Ontario law enables unmarried, or common-law spouses who plan to live together or in fact live together to enter into an agreement known as a cohabitation agreement. A cohabitation agreement provides for the rights and obligations each spouse will have as a result of their relationship.
The main purpose of a cohabitation agreement is to protect a couple financially if the couple chooses to live together without being married. The agreement, among other matters, usually sets out the spouses’ ownership in and/or division of property, and their support obligations. Cohabitation agreements cannot determine the rights of custody or access to children.
The property rights of married couples and unmarried couples in Ontario are substantively different. Ontario’s legislated property division regime is limited to married spouses only. The Family Law Act recognizes that marriage is a form of economic partnership in which spouses share the value of property acquired during the marriage. This is done through an equalization payment, not a sharing of the assets themselves. Married spouses also have an equal right to continue to live in the matrimonial home. This is true no matter which spouse’s name is on the deed or the lease.
These rules do not apply to unmarried couples. The act of cohabiting, unlike getting married, does not entitle one person to a share of the other’s property. There is no statutory protection for a cohabiting spouse’s interest in property to which the other spouse holds title. A cohabiting spouse who has not executed a cohabitation agreement must rely on equitable remedies to assert a claim against a property. The claimant must show that the party on title has been unjustly enriched at the claimant’s expense. The court determines the appropriate remedy, which may be a monetary award or a constructive trust over the property.
Cohabitation agreements can be made to reflect a couple’s unique financial relationship. For common-law spouses who choose to be financially independent, the agreement can provide that each party is responsible for his or her own financial support and has the rights to his or her own property.
Common-law spouses who choose to have a more financially interdependent relationship would approach their cohabitation agreement with different objectives. Perhaps their agreement would specify that property is to be shared jointly even though title is held in one spouse’s name but the other spouse has made a greater contribution to care of the couple’s children.
Regardless of the specifics of a cohabitation agreement, each agreement may consider pertinent financial details relating to children, career, retirement, purchases and savings, support, rights to inherit property in case of the death of one of the spouses and an acknowledgment of dependent children.
If the couple marries in the future, their cohabitation agreement may become a marriage contract, governing their changed status and the rights and obligations it entails, unless a contrary intention is indicated in their agreement.
In preparing a cohabitation agreement, it is important to know that a testator’s will is revoked upon his or her marriage, subject to certain exceptions. There is not the same consequence if a person enters a common-law relationship.
Although it can be signed at any time during the relationship, we recommend that an unmarried couple sign a cohabitation agreement before they move in together. Otherwise, it may be more difficult to have financial discussions as the relationship progresses.
Discussing and agreeing on financial matters gives each common-law spouse a better understanding of his or her expectations related to the relationship. Making these types of decisions can help reduce frustrating disputes that may arise in the event of a separation. A cohabitation agreement clarifies the division of property and what happens if spouses contribute to each other’s property. For example, if one spouse gives something of financial value to the other spouse, will it be considered a gift or do the spouses share in the property?
