Cohabitants and investors in each other's property: pay attention to the statute of limitations!
The number of unmarried cohabitants is increasing. General property law applies to them. The protection provisions for married couples do not apply to them. This can lead to very unfair consequences, for example if one partner invests in the other's home. If the parties end their cohabitation, it may happen that a claim for compensation for the investment in the other's property has expired. I will discuss this below.
Statute of limitations for married couples
A claim for compensation between spouses does not expire during the marriage. A claim that would have expired during the marriage will only expire after 6 months have passed since the dissolution of the marriage. Spouses do not have to worry about current limitation periods during the marriage, so that (legal) measures are not necessary to preserve rights.
Prescription period for cohabitants
The general limitation period provisions apply to cohabitants. Based on general property law, a legal claim expires after 5 years. The limitation period starts when the claim becomes due. If nothing has been agreed on the enforceability, the claim is immediately due. This is explicitly stated in the law. This is often also explicitly stated in the cohabitation contract. This means that the limitation period starts from the moment of the investment in the other person's property, so that the legal claim expires 5 years later. It is therefore important to institute the legal claim in good time or to interrupt the limitation period in good time. For the latter, a written reminder or a written notice is required in which the investing partner unambiguously reserves the right to performance. Of course, this partner must then be aware of the current limitation period. This (legal) awareness will often not be there, with the result that nothing can be enforced in law if more than 5 years have passed. The investing partner can then no longer enforce payment. The judge applies limitation periods strictly.
There have been only two exceptions to this to date. These are rulings both made by the Gelderland District Court. It was held that the extended limitation period for married couples also applies to cohabitants on the grounds of reasonableness and fairness, whereby a claim that would have expired during the cohabitation only expires after 6 months have passed since the end of the cohabitation. However, the question is whether the (legal) reasoning underlying this also holds up on appeal and in cassation.
Tip
Careful drafting of the cohabitation agreement can prevent the investing partner from being left behind due to the expiry of the limitation period, for example by including a provision that (certain) compensation rights are only claimable upon termination of the cohabitation agreement.
The problems outlined above can also occur if one partner invests in a home that is registered in the names of both partners. In that case too, the intention will often be that there is a right to compensation when the cohabitation ends. In that case too, prescription plays a role and careful drafting of the cohabitation contract is of great importance.
We would be happy to help you review the draft of your cohabitation agreement, because once again the following applies: penny wise, pound foolish…
Nb. The author of this blog wrote an extensive article on this subject in the Tijdschrift Relatierecht en Praktijk (REP 2016/5) under the title 'Cohabitants: compensation rights and prescription'.
