Granted, it is not a particularly romantic gesture to ask your common-law partner for a cohabitation agreement. If you are busy building a happy life together, bringing up the possibility of separation and legal consequences that may result can be uncomfortable. Here are several reasons why that discomfort should be faced, overcome, and how your relationship can enter a stage of increased certainty and security with the protection of a cohabitation agreement.
Protect your Property
Many people think that common-law partners are treated just like married spouses in family law when they separate. Right? Wrong.
When a marriage breaks down, both spouses are equally entitled to the property accumulated over the time of the marriage, subject to some exceptions. You start by calculating your Net Family Property, and the resulting transfer of money is called an "equalization payment". This statutory scheme does not apply to unmarried cohabitants.
When a common-law partnership breaks down, you are not automatically entitled to one-half the Family Law Value of your partner's assets, including their pension, property to which you are not on title, or their savings or investments.
The default rule is that each common-law spouse keeps the property that they own at the end of the relationship. This is determined by legal ownership or title. If one partner feels like they deserve a share in the other partner's property, they must seek recourse through general equitable legal principles, such as resulting and constructive trusts, or on the basis of a "joint family venture". In many cases, this means that the partner claiming a share of the property or a monetary payment must prove that the other partner has been "unjustly enriched". The court may then endeavor to repay or reverse the unjust enrichment only if the claim meets several legal thresholds determined by case law. Therefore, making these claims in court is much more difficult without a contract.
In a cohabitation agreement, common-law partners can contractually agree to a property arrangement that suits them. They can agree to share equally in the accumulated property during the relationship upon separation, or specify the property they will have a share in, or even specify a ratio if they wish. Alternatively, they can agree that there will be no entitlement to share in the other partner's property at all, not even pursuant to the equitable principles described above. Such an agreement can prevent time-consuming and expensive litigation and evidence gathering that may otherwise be necessary if the parties cannot agree on a settlement. In many cases, it is much easier to part ways if there was a clear agreement setting out the property consequences the partners have agreed upon in advance of a separation.
Specifying Any Spousal Support Obligations
On the other hand, spousal support legislation does provide a framework for unmarried cohabitants. In other words, your entitlement to spousal support is not dependant on whether or not you were married. However, in order to be eligible to claim spousal support under the Family Law Act ("FLA"), common-law partners must either: 1. have cohabitated for at least three years, or 2. have a child together (including through adoption) and be in a relationship of some permanence. However, the issue of spousal support at the end of a common-law relationship still gives rise to a great deal of litigation.
Once an unmarried cohabitant meets that first threshold, their entitlement to spousal support is generally determined having regard to the Spousal Support Advisory Guidelines, and case law in Ontario. Their claim may be compensatory or non-compensatory (needs-based). To avoid costly litigation upon separation, it is prudent to enter into a cohabitation agreement that can stipulate exactly at what point one party will be entitled to spousal support. Alternatively, the agreement can provide for a complete spousal support waiver. In any case, a cohabitation agreement can be a useful tool to reduce litigation of the issue later.
Care must be taken that these provisions are not "unconscionable", because if the court finds that they are, they may be set aside. Mere unfairness, however, does not suffice (Miglin v Miglin). For this reason, it is also prudent to update the cohabitation agreement from time to time to indicate that the terms still reflect the parties' intentions. For instance, after only one year of cohabitation, a complete spousal support waiver may be equitable, but after a significant passage of time, that same waiver may be determined to be unconscionable and set aside by a court.
Custody/Access and Child Support
For custody, access, and child support issues, however, cohabitation agreements are not as helpful and are not often included in the contract. Custody and access arrangements in a cohabitation agreement are not enforceable. In this regard, the legislative provisions are mandatory and apply to married spouses and unmarried cohabitants equally. A cohabitation agreement can merely provide an understanding regarding the upbringing of the child, for example, religious education. However, these provisions are still subject to the court's overriding jurisdiction to determine the best interests of the child, such that courts will set aside provisions of a contract if it is contrary to the best interests of the child.
Similarly, if a cohabitation agreement specifies a child support obligation, provisions of the contract may be set aside if they are found to be contrary to the Child Support Guidelines
Preparing a Cohabitation Agreement
As you can see, the law in this area is complex. In most cases, it will be best to retain a family lawyer to draft a cohabitation agreement on your behalf to ensure it has the same legal effect that you intend it to have, and to ensure it complies with the formal validity requirements of domestic contracts. It is generally best for both parties to have independent legal advice before signing the agreement. Also, if you do decide to get married, the cohabitation agreement automatically becomes a marriage contract and remains valid. However, at that point, it is wise to update your agreement, because, as we have seen, the law lays out different rules for common-law partners and married spouses.
Originally Published by Devry Smith Frank, January 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.