Cohabitation Agreements and Living Together Common Law- What you Need to Know

Now that Valentine’s Day has come and gone, I would like to delve into the very unromantic subject of Cohabitation Agreements. Last month, I talked about whether living together before marriage will save you money. In Canada, most people would assume (well, I did, anyway!) that if you live common law, you are entitled to the same  property rights and division of assets the same as if you were married.  If a marriage breaks up, one generally speaking is entitled to 50% of the others’ assets under the Family Relations Act.  Everything is split 50/50 equally.  For common law, I thought that if you lived, let’s say, 2 years together and somehow things really just don’t work out, you would be entitled to 50% of each other’s assets, right? WRONG.

The justice system doesn’t treat it like that.

Now I’m not a family lawyer or anything, but the Canadian family law system tells us that for common law arrangements, if you don’t have documentation or a paper trail that you have contributed to rent or a mortgage (or if your name isn’t even on the title of the home), you’re really sh*t out of luck.  You’ll get none of it.  Zilch. Nada.

So when you move in together, it’s really important to either a) keep all your receipts and make sure that if you’re paying into the mortgage, that your name is on the mortgage and b) you have a good sit down talk about your assets and what you want to do with them in case you break up.

I know talking about the possibility of breaking up is about as romantic as dissecting a cow’s eyeball in Biology lab (mmm formaldehyde, anyone?), but it’s necessary to at least get a sense of what you both want to do if you are faced with a break up.

I have an acquaintance who was living common law for about 7 years with her boyfriend, and she bought an investment condo on her own and it needed fixing up.  Her boyfriend offered to help her and he voluntarily fixed up her place really nicely.  Things didn’t pan out a few years down the road (she broke up with him) and she thought everything would be simple after the break up.  Boy, was she wrong!  In court (maybe out of spite, I don’t know), he showed each and every receipt he saved from the renovations he did on her condo, and added in the labour costs, and it added up to a nice sum of $40,000.  She did NOT have $40,000 just sitting in the bank, so she was forced to sell her investment condo to come up with the capital to pay him.  She did NOT know that he kept every single receipt and that it would bite her in the behind in the future.

So, a Cohabitation Agreement (though it can be pricey because you need a lawyer from both parties to witness it) can save you some money in the long run, should you ever break up (knock on wood).  Cohabitation Agreements can show that you want the same rights as married couples (that is, split 50/50)- though on the flip side of the coin, you probably don’t want to be picking up their baggage, if they have any (*ahem* DEBT).  They can also help you protect any assets that you may have (e.g. inheritance, a previous property) if your angry ex-partner somehow proves that they have claim in your assets.  They are useful tools to have BEFORE or shortly after you start living together.  Just to keep things clear.

Sorry for bursting everyone’s bubble.  I’m being a real Debbie Downer, but I think it’s some food for thought. Most people don’t get Cohabitation Agreements or even Pre-nuptuals.  I guess it’s kind of taboo and unromantic.

What do you think?  Are common law partnerships treated differently elsewhere (e.g. United States, Australia)?  Please share!

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Young is a writer and former owner of Young and Thrifty and the main "twitter' behind Young and Thrifty's twitter account. She lives in Vancouver, BC and enjoys long walks on the beach, spending time with her anxious dog, and finding good deals. If you like what you read, consider signing up for email updates.

44 Responses to Cohabitation Agreements and Living Together Common Law- What you Need to Know

    • @RainyDaySaver Wow, New Jersey doesn’t have common law? That’s interesting…but there’s probably lots of couples living common law in New Jersey, though, right? I wonder how couples who break up would deal with division of assets…

  1. Rainy Day is correct. It depends on what state you live in. In NY, you are considered to be in a common law partnership if you live together with someone for 7 years, even though NY isn’t a common law “state” per se. So, pretty much, it’s just better to get married in NY than to risk being together for a while and having it all end messily.

    • @SAHMCFO Hmm it seems like in a lot of the United States, common law doesn’t sound like it’s recognized.

      @Investing Newbie 7 years?? That’s a long time to be considered common law…some people don’t even stay married for that long! Yeah, might as well get married, huh? Here in Canada it is 1 year of cohabitation= common law for taxation purposes.

      Thanks for all your input- it’s nice to see differences and similarities between states and provinces!

  2. You’re right – In Canada, if a couple is considered to be common-law and things deteriorate and a breakup ensues, the situation is not the same as being married, and in most cases it ends up being a far cry from a 50/50 split on assets. I also think each of the provinces have subtle variations of the law and can vary somewhat depending on where one resides.

