Pasternak & Fidis Reporter

October 7, 2021

The Uniform Cohabitants’ Economic Remedies Act and Cohabitation Agreements

In July 2021, at its annual meeting, the Uniform Law Commission adopted the Uniform Cohabitants’ Economic Remedies Act (UCERA). Cohabitants already have the right to enter into a written or oral contract under general contract law principles. If enacted, UCERA would create statutory recognition of these rights and would expand the bases for cohabitant property claims.

UCERA has not been adopted, or even considered, by the legislatures of Maryland, Virginia, or the District of Columbia. It seems unlikely that it ever will. However, it addresses a problem that will continue to exist when two people live together, acquire property, make promises to each other about sharing assets upon death or dissolution, or when one party believes they have done so.  Whether UCERA is ever adopted, it points up the need for cohabitants to have a written agreement that specifies their rights at the end of the relationship.

Rights of Cohabitants upon Death or Dissolution. Marital status alone creates property rights and obligations upon death or dissolution. In D.C., parties who enter into a registered  Domestic partnership (RDP) also acquire property rights by virtue of their status. By contrast, in the majority of states, including D.C., Maryland and Virginia, living together in a committed relationship does not.

Express and Implied Oral Contract and Other Legal Theories. Cohabitants may enter into a written contract governing their property rights at death or dissolution. When they have not done so, disappointed surviving or former partners have tried a variety of legal theories in pursuit of a remedy. These include express oral contract, implied contract, unjust enrichment, irrevocable gift, and implied partnership.

When cohabitating parties acquire real estate with joint title, principles of property law will be applicable. Property held by tenants in common is presumed equally owned. When one member of a couple acquires sole title to real estate, the other cohabitant who contributes money or labor to acquisition or improvement may be able to pursue a claim for reimbursement.

Cohabitants Need an Express Written Agreement. Cohabitants should have a written contract spelling out their rights. Without one, a party may be forced to defend in court a property or support claim he or she thought could be avoided by remaining unmarried. For an economically weaker party, anything less than a written contract will provide poor protection for that person’s  interest in property he or she may help to create but which is titled in the name of the other partner. Where the claimant must assert his or her claim after the death of the partner, the lack of an express, written contract creates a greater obstacle to enforcement.

Parties who plan to enter into an RDP in D.C. need a written agreement. If either party leaves the jurisdiction and moves to a state that does not recognize the parties’ legal status, and the property and support rights that flow from it, in the absence of a written contract, their remedies will be inadequate.

In sum, cohabitants who wish to reduce the risk of litigation and to protect their financial and property interests from claims upon dissolution or death, or who wish to establish their monetary rights in the fruits of shared labor, need an express written contract defining their rights and obligations.

Criteria to Create an Enforceable Cohabitation Agreement. Cohabitation contracts are governed by the same validity criteria as any other contract. It must be executed voluntarily, not under duress or as a result of fraud, by parties with legal capacity to contract, and there must be consideration. There must be agreement as to all essential terms.

Consideration is something of value given by each party. Consideration can include: agreement to share and pool income and other economic resources; domestic services; services as an unpaid employee of a business; labor in the acquisition or improvement of real estate; agreement to quit work, retire, or move to a different geographic area; agreeing to care for a party during an illness.

Financial Disclosure. Financial disclosure is not a general obligation of parties to a cohabitation agreement, as it is for a valid premarital agreement. However, for some couples, it may be a good idea to make some disclosure. Disclosure can help to establish the identity of a party’s pre-cohabitation separate assets. The weaker party may need to get disclosure in order to have a basis to negotiate the terms.

Scope and Terms. An agreement may address property rights upon the death of a partner or the dissolution of the relationship. It could address only ownership of specific property, such as a home, investment property, or a business; or, it can be broader and apply to all property. It can provide for the parties to waive all rights and claims so that a parties’ rights are determined exclusively by title.

It can include an obligation for the wealthier party to transfer assets, make lump sum payments upon dissolution, or make provisions for the weaker party in the event of death. It could provide that parties will pool their resources and create a shared estate.

Provisions for Support After Dissolution. Parties can agree to a specific amount and duration of support if the relationship ends or can waive any such claim. They could agree to go to binding arbitration to determine a future post-dissolution support claim. It is doubtful that a court in D.C., Maryland, or Virginia would hear such a claim, but this is untested.

Terms Affecting Retirement Benefits. Retirement benefits are a special class of property. Parties can provide in an agreement for their value to be counted in the event of dissolution and for a payout of cash or a trade-off of other assets to compensate for such value. Courts have no authority to order a plan administrator to pay benefits to the nonparticipant. Parties can agree that a plan participant will name a cohabitant as a survivor of a death benefit so long as the terms of the plan permit the participant to do so. These contractual rights may not be enforceable directly against the plan.

Effect of Marriage or Other Formal Legal Status on Agreement. A cohabiting couple may decide to marry or enter into an RDP in D.C. The contract could provide either that it survives so that it functions as a premarital agreement or that it is terminated upon such an event.

An unmarried couple has the right to enter into a contract governing property upon death or dissolution and providing for support, or for a waiver of any claims. Cohabitating parties who have property interests they wish to protect from partner claims upon dissolution or death, or who need protection from being divested of property to which they have a valid claim, should enter into an express, written agreement defining their rights.