Katie Rainscourt, family solicitor at Boodle Hatfield, Oxford, discusses the difficulties facing co-habiting couples when their relationship breaks down

High profile divorce settlements have been hitting the headlines recently, but what happens at the end of the relationships of the millions of couples who choose to live together without marrying?

Unfortunately, the law in this area has not kept pace with society and, as a result, the rights for such couples are very limited.

In recognition of this, the Government has asked the Law Commission, a statutory body set up to look at law reform, to examine whether live together couples should automatically acquire legal rights against each other when they set up home.

Before I examine the proposed changes, I will briefly explain the current law. The most important point to make is that common law marriage does not exist.

If a couple cohabits for a period of time they will not become common law spouses. If you are living with your partner, the law may view your relationship in exactly the same way as if you were living with your best friend, or in a house share with strangers.

Many couples cohabit for a period of years and then move seamlessly into marriage. Little changes on a daily basis.

However, the act of marriage will provide you and your partner with not only a house full of items from a John Lewis wedding list, but also a raft of financial rights.

If you later find yourself in the unhappy situation of facing a divorce, you will be entitled to ask for maintenance from each other, for property to be transferred to you, regardless of whose name it is in, and for a share of each other's pension.

We have read this month about Mrs Miller, whom the House of Lords has confirmed should walk away with £5m after a childless marriage of two years nine months.

If you are cohabiting, you acquire none of these financial rights, regardless of whether you live together for two years or 20 years.

I will use Jack and Jill for my example although the legislation would apply to same sex cohabitees, too.

If Jill moved into a property that is owned solely by Jack, and they subsequently split up, she will have a tricky and expensive legal battle facing her if she wants to establish that part of the property is legally hers.

If Jill had bought their groceries and paid the household bills while Jack used his freed up income to clear his mortgage debt, she may subsequently be unable to claim back the money that she had indirectly contributed to this relationship.

To claim a share in the house, she will need to show that Jack had expressly agreed with her that she could have a share of the property, or that she had financially contributed towards the house's purchase price, or mortgage payments.

Therefore, cohabitees should try to ensure that the house in which they are living with their partner is put in their joint names.

If you are buying a house with your partner, your conveyancing solicitor will ask you about this. If Jack and Jill had put the house in joint names, they would have had to decide whether to be joint tenants or tenants in common.

Joint tenants hold the whole property in both of their names, so the couple will own 100 per cent of the property together.

Tenants in common specify how much of the house each of them owns, so Jack could own 70 per cent and Jill 30 per cent, to reflect the fact that Jack, for example, invested a larger deposit and paid more of the mortgage.

If Jack and Jill had had children, she would have been in a slightly better position, as there is law in place that enables you to ask the court for financial relief for your children.

If Jack is wealthy, Jill could apply to stay in the family home until the children leave school, but she would receive no compensation for the devastating impact the child-rearing may have had on her income potential and pension pot.

These problems have led to the creation of the Law Commission consultation paper, which was published this month, and asks whether the concepts of economic benefit and economic sacrifice could be used to decide whether assets need to be transferred between cohabitees at the end of a relationship.

The proposal suggests that a separating couple look at their economic positions as they leave the relationship.

If Jack and Jill decide that Jill should give up work to look after the children and the house, Jill would have made an economic sacrifice.

If she used her building expertise while at home to renovate Jack's house, he will have enjoyed an economic benefit as a result of their relationship.

The court would then decide whether these benefits or sacrifices created a need for assets to change hands on separation.

Reforms of this nature would be particularly relevant for cohabiting parents, in view of the sacrifice that is likely to be made by one partner when they are looking after children.

The Law Commission is going to examine all the responses and then publish a report by August 2007.

Whether those recommendations are made into law is for Parliament to decide.

In the meantime, the legal position for cohabitants remains precarious and uncertain, and I would advise those in a cohabiting relationship to make themselves aware of the financial realities of their situation.

E-mail krainscourt@boodlehatfield.com or call 01865 790744.