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Division of Property for Common Law Couples

There are many different reasons why a couple may choose not to get married; however, just as choosing to get married has legal implications, so does choosing not to get married. One of the most notable legal implications of not getting married relates to the division of property when the relationship breaks down. If you make the decision not to get married, do you really know what you are (not) buying into?

Division of property is dealt with in Part I of the Family Law Act. When married couples separate, they are entitled to divide their property equally between the two spouses, regardless of who legally owns the property. Under the Family Law Act, “spouses” are entitled to divide their property on the breakdown of the marriage. “Spouse” is defined as either (1) two people who are married to each other, or, (2) two people who entered into a marriage that is either void or voidable, in good faith. It does not include “common law couples” – even couples who have lived together for more than least 3 years, or are living together and are the parents of a child. So, what does that mean exactly? It means that common law couples cannot look to the Family Law Act to make a claim to a share of property that they do not own.

Here is an example:

Fred and Bill have been living together for the past 15 years. They are not married. They live in a house owed by Bill that they both spent time furnishing, decorating and renovating. They have two cars. Both vehicles are jointly owned. Fred and Bill each have their own chequing account. They also have a joint savings account in which they both deposit money. Bill has a fairly substantial pension with the federal government. Fred only has a modest RRSP. Suddenly, Bill tells Fred he is no longer happy and wishes to end the relationship.

When common law couples break up, lawyers look to the title, or ownership of the property to determine how it will be shared. If the title is held jointly, the parties can share the value of the asset equally. If the title is held by only one person, only that person is legally entitled to the asset, with only limited exceptions.

What Fred and Bill Can Share:

Fred and Bill will be able to share in the value of both vehicles, as well as the joint savings account. This is because these assets are held jointly. Both parties are automatically entitled to share in the value of those assets.

What Fred and Bill Can’t Share:

Fred and Bill would each keep their own bank accounts. Unfortunately for Fred, the title to the house is in Bill’s name alone. While Fred and Bill have been living in the house together for the last 15 years, and both put time and money into renovating and decorating the house, Fred has no automatic entitlement to half the value of the house. If Fred and Bill were married, the treatment of the house would be very different.

Fred would be entitled to keep his RRSP. Bill would keep his pension; quite unfortunately for Fred, as he was hoping to share in Bill’s pension to fund his retirement. Now that Fred and Bill are no longer together, Fred is likely going to have to come up with an alternative retirement plan.

While the law for dividing property on the breakdown of the relationship for common law couples follows the title of the asset, it may be possible to make a claim for an equitable share in an asset that is in the other person’s name. The best means of doing this is to claim a Constructive Trust based on equitable principles. Be forewarned that such a process is expensive and protracted; the threshold for establishing a claim is high.

To help avoid litigation on the break down of a common law relationship, we recommend entering into a cohabitation agreement which allows the parties to agree on the division of property, support and other matters which may be disputed when the parties end their relationship.

Do you have an equitable claim to the property of your current or former common law spouse? Are you embarking upon a common law relationship and would like a cohabitation agreement prepared?  Has your common law relationship just ended and you want more information on your rights? If so, contact one of the lawyers in our family law group to assist.

Article written by Lauren M. Angle.