Now that Valentine's Day has come and gone, I would like to delve into the very unromantic subject of Cohabitation Agreements. Buying a house or moving in together might not sound like the biggest of deals, but it's important to know the rules going into the deal – in order to avoid finding them out the hard way later on. 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, two years together and somehow things really just don't work out, you would be entitled to 50% of each other's assets, right? WRONG. If you're like me, most of what you heard on this topic growing up is just fake news.
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 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 sevem 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-nuptials. I guess it's kind of taboo and unromantic.
Since writing this article the prevalence of common law relationships has continued to sky rocket across Canada. The number of folks deciding to live together in some capacity before marriage is now roughly five times what it was thirty years ago! Because of how prevalent common law relationships are becoming, more and more experts are recommending cohabitation agreements, and many are pushing for national legislation on the topic. Right now, places like New Brunswick, Alberta, and Ontario, unmarried spouses have vert little rights to partner's property, whereas British Columbia enacted new legislation in 2011 that guarantees property right consideration after two years of cohabitation. As an example of how seemingly random this process can be, in the recent New Brunswick court case of Noel v. Butler, an unmarried couple that had been together 14 years split up, and it was determined one of the partners had no claim on the property of the other despite all “married rights” assumptions.
So whether it's as simple as deciding who is going to move their toothbrush into the other's place, or deciding whose name will go on the mortgage, make sure that you know your rights and responsibilities in your province. No one likes to think about the worst case scenario, but given the statistics in the area of common law relationships, it's important to put up safeguards so that a possible emotionally turbulent time isn't compounded by a financial catastrophe. It's also important to note that it is worthwhile to make sure that each of you has your name on various types of payments, utility bills, and credit cards throughout the relationship (or at least not have just one name on EVERYthing) because this can leave one person with no credit history if the relationship dissolves. If you don't know what your credit situation is, check it for free using our Borrowell free credit score promotion.