A recent High Court case highlights once again the dangers of cohabiting without entering into a formal cohabitation agreement, particularly when substantial assets are acquired jointly.
Things fall apart
- After living as a couple for 16 years, the parties – let’s call them A and B – jointly bought a house,
- They intended to marry but never did so,
- When their relationship came to an end they agreed to terminate their co-ownership of the property,
- What they couldn’t agree on was how to effect the termination, nor on how to split the proceeds – hence the application to the High Court.
The perils of prescription
Because A and B had no written agreement as to what their respective financial obligations were in regard to the costs of acquiring and maintaining the house, the Court had to exercise its “wide equitable discretion in making a division of the joint property”.
Critically, A claimed that many of B’s claims had prescribed (i.e. become unclaimable for lack of enforcement within 3 years). B tried to convince the Court that his and A’s co-ownership amounted to a partnership, in which event prescription wouldn’t have run its course and his claims would remain enforceable. He failed – it can be extremely difficult to prove the existence of any form of financial partnership in a cohabitation situation.
The danger of course is that cohabiting couples will only start thinking of enforcing their claims against each other when they break up – too late!
The result – B is down R815k in respect of prescribed claims against A for a share of the initial purchase deposit, bond repayments, improvements and rates and taxes.
In the final analysis however both parties are losers – they could have avoided all the delay, dispute, uncertainty and cost of litigation through the simple expedient of putting in place a comprehensive cohabitation agreement upfront.