Love me, love my mortgage

A verse for couples everywhere: 'Roses are red, violets are blue. If you take the house, what am I going to do?'

Dewy-eyed lovers seeking the perfect Valentine's Day gift this weekend could do worse than present their partner with a co-habitation agreement. However unromantic it may seem, the harsh fact is that even the most idyllic relationship will one day come to an end. Whether this happens on one partner's death or simply because you can no longer stand the sight of each other, co-habiting couples get none of the automatic legal rights that their married counterparts enjoy.

Dewy-eyed lovers seeking the perfect Valentine's Day gift this weekend could do worse than present their partner with a co-habitation agreement. However unromantic it may seem, the harsh fact is that even the most idyllic relationship will one day come to an end. Whether this happens on one partner's death or simply because you can no longer stand the sight of each other, co-habiting couples get none of the automatic legal rights that their married counterparts enjoy.

Courts try to treat children's needs in the same way, whether their parents are married or not. But the weaker economic partner - generally the woman - is often left financially stranded. No matter how long the couple have lived together, she may come away from the relationship with no maintenance for herself, no stake in the couple's shared home and nothing from her partner's pension fund.

A London independent financial adviser, Fiona Price, says the only way to guard against these problems is to draw up a co-habitation agreement setting out what will happen to the couple's assets if they split up. Talking through your financial affairs in such detail while love is still in full bloom is an unappealing prospect, Ms Price admits, but better to tackle it than wait until the relationship has deteriorated beyond repair.

"One problem with love is that there are lots of things we don't communicate about," she says. "We meet somebody, we fall in love, then we drift into a situation where we're living together. But you've never actually sat down and discussed money.

"There are real issues to confront, and they probably affect women more than men, because women tend to be the ones with the lower income. If you just break up and let your partner have the bulk of the assets, you may regret that."

One of the most valuable assets any couple has is the house or flat they own. When a married couple divorces, English law views this property as a joint asset, and accepts that each party has a stake in its value.

When an unmarried couple separates, the courts check whose name is on the property's deeds. If only one partner's name appears, that partner is taken to be the sole owner. The best the other partner can hope for is a refund of contributions he or she made to the mortgage or deposit needed to buy the property.

In 1984, one unmarried woman discovered how harsh this distinction can be. Mrs Burns - as she chose to be called - lived with her partner in the disputed house for 17 years, took his name, brought up their two children, redecorated the house, and contributed to family bills.

The house was bought by her partner in 1963, two years after they set up home together. He paid the mortgage and the deposit, and had the house conveyanced in his name. When the couple split, the courts ruled Mrs Burns had no right to any share of the pro-ceeds from sale. She appealed, and lost again.

Lord Justice May said: "When one compares this ultimate result with what it would have been had she been married to the defendant, I think she can justifiably say that fate has not been kind to her. In my opinion, the remedy for any inequity she may have sustained is a matter for Parliament, and not for this court."

The first step to reform would be draft legislation from the Law Commission. The Commission hopes to publish a consultation paper on the property rights of homesharers this summer, and seems to view the case for reform with sympathy.

Last May, Charles Harpum, who heads the Commission's property law projects, said: "The present law is widely acknowledged to be unsatisfactory and difficult to apply. It causes considerable problems in practice." The Commission will give interested parties time to reply to its consultation paper, consider those responses, then publish a final report outlining its proposals. This report will be laid before Parliament, which may, or may not act on it.

A Law Commission spokesman, Dan Leighton, says: "We push as far as we can to have our proposals implemented, but the final decision is down to the Government. Nothing is going to happen overnight."

Aside from a house, a couple's biggest asset will probably be the main breadwinner's pension fund. Here again, co-habitees are likely to lose. Courts accept the main breadwinner's pension fund should be shared when a married couple divorces, but recognise no corresponding right for co-habitees. Recent legislation on dividing a pension fund has also been drafted to include only married couples.

David Salter, chairman of the Solicitors' Family Law Association's pensions committee, says: "In the event of an unmarried couple's long-term relationship breaking down, there is no form of redress.

"The co-habitant who does not have pension rights cannot apply for earmarking, which was introduced in 1996 for married couples. The pension sharing provisions due at the end of this year do not apply to co-habiting couples."

Co-habitation agreements can give the joint affairs of unmarried couples the same degree of legal clarity a wedding certificate confers. The agreement can cover what share of the couple's home each partner should get if they split up, how the main breadwinner's pension fund should be allocated and what happens to the car. The Law Society says these agreements are enforceable, but warns that both parties should take independent legal advice before signing. This would cover issues such as the legal and tax implications of each option being considered.

Ms Price says: "Lawyers will draw up co-habitation agreements, although you're better going to one who specialises in family law. They cost about £500 or so, but it might be the best £500 you've ever spent."

To find a specialist lawyer near you, call the Solicitors' Family Law Association on 01689 850227