Property Sharing for Common Law Partners
Property Sharing for Common Law Partners
Property sharing for common law partners in Ontario after breakdown of the relationship is governed by legislation. Understanding what common-law spouses may be entitled to claim from the other upon separation is important to plan before you cohabit.
Property Sharing For Common Law Partners
Property brought into the relationship remains the property of the partner who owned it prior to cohabitation or who acquired it after shared residency commenced. Some people like to use the analogy of a bowling alley: what’s mine is mine and yours is yours. Jointly owned assets such as bank accounts to pay the household expenses, the family home taken in joint ownership, and gifts given to both partners entitle each partner to an equal share in the asset’s value unless otherwise specifically indicated.
Joint Family Venture
Newer, evolving applications of the equitable law of trusts may entitle a non-owner to a remedial share of the increasing value of an asset or enterprise where both spouses contribute effort, pool their resources, and plan towards a common objective, such as opening a family business.
When a disproportionate share of the enterprise is retained by one spouse to the detriment of the other for no justified reason, then a claim for an equitable settling of accounts may be made against the spouse who retained the greater share of the wealth. The link between an increased value of the enterprise and the amount of the contribution to it needs to be carefully assessed. The analysis is fact specific and the whole of the relationship is taken into account.
Joint Tenancy and Tenants-in-Common
The type of ownership cohabitants have in the family home, investments, or debts should be carefully considered. Ownership of an asset held in joint tenancy means both owners have a 50 percent interest in the property. However, the property sharing for common law partners in this ownership arrangement upon death of one partner, the surviving spouse by operation of law assumes full ownership of the asset.
Ownership held by the cohabitants as tenants-in-common entitles each to a one-half interest in the property with no right of survivorship. The property sharing for common law partners upon the death of one does not entitle the survivor to assume full interest in the property. One spouse may bequeath the ownership of his or her 50 percent interest to someone other than the surviving spouse. The surviving spouse may then find themselves in the odd position of jointly owning the property with a complete stranger.
If a mortgage or other debt is arranged in the names of both spouses, then they are jointly and severally responsible to ensure the debt is relinquished as agreed when the debt was assumed. Failure by one joint debt owner to contribute to the paying down of the debt may result in the other being 100 percent liable.
The property sharing for common law partners relating to a bank account opened in both spouses’ names allows either spouse to remove part or all of the funds. Similarly, when a debt such as a line of credit is jointly owned, each spouse is able to separately or jointly withdraw funds to the limit set by the financial institution.
Where trust between the partners fades, an inventory of jointly owned assets and debts should be considered and the type of ownership reviewed.
Effect of a Domestic Contract
If you have entered into a valid Cohabitation Agreement, you may have already confirmed that neither will share any value of property owned by the other. The Agreement will typically override a limited number of assets or any property sharing for common law partners. For example, the Agreement may focus on the exclusion of sharing of one asset such as a home brought into the relationship by one partner. The balance of family assets habitually used by both partners may be considered joint property. Each situation will depend on the factual circumstances of the use of property, the existence of valid domestic contracts, and proof of ownership.