    With that being said, from a personal standpoint, I think a couple could end up in a worse situation if they decide to get married before having the experience of living with each other. It’s one thing to go each one’s separate ways while being common law, but you’d be surprised how many people go out and spend a bucket of cash on a wedding and new home only to realize when they start living with each other that they despise one another and aren’t compatible!

    That’s when it can get really nasty from a financial perspective!

    Nice post
    .-= The Rat´s last blog ..Would You Pay $50,000 For Crosby’s Golden Stick? =-.

    • @The Rat- Yes- I think I’ve come to the consensus that I would rather see if I can stand the other person before I dump a bucketload of cash on a wedding! (At the going rate these days, that’s $15000+) How did you and Mrs. Rat do it? Did you co-habitate beforehand?

  3. Oops, I think I messed up my other comment. Here it goes again.

    We have the same common law thing in California after 7 years. My question is: does the law kick in at the start of the 8th year for things to be split if things don’t work out, or does it go retroactive?

    i.e. I buy a $1mil house cash in year 1. GF moves in yr 4, and lives with me for 7 years. Am I supposed to give her half if we break up?

    That’s a brutal story you told!


    .-= Samurai´s last blog ..The Mental To Physical Connection For A Healthier Lifestyle =-.

    • @Samurai- I did some research and it says that California doesn’t recognize common law marriages (since 1895). These are the states that recognize common law marriages:
      Only a few states recognize common law marriages (living together >7 years) AND you’ll need to have certain requirements to prove that you are ‘common law married’. You’ll need to INTEND to get married, call each other husband or wife/ share the same last name, or have joint accounts. AND both parties must not be minors (haha, ewww… the thought of common law with a minor!!) If you both intend to live common law and not ever get married, then in the event you break up, you will not have to go through a divorce like married people do.

      New Hampshire (for inheritance purposes only)
      Rhode Island
      South Carolina
      Washington, D.C.

      Here’s where I got that summary from

      Hope that helps, and I think the answer to your question is that it will retroactive.. Now if you were common law in these above states and MOVED to California, then they will recognize the common law marriage. I think as long as you’ve been together 7 years, you have the same rights as married couples do, BUT you have to INTEND to get married. Not just be living together.

      Wow, this is so interesting! Canadian and American laws in regards to common law are really quite different!

  4. Scary stuff. I have to say that I was not smart when I was younger and living with my ex boyfriend, just really lucky! When I moved out, I decided to leave the country. He looked over the stuff we’d bought together, divided the cost by two and sent me a check. Seriously, it didn’t work out, but he was a nice guy. I probably would have just ditched the stuff if he hadn’t been willing to buy me out as I was leaving the country anyhow. . .

    Breaking up sucks, I’m getting depressed thinking about it even now years later and happily married. The only thing that sucks more than a breakup is a breakup plus nasty financial troubles!
    .-= Simple in France´s last blog ..Who’s affraid of a big, bad mortgage? =-.

    • Wow- your ex boyfriend did sound like a nice guy! Not nice enough to be your future husband, of course, but decent to have split it up without any issues. Yeah, breaking up already sucks AND when you add financial issues with that, it just makes breaking up 100x worse and nasty. Glad that you’re happily married now =)

  5. Young and Thifty,

    Thanks for debunking the urban myths on this. I learned something. No longer can I freak people out with the 50-50 commonlaw split thing. Unless, of course, I want to be mischievous.

    • @Andrew Hallam Thanks for visiting =) No problem, it was my pleasure- I believed that urban myth too (maybe it’s like some kind of Canadian urban myth?!).

  6. To be fair, the boyfriend DID contribute to the value of the house. And he had the documentation to prove it. But this just goes to show how important it is to be very clear on financial obligations in a relationship.

  7. Thanks for visiting WellHeeled! Even though it’s very unsexy to talk about finances, they are an integral part of the “teamwork” between partners.

    The number 1 reason for fighting and discourse (other than Jesse James and Tiger Woods being jerks) is $$$$.

  8. been living common-law almost 27 years , we own our home and vehicles and actually are seeing our lawyer tuesday to sign wills and power of attorneys
    My name is not on the deed as yet but we are covering all the bases. I;m in Ontario by the way

    • @Sable211- Wow- good for you for covering the bases! Yeah the cohabitation laws seem a bit different in each province. Good luck with the lawyer next week. =)

  9. Only 17 US states have common law marriages. They are mostly southern states. NY, California, all of New England (see NH below, it doesn’t do what you want girl), Illinois etc. don’t recognize them. Some of the common law marriage states like New Hampshire only apply that against the outside world while the partners are together, e.g. for inheritance, hospital decisions, taxes, insurance, but not in the case of split ups – which aren’t divorces. Most however who have common law marriages do consider them full fledged marriages including for divorce — just as much as if the couple had gotten a marriage license.

