Cohabitation Agreements: When Do You Get One?
We often get asked “How long after I move in with my partner should I get a cohabitation agreement?”.
The short answer is that the ideal time to enter into a cohabitation agreement with your common law partner is before you move in together; however, you can enter into one at any point in your relationship. Essentially, the sooner the better.
The rate of common law couples in Ontario has steadily been on the rise for a number of years now. There are many couples that live together before eventually getting married, and many couples that choose not to get married at all. Whatever the reason, it is important to understand there are differences in the rights afforded to common law couples and married couples. While thinking about the potential breakdown of a relationship is not very romantic, it is necessary in order to best prepare and protect yourself and your assets in the event that it occurs.
Dividing property during a separation is often a main source of conflict, but it is also the area in which the rights of common law couples and married couples differ the most. In Ontario, there is no statute that governs the division of property for common law couples. Generally, each party will keep what is in his/her name. While there is the doctrine of unjust enrichment that allows a party to claim the other party has been unjustly enriched financially or via their labour (i.e. if one party took on all the household labour while the other worked), it is a very murky area of law. It can be difficult for a lawyer to predict whether a claim of unjust enrichment will be successful. Not to mention the process can be time-consuming and costly. A cohabitation agreement can provide certainty as to how assets will be divided if your common law relationship ends.
A cohabitation agreement is a type of domestic contract that you and your common law partner can make that sets out how you will handle a variety of issues during and/or at the end of your relationship. As mentioned already, you can enter in to a cohabitation agreement at any point in your relationship, but the best-case scenario would be at the commencement of your cohabitation. If you eventually intend to get married, your cohabitation agreement can be structured to automatically transform into a marriage contract.
As division of property tends to be a significant point of contention for many couples, most cohabitation agreements will address this issue. If you would like your assets divided as if you were married, or at least in a similar way, this can be set out in a cohabitation agreement. You can also set out your own preference in regards to property division, as well as a number of other issues.
For example, you can include clauses about how you will deal with spousal support. Spousal support is one area in which common law couples are treated similarly to married couples. In Ontario, after 3 years of living together, or one year if you have a child together, the higher earning partner will be responsible for paying spousal support. If you wish, you may include clauses that waive these spousal support obligations, or set out parameters for how spousal support will be determined.
Cohabitation agreements can also address who is responsible for certain expenses during the relationship and for estate planning in the unfortunate scenario that one partner passes during the relationship.
There are a handful of rights and obligations that you cannot contract out of with a cohabitation agreement. The first is any decisions pertaining to children. You cannot use a cohabitation to waive child support obligations. This is because child support is the child’s right; therefore, a parent does not have the authority to waive it. Decisions about children, including who gets decision-making responsibility and parenting time must be made at the time of separation and be based on the best interests of the child.
The second restriction applies if you had a cohabitation agreement, and subsequently got married, turning that agreement into a marriage contract. Once married, the residence that you ordinarily occupy with your spouse will become a ‘matrimonial home’. While there are ways to alter how the value of the matrimonial home is divided upon divorce, there exists an equal right to possession the matrimonial home that cannot be contracted out of.
While obtaining a lawyer is not a strict requirement for entering into a cohabitation agreement, it is strongly encouraged that both parties receive independent legal advice before signing one. Not only does obtaining independent legal advice help you understand what you are agreeing to, it reduces the likelihood that the agreement will be challenged in court, and increases the likelihood that a court will order what you and your partner set out in the cohabitation agreement. If you choose to not get legal advice, you may not be able to argue in the future that you didn’t understand your rights when you signed.
Separating is often a very stressful experience, but a cohabitation agreement can reduce some of that stress by providing certainty of precisely what will happen with regard to the issues covered in your agreement should your common law relationship end.
Jessica Commanda and Tim Gronfors