Ivan Merrow, Summer Law Student
According to a 2013 study by Coldwell Banker, one in four couples under 35 purchase homes together before getting married . One reason is that rising property rates, student debt, and low salaries have made it difficult for people aged 18 to 30 to afford a house on their own .
Property ownership with a loved one can be romantic, but creates a more risky financial situation in the event of a breakup. Before popping the “mortgage” question to your partner, the Toronto family lawyers at Devry Smith Frank LLP suggest creating a cohabitation agreement.
Essentially a cohabitation agreement is a contract between you and your partner that defines, among other things, how you intend to divide your property upon separation. The cohabitation agreement ensures there is no confusion if your jointly held property needs to be divided because you break up or one of you dies unexpectedly.
“Property” includes your car, pension, bank accounts, investments, land, debt, and any houses or buildings you own prior to the relationship.
The major concern you should have buying a house with a partner before being married is that in Ontario, living together in a conjugal relationship creates a “common-law” spousal relationship after three years (or sooner if you have a child together) .
In general, property separation is much simpler for common-law couples than married couples. You and your partner will continue to independently own whatever you brought into the relationship, unless you put it into joint ownership.
For example, if one partner had a business at the beginning of the relationship, they continue to own that business upon separation. The only way the other partner would have an ownership interest in that property is if they could demonstrate they made a significant contribution or improvement to it. If non-owning partner in the earlier example devotes significant time and money into the other partner’s business, the court may recognize split ownership in the business. These cases are highly fact-dependent, that’s why it’s a good idea to talk to a family lawyer to hear what works best for your unique situation.
The cohabitation agreement can also precisely state what proportion of the house or down payment each person owns. One partner can own the home independently, but the other partner may have a claim to some of the value if they spend time and effort improving the value of the property.
The main concern for couples moving in together is that common-law partners may still be entitled to spousal support in Ontario if certain conditions exist. For example, the Ontario’s Family Law Act says that the purpose of spousal support is to recognize a spouse’s contribution to the relationship, share the economic consequences they have suffered, share the burden of child support, help the spouse become financially independent, and relieve financial hardship .
A cohabitation agreement can set out expectations early on about what (if any) spousal support would result from a future breakup, or provide a complete release from those obligations in the future.
An added benefit of a cohabitation agreement is that it can automatically become a marriage contract if you were to ever get married. Some allowable provisions of a cohabitation agreement (for example, who is required to leave after the breakup) may not be allowed in a marriage contract, so it’s a good idea to check with your Toronto area family law lawyer before getting hitched.
If you have your eye on a hard-to-find Toronto property right now, don’t worry, you can also create and sign a cohabitation agreement after you move in . It may just be a more difficult conversation to have because you have nowhere to go if your partner does not want to sign.
For more information, read our previous article “Common Law Spouses, your Property and the Law”. For any questions related to family law, cohabitation agreements, or divorce, please contact the Toronto family lawyers at Devry Smith Frank LLP at 1-416-446-1400.
1 – Coldwell Banker Real Estate LLC, “Marriage and Homebuying Study” April 2013.
2 – “Road to homeownership ain’t what it used to be says Gen Y: TD poll” April 23, 2013.
3 – Family Law Act, R.S.O. 1990, c. F-3, s. 29 (a).
4 – Family Law Act, R.S.O. 1990, c. F-3, s. 29 (8).
5 – Family Law Act, R.S.O. 1990, c. F-3, s. 52(1), as amended.