Is a cohabitation agreement still binding after you get married?
Question:If you have a cohabitation agreement do you then need a 90B prenuptial agreement if you are getting married or will the cohab suffice?
We’ll answer this question in two parts. Firstly we’re going to explain a little background about the way these types of agreements have been dealt with in the past, and then we’ll explain the changes that have occurred due to a recent court case.
How it worked in the past
Imagine, you’re in a de facto relationship and you decide to make a de facto or cohabitation agreement which sets out what will happen to your finances if the relationship breaks down. Then you decide to marry your partner. So does your de facto agreement still protect you? The simple answer is No - your agreement becomes unenforceable.
The reason it becomes null and void, is that the cohabitation agreement only sets out what would happen if the relationship breaks down and as marriage does not fit this scenario, that is, it has not broken down (just moved to another phase) and the agreement ceases to be binding. (section 90UJ(3))
Conversely, an agreement made before marriage (like a pre nup) only operates if the marriage breaks down, So you could be in a de facto relationship planning to marry, enter into a prenup (or financial agreement made under section 90B) and if you don’t get to the wedding then the 90B agreement has no effect either.
The Family Law Act (FLA) states that when making a financial agreement the agreement is expressed to be made under a particular section. That is, a financial agreements made during de facto relationship must state that the agreement is made under section 90UC. (see sect 90uc (1) (c))
And a financial agreement made in contemplation of marriage must state that the agreement is made under section 90B. (see sect 90B (1) (a)).
So, if you were in the situation of being in a de facto relationship and maybe one day you might get married, then you would have to make two agreements – one under 90UC and the other under 90B.
Of course this doubles the cost and could be the cause of friction upon entering the marriage if one party changes their mind.
This is the way it has always operated – until late 2015 and the matter of Piper and Mueller .
How it works now
This court case involved a couple who made an agreement under two sections of the Family Law Act. Their lawyers drafted an agreement which essentially said “we’re in a de facto relationship at the moment and we want our assets and liabilities divided in this way if the relationship breaks down. But if we decide to get married we want this agreement to be read as a 90B agreement”.
This agreement straddled the fence, with a foot in both camps or sections as it were, making two agreements out of one.
It’s always been our belief, and that of the lawyers we work with, that if an agreement like this were ever challenged, it would be on the grounds that you cannot make an agreement under two sections of the act at the same time. And that’s exactly what happened in Piper and Mueller - one of the parties challenged that it was not a valid agreement.
However, the magistrate ruled that these two agreements do not conflict with each other, they are complimentary, and you can in fact be in a de facto relationship and contemplating marriage.
This precedent paves the way for couples to make considerable savings by having an agreement that is binding under section s90UC while in the defacto relationship, and continues to operate under s90B after the marriage.
If you’re in this situation and you would like certainty about what should happen if your relationship come to an end, you’ll be happy to know that we have a specially drafted agreement template that will cover your de facto and married relationship.
By Ian MacLeod