A cohabitation agreement is a legally binding contract between common law couples that specifies and establishes financial agreements between the two parties who live or plan to live together. Unmarried couples who live together do not enjoy certain statutory protections that apply to married couples under Ontario’s Family Law Act (FLA) and the Succession Law Reform Actin respect of the division of property in the event of a separation or if one unmarried spouse dies intestate.
Under the FLA, married spouses are entitled to an equal division of financial gains of the marriage, and the property regime under the FLA only applies to married spouses. The Supreme Court of Canada clarified that this distinction between married spouse and common law partner is not discriminatory because married spouses have made a conscious choice to enter into marriage. Because a common law partner is not entitled to a share of the other party’s property, they must resort to equitable remedies to assert a claim against a property, which then falls into the discretion of the court. Thus, having a cohabitation agreement in place may be significant as it is one of the best options for common law couples to address how they will deal with property ownership and/or division at the end of the relationship. The end of a relationship refers to not only a separation but also the death of one of the parties.
What constitutes a common law partnership in Ontario?
In Ontario, a couple is considered to be common law partners if they have cohabited together for at least three years, or if they have a child together by birth or adoption and lived together for at least one year.
The Government of Canada recognizes a common law relationship if two parties have been living together for at least 12 consecutive months in a marriage-like relationship. However, this requirement by the federal government applies mainly to immigration related purposes.
What is a cohabitation agreement?
It serves as a legally binding contract between common law partners that stipulates the protection of individual interests and property rights within their common law partnership, outlining the parties’ rights and obligations in the event of the relationship coming to an end. It allows parties in a common law relationship the freedom to make decisions on whether they want to equally share their finances, assets and debts, or whether they want more control over their own property and financials, therefore predetermining the division of property in case of the end of a relationship.
The most common issues addressed in a cohabitation agreement are the division of property and spousal support. However, issues surrounding rights of custody and access to children, and child support, cannot be established in a cohabitation agreement as these generally are addressed in a separation agreement when separation occurs.
When would a cohabitation agreement be useful?
Generally it may not be necessary to draft up a cohabitation agreement if neither party has any assets at stake in the beginning of the relationship. But if one partner owns a home that the other party moves into, it may be necessary to think about having a cohabitation agreement if the homeowner party wants a legally binding contract that protects the equity they have put into the property. If both or either party has substantial assets they bring into the relationship, they may want legal protection over their assets if they expect a considerable increase in income after the start of the relationship. This does not necessarily reflect an unwillingness to share the property but rather allowing the parties more freedom over how they would like their property to be dealt with.
A cohabitation agreement may also be useful in preventing creditors from having access to the separate property, debt and income of the partners.
How can you get a cohabitation agreement?
First, you should speak to a lawyer and seek legal advice. Each party in a common law relationship must retain their own separate lawyers to ensure that both parties understand the effect of the agreement before signing. It may be helpful to determine the important factors and create a list of your assets that you want to protect before meeting with a lawyer.
Second, it may be advisable to sit down with your partner and think of the things you both want included in your cohabitation agreement, such as matters relating to property division, spousal support, inheritances, pensions, any future properties and debts, etc.
Third, both partners should be upfront and candid about all your assets and liabilities to ensure a legally effective agreement. It is always best to be as thorough as possible about the details of what is to be included in and protected by the cohabitation agreement.
Fourth, your lawyer will draft the agreement upon receiving the above information and your instructions and review it with you before you sign. It is important that each party has their own independent lawyer, otherwise the document may not hold up in court.
If you are considering moving in with your partner, or are already living with your partner and want to seek advice on drafting a cohabitation agreement, Lak Law Firm is here to help and guide you through the process and make sure you understand every step up till signing. Contact us today at info@laklaw.ca or 416-477-5686.