Common Myths About Common Law: Creating a Cohabitation Agreement in Ontario
Not every partnership turns into a marriage. There are plenty of couples who, for a variety of reasons, choose to live together without getting married. This is known as cohabitation, or a common-law partnership. While this is a perfectly good option for plenty of people, it can make for a messy situation if the relationship ends unless you have prepared in advance for that possibility.
To head off any difficult financial entanglements in the event of a breakup, it’s a good idea to draw up a cohabitation agreement. This is similar to a prenuptial agreement but doesn’t require the two parties to be legally married. This is to protect each party’s assets and make it easier to divide everything if the relationship ends.
What is Cohabitation?
Cohabitation, or common-law partnership, is a situation where two people live together but aren’t actually married. You are “common law” as soon as you start living together. Some rights may not arise for some other time such as rights to share in benefits may not kick in until you have lived together for two years, depending on the wording of the benefits package.
This is an increasingly common arrangement in Canada; according to the Toronto Star, as of the 2006 census there were nearly 3 million people in common-law relationships.
In terms of your day-to-day life, this type of relationship isn’t much different from marriage. However, it’s a much different story if the relationship ends. Ontario law states that each partner in a marriage is entitled to half of the growth in the family’s assets (unless a valid prenuptial agreement says otherwise). Here is what happens if you are married. There is no such provision for common-law couples, meaning that it can be very difficult to divide any shared assets fairly if the relationship ends. This is why it’s often a good idea to draw up a cohabitation agreement.
What is a Cohabitation Agreement?
In a nutshell, a cohabitation agreement is a prenup for people who aren’t married. Without one, you’ll have no legal protection for your assets in the event of a breakup. This does not change your legal relationship status at all; it only protects your financial interests. If you do decide to get married later on, the cohabitation agreement may be worded so that it becomes your marriage contract.
If neither partner has any assets to speak of at the beginning of the relationship, it may not be necessary to draw up a cohabitation agreement. However, if (for example) your partner owns a home that you move into, that’s when the home owner will want to have a legal document protecting the equity they have put into the home. In addition to any assets you may have, a cohabitation agreement will also lay out how any debts are to be divided between the two of you. It can even cover the topic of spousal support.
On the other hand, a cohabitation agreement does not cover child support and custody issues, which are handled separately. You cannot pre-determine issues related to children in advance. Even if you waive child support in an agreement or specify the custody/access arrangements, a judge always has the right to review them to ensure that they are in the children’s best interests.
How Can You Get a Cohabitation Agreement?
For documents as important as this one, it’s not enough to type something up on your computer for the two of you to sign. If you don’t seek independent legal advice and have it draft in accordance with the law, the agreement probably will not hold up in court if it comes to that. Take the following steps to create a valid cohabitation agreement:
Step 1: Seek individual counsel. Each party involved in a cohabitation agreement needs to have their own legal counsel if you want to make sure it is done properly. This is to ensure that you’ve both had a lawyer look over the agreement to make sure you understand the impact of it on you before you sign it. Before you visit the lawyer, determine what factors are most important to you and make a list of your assets (including pensions, inheritances, and investments) that you want to protect.
Step 2: Create a list together of what you want the agreement to cover. Decisions on how to divide assets if you break up are always best made while you’re happy with each other! Take some time to sit down together and draw up a list of what you want to include in a cohabitation agreement. It should include information about:
- Property division
- Spousal support
- Inheritances, pensions, or other assets you wish to protect
- All future properties, debts, including any jointly purchased assets
Step 3: Disclose all of your finances. This will need to come from both of you. Now is the time to be upfront about all of your assets and liabilities if you want the agreement to be effective. On the list you made previously of what you want included in the cohabitation agreement, fill in the details of exactly what those items are: your pension, your income and debts, your investments and RRSP’s, even a future inheritance from your aunt Edith. Be as thorough and specific as possible and don’t hold anything back.
Step 4: Make the agreement. This is the part where you ask your lawyers to draw up the final document and review it before you sign. This is extremely important; if you don’t each have your own lawyers representing you, the document may not be valid in court. It is in your best interests that your partner has a lawyer review the agreement so that they can never argue they did not understand the legal implications of signing it. It’s also just good sense to have a lawyer look over a contract, especially one this important, to make sure it’s truly protecting your interests and isn’t weighted too heavily to one side or the other. Also, you cannot pressure your partner into signing the contract. This is known as signing “under duress” and will invalidate the contract.
Cohabitation Agreements in Ontario Benefit Both Parties
When you’ve just moved in with your partner, you’re probably still in the blissful “honeymoon phase,” and breaking up is the last thing you want to think about. But, believe it or not, this is actually the ideal time to be thinking about that. Nobody anticipates a relationship ending so drawing up a cohabitation agreement can feel distasteful and antagonistic, but in fact the opposite is true. By signing an agreement now to protect both parties’ assets later, you’re showing that you care about each other’s well-being even if you’re apart.
If you’re considering moving in with your partner and you’d like to talk about a cohabitation agreement, the professionals at Galbraith Family Law will be glad to help. To reach us, call (289) 319-0635, (705) 727-4242 in Barrie, or send a message through our website.