carolina did not have any legal or beneficial interest in the house and this would not change regardless of any contribution made by Carolina or conduct of either Reevaldo or Carolina.
The cohabitation agreement would also avoid any future arguments over whether or not items used by Carolina during the relationship were gifts. If the relationship ends, then the Audi Q7 that Reevaldo bought for Carolina to use while he was at training will be returned to Reevaldo, but Carolina will keep the jewellery and Louis Vuitton luggage.
As with any legal agreement, it is best that it is discussed and agreed as early as possible. In order to protect his house, Reevaldo should finalise a cohabitation agreement before Carolina moves in.
Key considerations when entering into cohabitation agreements
Below, we set out some fundamental areas that should be addressed in any cohabitation agreement.3 We discuss some of these issues as they relate to Reevaldo and Carolina’s situation, and for more information on any of these topics, just click on the footnotes.
Information and definitions5
Independent legal advice
Documenting that both parties have had legal advice ensures that there is an equal bargaining position, and counters suggestions of invalidity due to duress or undue influence. The risk is that Carolina attempts to argue in the future that Reevaldo put so much pressure on her that she felt she had no option but to sign the agreement. Here, it would be highly recommended that both Reevaldo and Carolina remain represented by solicitors throughout the negotiation period, and that Reevaldo pays for Carolina’s legal costs.
Freely and voluntarily entered 6
Both Reevaldo and Carolina should provide full and frank disclosure of their income, capital, assets and liabilities to reduce the risk of misrepresentation being used to prevent enforcement. The usual position would be for a detailed asset schedule to be attached to the agreement.
Separate and joint property
One of the key points in the agreement would be to ensure that if Reevaldo and Carolina buy any property, they are clear about its ownership. We have already discussed above the importance of this clause with reference to Reevaldo’s new home.7
Contents and personal possessions
It is helpful to record the ownership of personal property and household contents and how they will be dealt with upon cohabitation ending, despite allowing for their use and enjoyment during cohabitation. Certainly, Reevaldo will be keen to record that his new Range Rover remains in his name, and Carolina will be keen to record any gifts received from Reevaldo remain in her name.
It is likely that both Reevaldo and Carolina will wish to maintain separate bank accounts, as well as any joint accounts. It is usually the case that separate accounts will remain with the respective party, and as the only partner making deposits, the joint account will also remain with Reevaldo, should he and Carolina separate.
There is absolutely no obligation on Reevaldo to provide anything, but given the steps Carolina took to be with him in the UK and their disparate incomes, he decides that, during the relationship, he will cover the household expenses from his income.8
Reevaldo is under no obligation to provide direct financial support to Carolina, and therefore, it is in Reevaldo’s interest, for this to go unrecorded in a cohabitation agreement and any financial support be made on an informal basis. This would avoid placing him under a contractual obligation, while also leaving him free to be as generous as he pleases. The cohabitation agreement would make it clear that , regardless of any gifts or support made during the relationship, Reevaldo would provide Carolina with no financial support after the relationship ends.
Review and variation
As a footballer, Reevaldo’s career is rather uncertain. He could suffer a career-ending injury at any moment, and he could also fully realise his prodigious talent, which would him secure a massive pay increase and more lucrative opportunities. It may be desirable to include a number of specific event triggers for an automatic review of the agreement to take place. One specific trigger event would be marriage, which we will discuss in Part 2 of this series.
Confidentiality is unlikely to be particularly important to many cohabitees. However, for Reevaldo, as a high-profile footballer, the unfortunate reality is that his relationship with Carolina is likely to receive public scrutiny from less-reputable media outlets. Therefore, it will be important for Reevaldo to include a confidentiality clause that extends both to the terms of agreement, and anything Reevaldo says to Carolina during their cohabitation.
Legal costs are another non-essential clause, but logistically, it is more likely that Carolina would be willing to engage in the process of signing a cohabitation agreement if it was not going to cost her any money in legal fees. Reevaldo therefore agreed to pay the costs of Carolina’s legal fees.
As you can see, cohabitation agreements can be a bit daunting for anyone who is merely wishing to live with their partner, and this is likely why they are not particularly common in general. However, for footballers, cohabitation agreements can be essential to protect themselves financially, and the family law team at Mills & Reeve have acted for several footballers on the execution of these agreements.
Pretty cool, right? ↩
Stay tuned for a forthcoming post focusing specifically on issues footballers should consider when buying a home. ↩
The following is not intended to discuss all the terms of a cohabitation agreement. Rather, we discuss the importance of key terms to consider in order to ensure the validity of an agreement is not brought into question. ↩
Every contract needs “consideration” on both sides – i.e. you cannot receive something for nothing, and a cohabitation agreement is no different. However, deeds do not require consideration, and therefore it is prudent to execute the cohabitation agreement as a deed. ↩
Full names, addresses, dates of birth and occupations should be set out. Again, while quite unromantic, it is also legally useful for the parties to record the reasons for entering into the agreement to clarify their intentions and prevent a challenge on duress or undue influence. ↩
A clause documenting that the agreement is freely and voluntarily entered into strengthens any arguments of undue influence or duress. Stating that they intend the legal consequences to flow from the agreement will prevent it from failing, as the courts have historically been reluctant to hold that domestic arrangements can allow legal consequences to flow from them. ↩
It is common to record any joint property and separate property in schedules to the cohabitation agreement. ↩
A list of running costs should be included in the cohabitation agreement. ↩
If one clause is found to be unenforceable, this clause allows the rest of the agreement to survive as though that clause had not been included. This is incredibly important, especially given the uncertain attitude of the courts towards cohabitation agreements. ↩
This is an extremely complicated area of law and has been the subject of many cases. The shared intentions of the parties will depend on the specific facts of the case. It will also require evidence of relevant conversations and conduct. ↩