If you’re a homeowner in a common-law relationship in Ontario, protecting your home in the event of a separation is a legitimate concern. While common-law couples don’t have the same property rights as married couples, a cohabitation agreement can be a useful tool for outlining how property, including the family home, will be handled should the relationship end.
However, there are important distinctions based on whether the home is considered a “matrimonial home” or a “cohabitation home,” and the ownership status of the property can also affect your rights.
An Important Distinction; Cohabitation Home vs. Matrimonial Home
In Ontario, the family law legislation allows for couples who are legally wed to enjoy more property rights than common-law couples. While the contracts themselves generally contain similar clauses, a domestic contact between married spouses is referred to as a Marriage Contract and one between common-law spouses is commonly called a Cohabitation Agreement.
Married couples have equal rights to the “matrimonial home,” meaning that even if one spouse owns the property, the other is entitled to half of its value upon separation. Additionally, the non-owning spouse has the right to remain in the home until a separation agreement is reached.
In contrast common-law couples do not automatically share equity in the home, but they are not left without any way to make a claim against the house. If one spouse who doesn’t have legal ownership of the property puts a lot of money, sweat equity or otherwise contributes to the value of the property, the courts can find that the non-titled spouse should be compensated for how much they have invested into the property (usually the home they lived in together), known as a resulting or constructive trust.
Without a cohabitation agreement, recently separated common-law homeowners can find themselves having to take out another mortgage on their house to pay off someone who never legally owned it.
Cohabitation agreements
Moving in together is a big step. Take it on solid ground.
A cohabitation agreement protects you both, whatever comes next.
How a Cohabitation Agreement Can Protect Your House
The way the home is owned will influence how you can protect it in a cohabitation agreement. If you and your partner jointly own the home as common-law spouses, the agreement may not grant you exclusive rights to the property, but it can outline a clear process for addressing the division of the home if the relationship ends.
In this agreement you can set out how the house is dealt with should the relationship cease. Giving one or both partners the opportunity to buy the other out, dividing any equity in the property equally or proportionally, and assumption of any debt associated with the property are all things that can be pre-decided.
If the house is only in only spouse’s name, they can protect their asset with a cohabitation agreement by having their common-law partner release their rights to any legal interest they may have in the homeowner’s property because they contributed to the improvement, upkeep or restoration of the property.
What a Cohabitation Agreement Can Protect Besides Your House
Besides ownership rights to the property, cohabitation agreements can protect other assets and aspects of homeownership as well. For example, you can set out how household and living expenses should be divided, as well as debts, pensions, gifts and inheritances, vehicles, household property, pets and spousal support payments. Addressing the responsibilities and divisions ahead of time can protect you both from financial and emotional stressors in an already trying time.
Securing Your Home in a Cohabitation Agreement
In Ontario, a cohabitation agreement can help protect your home in a common-law relationship by clarifying property rights, contributions, and division of assets in the event of separation, offering a roadmap to avoid financial disputes and emotional stress. Contact one of our family law lawyers to assist you with preparing yours today.
Are cohabitation agreements legally binding in Ontario?
When properly prepared and signed, cohabitation agreements are legally binding in Ontario and can be used to enforce your rights both during cohabitation and separation.
How do I know if I am common-law?
In Ontario, for family law purposes you are considered to be common-law if you have lived together in a conjugal relationship for three or more years or have a child together and have lived together with any kind of permeance. Read more here.
Is my common-law partner entitled to my inheritance?
Under Ontario law, a common-law partner is not automatically entitled to an interest in what their partner inherits. However, if they end up contributing to the asset afterwards and there is no cohabitation agreement outlining who owns what, there is a possibility of a claim for an interest in that property.
