A lesbian couple are taking the Gibraltar Housing Department to court after it refused to place them as joint tenants.
The authorities said the couple should apply for separate housing units.
Nadine Rodriguez has applied for a judicial review to reconsider the non-inclusion of her partner in the tenancy agreement.
As things stand, should Ms Rodriguez die, her partner has no legal right to the apartment and could be forced onto the street.
The Gibraltar government argues that they do not discriminate based on sexual orientation as the laws also apply to heterosexual unmarried couples.
However, heterosexual couples can marry.
Gibraltar’s Equality Rights Group (GGR) has welcomed the start of the court hearing.
“It is ridiculous and backward in this day and age in a situation of housing shortage that two people in a committed relationship should be required by government to apply for and obtain two separate housing units when they, in fact, wish nothing more than to live together,” said GGR chairman Felix Alvarez.
“The only reason why the Housing Department are refusing to accept to place one of the partners as a joint tenant is the fact that they are lesbian.
“Nowhere is the ridiculous nature of discrimination and prejudice more clear than in this case.
“It’s time the Gibraltar government became reasonable, stopped being on the defensive, and helped create an atmosphere of responsible dialogue in order to lead to what the majority of people in Gibraltar consider today to be fair and reasonable treatment of sexual minority fellow citizens.”
The self-governing British overseas territory, which shares a land border with Spain, still has a higher age of consent for gay sex.
Gibraltar also retains criminal offences such as buggery and gross indecency, which exclusively criminalise gay men.
Gay and lesbian people on “The Rock” were heartened last month when British government has told the Council of Europe that it takes “very seriously” Gibraltar’s compliance with the European Convention on Human Rights.
The Council of Europe is responsible for overseeing human rights as laid out in the Convention.
In October 2007 the Prime Minister committed himself to ending the unequal age of consent in the self-governing territory.
“Statements from the Committee of Ministers are only published after consensus has been reached,” said Mr Alvarez.
“The fact that the Committee clearly signalled that a change in the age of consent in Gibraltar must be effected in the near future’ in order to make equality in consent between gays and heterosexuals a reality, is significant. It signals the UK’s clear endorsement.
“GGR is confident of information it has received that meetings between government and Foreign and Commonwealth Office officials have been taking place in order to reach agreement about the manner and timing of these changes.”
GGR was established in 2000 by Mr Alvarez, and in a community of 27,000 people where politics is dominated by the issue of sovereignty, they are openly campaigning for rights equal to those enjoyed by gay people in the UK.
Mr Alvarez said there was “growing heterosexual support being received on Gibraltar-based internet pro-gay rights forums which have spontaneously established themselves.”
Spain claims that Gibraltar is its territory. It was seized by Britain in 1704.