    HOWEVER, unlike Canada where cohabiting couples automatically become common law married more or less after 3 or 2 years depending on the province, in the 1/3 of US states that recognize common law marriages not only is a time period of around that necessary, but also the couple have to hold themselves out to essentially everyone as literally married. Calling each other wife and husband, a ring on her finger is evidence, and so on. The idea is that they just didn’t bother to get married but BOTH considered themselves married and led other people to think that for a long time. In no US state does a couple who say they are cohabiting partners who aren’t married to most people inducted into a common law marriage.

    Men of course shouldn’t get married in the US or Canada (or elsewhere in the Anglosphere) because marriage and especially divorce 2.0 (which occurs in 50% of marriages in the US and is initiated 2.5x as often by women formally, and as much as 90% of the time by women effectively according to many divorce attorneys). Why the hell should a higher earning man who’s partially or more than that supported a woman have to fork over half of his increase in wealth to her, in addition to often having to pay her attorney’s fees during an American divorce, encouraging her to unreasonably drag it out? Why should a man be in danger of alimony indentured servitude to a woman who’s no longer doing anything whatsoever for him, when women can work at all levels of the workforce, and now graduate from college at a lot higher rates than men? Yet in 2007 97% of alimony was paid by men to women.

    Men shouldn’t marry, but rather cohabit, and if they want children, have them in a committed cohabiting relationship – with a cohabiting agreement that gives neither party any of the divorce rights of marriage upon a split up. Child custody and support cannot be effected by such an agreement in the US and I strongly thing as well Canada. (That’s high enough as it is, and includes a very substantial portion of stealth alimony, esp. when paid by upper middle class on up men.)

    • @Doug1- Thanks for this! Are you in Family Law? This is comprehensive. I am aware that certain states don’t recognize common law marriage. I didn’t know that divorces are initiated 2.5x by women vs men. Is this because men just stray and they don’t really want to rock the boat but instead lead a “double life”? I guess it goes the same (sorry my feminist side creeping up on me) for a higher paid woman who has to fork out money for her lower paid husband… I guess the rule of the story is to have an agreement beforehand to avoid this mess in the first place.

  10. You may want to investigate the legal concept of “matrimonial home”. I have looked into cohabitation agreements in the past with a lawyer. If I recall correctly, the primary shared residence is deemed to be a matrimonial home and you’re entitled to a 50/50 split of the increase in it’s value over the term of cohabitation, regardless of ownership so long as the requirements for a common law relationship can be established. Note that this is not 50% of the whole thing, but it could 50% of the market appreciation and the amount by which you’ve paid down the mortgage over that time. I know this because I am the owner of our condo and I also pay the lion’s share of the carrying costs. I wanted to draft the agreement such that the appreciation and principal reduction would be split more in accordance with our proportional contribution to the carrying costs but my lawyer advised me that such a clause would not be legal and overridden in court to a 50/50 split.

    Everything else you own off the table and for your ex to have any claim upheld in court will have to provide documentation of an ownership interest such as receipts, credit card statements, written agreements, etc. Again, this is how I understand it after having discussed it with two separate lawyers in Toronto. Note that other provinces may have different rules, so this might only apply in Ontario. Also, I’m still not a lawyer, so you should really seek professional legal advice on these matters.

    • @Brett- Cool, thanks for sharing. Yes, different provinces have different legislation. Hopefully you and your partner don’t ever split, otherwise she’ll be entitled to a lot! I do know that the rules have recently changed for 2011.

  11. Nice post on cohabitation agreements and rights. Law on cohabitation varies from one state to another in the US. You are right in saying that documentation is very important.

  12. I’m planning to buy my own house in alberta and have my girlfriend who is a student move in with me. If things do lead to a break up is she entitled to anything, and if we Signed papers that she would be paying me rent monthly, would she be considered a roommate? I am looking to cover my ass, as I have done really well for myself and she will in school living on student loans for a fee more years.
    Thank you for any advice

    • @Firestarter- Thanks for writing. Well, in BC at least, IF you are living with someone for 6 months and she is PAYING you rent, that could seem like she is paying for your mortgage and contributing to it. If I were you, I would get a cohabitation agreement for sure, especially if she is paying you rent. To the courts (or whoever) that can mean she is contributing to your mortgage, meaning she’ll be entitled to your house.

