Posted: 28/10/2024
As highlighted in our International Family Law Report: the Cohabitation Conundrum, cohabiting partners represent a significant proportion of couples, and the numbers choosing not to marry continues to increase.
It is well-trodden ground that unmarried partners face a different legal landscape on separation in England and Wales. For cohabitees, the protections of the Matrimonial Causes Act 1973 are replaced with the more limited provisions of ToLATA and Schedule 1 of the Children Act (an overview is provided in the report).
How to fund any legal proceedings is always an important consideration regardless of the type of proceedings. But for unmarried couples, the options may be more limited.
This is the most traditional route, however, it is not available to all. Costs for fully contested proceedings can be high and not everyone will be able to meet those costs from income, or have a capital base able to deal with the strain. Equally, if that capital is held in a business or other structure, it may be inefficient from a tax perspective to make the capital available for legal fees.
Where there are children and there are proceedings under Schedule 1 of the Children Act, it may be possible to request that the financially stronger party pay the legal fees of the financially weaker one. This does of course require agreement and thought should be given to the security of this position: if the other party decides to stop assisting, what next?
If the other party refuses/ceases to assist, then the court does have the power in cases concerning financial provision for children to make an order for one party to pay the other’s costs. Such applications are a useful tool for parties who would otherwise not be able to continue with the court process.
This option is unlikely to be available for cases where there are no children and the dispute relates solely to a property: there is no expectation that one party would pay the other’s costs on an interim basis and the party seeking to establish or realise an interest in the former family home will likely need to fund proceedings from another source. Costs may be awarded to the successful party at the conclusion of the litigation but there remains the question of how to meet fees in the interim.
Care should always be taken when borrowing money from family and friends, before the money is paid, to ensure that the agreement is clear and subject to a formal loan agreement (even if there is a trusting bond and neither party feels it is necessary).
This is particularly important in proceedings relating to financial support for children: when the court considers an appropriate outcome at the end of the case, one of the considerations will be what debts each party has that must be paid. If money has been borrowed on a casual basis without express terms, the court may well decide that the debt does not need to be factored into the outcome – not necessarily that the debt does not exist – but that it does not need to be considered as an immediate liability.
High street loans are unlikely to be available to fund legal proceedings unless there is sufficient income to meet the monthly instalments required by the bank. That will obviously depend on circumstances. Litigation loans can assist here as lenders do not require payments on a monthly basis – the entirety of the loan (together with interest and fees) is paid on conclusion of the proceedings.
Where the dispute relates to financial support for children alone (ie there is no ownership of property involved), a litigation loan from a specialist litigation loan provider is very unlikely to be available. The applying party would need to demonstrate to the lender that they have sufficient assets in their name to meet its affordability requirements and be able to repay the loan at the loan end date (generally set at between 12 – 24 months). This can be particularly problematic for international families as lenders will normally require the assets to be based in England and Wales.
Whilst the situation is better for applications relating to a property (or where the proceedings relate to both children and a property), lenders may find it difficult to assist where the property in question is in the sole name of the other party and the applicant asserts an interest by way of constructive trust or similar. In order to be comfortable lending into such cases, lenders will usually want significant detail of the client’s case and possibly even counsel’s advice before committing funds.
The best option for funding a legal case will change depending on the circumstances of the individuals involved, and considering all of the funding options at an early stage is important. Our experienced team can provide detailed estimates of fees and assist in exploring these options.
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