WHAT YOU SHOULD KNOW ABOUT COMMON-LAW PROPERTY DIVISION
The rights and protections afforded to common-law spouses regarding property division are different than those offered to married couples. Whether you are part of a common-law partnership or are looking to end the relationship, understanding where you stand is critical.
According to the Canadian Revenue Agency, a common-law relationship is defined as a couple who are not legally married but who live together in a conjugal partnership and who have either been together for at least 12 continuous months. A common-law partnership can include individuals of either sex, provided that both parties are 18 years of age or older.
While some couples may argue that the only difference between marriage and a common-law relationship is a piece of paper, when it comes to navigating certain legal issues, there are several key factors to consider. Unlike marriage, where a couple will typically share the value of a property if they divorce or separate, common-law partners do not necessarily have the same automatic provisions.
The Division of Property
Generally speaking, the rules regarding property division for common-law couples dictate that in the event of separation, each partner has the right to keep any property that belonged to them prior to the beginning of the relationship. They can also keep property that was acquired by them separately throughout the duration of the relationship.
Shared property, on the other hand, is divided between partners. For easily divisible property (money in a joint back account, for instance) the process is typically straightforward. Each partner is entitled to their equal share. For property that is harder to split in two, the value of the property is taken into consideration, rather than just the property itself.
If a couple purchased a boat together during their relationship and own it together, it becomes property that must be divided equally. Since a boat cannot reasonably be split into two equal pieces, the couple may choose to sell the boat and divide the proceeds or one partner may decide to buy the other partner out so that the boat becomes entirely theirs.
There are exceptions to the rules regarding property division for common-law spouses that may have to be navigated, depending on the situation. Some examples of exceptions to the rules include:
· Joint Family Venture- When one spouse has accumulated a significant portion of wealth throughout a relationship and the other has not, it may be possible to claim that the couple was part of a joint family venture. Factors to consider include whether the couple’s financial interests were interdependent, whether the concept of family was prioritized, and that there was a mutual effort being made.
· Unjust Enrichment and Constructive Trust- When dividing property upon separation would be considered unfair. Unjust enrichment and constructive trust claims may be made if there is evidence that one partner made contributions to the property that the other partner benefited from. Examples include, but are not limited to renovations, unpaid labour, or financial contributions such as mortgage payments or household expenses.
· Resulting Trust- When property is under one partner’s name but actually belongs to the other spouse. An example of resulting trust is if both partners contributed to the down payment of a home but the house itself was only under one partner’s name.
Determining whether exceptions to property division rules are applicable to a specific case can be complicated. Proving claims based on resulting trust, unjust enrichment, and other exceptions has the potential to be difficult and will benefit from the support of a skilled lawyer well-versed in navigating common-law property division issues.
Barring an agreement that stipulates otherwise, each partner is typically responsible for repaying their own debts. For shared debts, both spouses are responsible for repayment. It is important to note that even if only one partner benefited from a shared loan, both parties are required to repay.
One way that common-law partners can protect themselves from future complications is to create a cohabitation agreement. This contract can include details regarding property division, handling debt, and other issues that could arise if the relationship ends. A cohabitation agreement can help partners stay in control of their assets and determine how they wish to handle their affairs according to their personal preferences rather than relying on the courts to decide for them.