  13. I’ve been (I almost put married) in a common-law relationship for 8 years, 3 children, and 3 children from my first relationship. My ex owns our family home. I never contributed to the mortgage or to the ‘house’ where repairs or renovations are concerned nor did I pay utilities …. I am a house wife with 6 children, how could I? … I left an abusive relationship. Now I am not entitled to anything. Why do we claim common-law on our taxes, if, unfortunately, the relationship ends and I am not entitled to anything ….. seems to me, house wives in this day and age are still getting screwed!

    • @Flitterfly- Did you clarify with your lawyer whether or not you are entitled to anything? I’m so sorry to hear about that- that is a very sad story. The most important thing is that you are safe now. I think you should be entitled because common law you get the same rights as people who are married UNLESS he and you signed a cohabitation agreement beforehand.

  14. One thing you hadn’t mentioned, which was what I was specifically looking for as I stumbled across this story, was the other side of this situation…
    A roommate in the TRUE sense of the word COULD apparently CLAIM common-law status in Canada, as rediculous as it sounds! In this case the landlord would have to PROVE that they were co-habitating as opposed to living as a couple.
    The only way to stay safe unfortunately is to have a legal cohabitation agreement written up by a lawyer. That SUCKS!

    • @BC Mom- I’ve totally heard about that as well. Dangerous! You would have to make sure you sneak around pictures of your separate living spaces I guess!

      • The situation & issue:
        My father is recently widowed & looking for companionship in the form of a roommate, friend & caregiver. He had a female friend who was wanting to move into his home to be all of those things to him & help him with his bills in the form of rent. Upon research, I found that basically he could not ever have anyone else in his life (or his home) unless he presented them with a prenup. When I informed him of this, he became even more lonely than he already was :(

  15. I was in an abusive relationship for 11 yrs I have two children from this january he beat me so bad I had bruises on my face for five days,stupidly enough I just took what was most important to me(my children)and I moved an 1 1/2 hrs.from the home I purchased with my ex.i am first owner on the deed but he is second im the only one who has had a job for the last nine years I recently paid off the remainder of my loan for the house all the morgage payments,loan payments,car payments ive paid them all for nine years,I only want the house to sell it buy a new house so my children will end up with something when I die,thats the only reason I purchased the house to begin with in the state of iowa what r my chances

  16. I have been living with my boyfriend for about a year with my three kids. Last night he kicked me out and said he would only give me two weeks, what rights do I have? I need a month to find and secure a place.

    • Hi Heather, that is a really sad story. I’m not sure I can answer this question with the confidence that you need. I would promptly go to my local police office and address my questions there. Sorry I can’t be of more help!

  17. I can say from personal experience that it’s not so cut and dried in Canada. I was common law for 10 years and I most certainly got a ‘divorce’. I was even entitled to half of his pension if I chose to take it (for the record I didn’t, because he was also entitled to half of mine). As with any legal suit, it really is dependant on the circumstances. In short, if you feel like you’re entitled to something and you can prove you have a case, than it’s worth a shot.

  18. When the man I love broke up with me, my world fell apart. I had gone to several casters and I got no results or insufficient ones. I found and gave another try to retrieve my lover and restore the passionate relationship I had with him. I’m so glad I did and trusted him. He performed a spiritual cleansing to banish negative energies and cast a love spell. After 3days, the man I missed dearly started to call me and told me few days ago that he still loves me and wants to try again. Thank you

  19. My ‘soon to be’ ex-wife had the lawyer and realtor convince me to sign for the money in her bank account from the sale of the house, in which we had an agreement to split it 50/50 after the sale. She did not however give me a cent from it after the fact (it was only a verbal agreement as discussed many times).
    She then bought a house with her new boyfriend using the entire amount as a down payment with only his name owning the house.
    She has been living together with him and our kids for over a year now and I know she plans to continue filing her taxes as a single mother and claim that she’s ‘renting’. To me this is fraudulent as I know this boyfriend makes way more money than my ex wife and I combined.

    I am left with nothing from our house in which I’ve worked so hard for for many years and a debt from starting over with nothing. Is there any possible loopholes to help prove this?? Please help!

    • Sorry sbell, this is beyond our expertise, to do anything other than advise you to see a lawyer that specializes in this stuff would be very irresponsible.

  20. “he showed each and every receipt he saved from the renovations he did on her condo, and added in the labour costs, and it added up to a nice sum of $40,000 … So, a Cohabitation Agreement (though it can be pricey because you need a lawyer from both parties to witness it) can save you some money in the long run”

    How does that apply in this situation? Unless the cohabition agreement screwed him over, in which case a guy like this wouldn’t be stupid enough to sign it, she owes him. He did put it in that money and labour and there’s no two ways about it. I doubt she would have any more luck trying to screw over such a canny fellow beforehand.

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