DSF Announcements Make A Payment Careers Testimonials Blogs
Toronto Barrie Whitby Midland Collingwood Haliburton Other Locations
416-449-1400

LAWYER SEARCH

    • Tag: Cohabitation Agreement

    Why You Might Want A Cohabitation Agreement

    Granted, it is not a particularly romantic gesture to ask your common-law partner for a cohabitation agreement. If you are busy building a happy life together, bringing up the possibility of separation and legal consequences that may result can be uncomfortable. Here are several reasons why that discomfort should be faced, overcome, and how your relationship can enter a stage of increased certainty and security with the protection of a cohabitation agreement.

    Protect your Property

    Many people think that common-law partners are treated just like married spouses in family law when they separate. Right? Wrong.

    When a marriage breaks down, both spouses are equally entitled to the property accumulated over the time of the marriage, subject to some exceptions. You start by calculating your Net Family Property, and the resulting transfer of money is called an “equalization payment”. This statutory scheme does not apply to unmarried cohabitants.

    When a common-law partnership breaks down, you are not automatically entitled to one-half the Family Law Value of your partner’s assets, including their pension, property to which you are not on title, or their savings or investments.

    The default rule is that each common-law spouse keeps the property that they own at the end of the relationship. This is determined by legal ownership or title. If one partner feels like they deserve a share in the other partner’s property, they must seek recourse through general equitable legal principles, such as resulting and constructive trusts, or on the basis of a “joint family venture”. In many cases, this means that the partner claiming a share of the property or a monetary payment must prove that the other partner has been “unjustly enriched”. The court may then endeavor to repay or reverse the unjust enrichment only if the claim meets several legal thresholds determined by case law. Therefore, making these claims in court is much more difficult without a contract.

    In a cohabitation agreement, common-law partners can contractually agree to a property arrangement that suits them. They can agree to share equally in the accumulated property during the relationship upon separation, or specify the property they will have a share in, or even specify a ratio if they wish. Alternatively, they can agree that there will be no entitlement to share in the other partner’s property at all, not even pursuant to the equitable principles described above. Such an agreement can prevent time-consuming and expensive litigation and evidence gathering that may otherwise be necessary if the parties cannot agree on a settlement. In many cases, it is much easier to part ways if there was a clear agreement setting out the property consequences the partners have agreed upon in advance of a separation.

    Specifying Any Spousal Support Obligations

    On the other hand, spousal support legislation does provide a framework for unmarried cohabitants. In other words, your entitlement to spousal support is not dependant on whether or not you were married. However, in order to be eligible to claim spousal support under the Family Law Act (“FLA”), common-law partners must either: 1. have cohabitated for at least three years, or 2. have a child together (including through adoption) and be in a relationship of some permanence. However, the issue of spousal support at the end of a common-law relationship still gives rise to a great deal of litigation.

    Once an unmarried cohabitant meets that first threshold, their entitlement to spousal support is generally determined having regard to the Spousal Support Advisory Guidelines, and case law in Ontario. Their claim may be compensatory or non-compensatory (needs-based). To avoid costly litigation upon separation, it is prudent to enter into a cohabitation agreement that can stipulate exactly at what point one party will be entitled to spousal support. Alternatively, the agreement can provide for a complete spousal support waiver. In any case, a cohabitation agreement can be a useful tool to reduce litigation of the issue later.

    Care must be taken that these provisions are not “unconscionable”, because if the court finds that they are, they may be set aside. Mere unfairness, however, does not suffice (Miglin v Miglin). For this reason, it is also prudent to update the cohabitation agreement from time to time to indicate that the terms still reflect the parties’ intentions. For instance, after only one year of cohabitation, a complete spousal support waiver may be equitable, but after a significant passage of time, that same waiver may be determined to be unconscionable and set aside by a court.

    Custody/Access and Child Support

    For custody, access, and child support issues, however, cohabitation agreements are not as helpful and are not often included in the contract. Custody and access arrangements in a cohabitation agreement are not enforceable. In this regard, the legislative provisions are mandatory and apply to married spouses and unmarried cohabitants equally. A cohabitation agreement can merely provide an understanding regarding the upbringing of the child, for example, religious education. However, these provisions are still subject to the court’s overriding jurisdiction to determine the best interests of the child, such that courts will set aside provisions of a contract if it is contrary to the best interests of the child.

    Similarly, if a cohabitation agreement specifies a child support obligation, provisions of the contract may be set aside if they are found to be contrary to the Child Support Guidelines.

    Preparing a Cohabitation Agreement

    As you can see, the law in this area is complex. In most cases, it will be best to retain a family lawyer to draft a cohabitation agreement on your behalf to ensure it has the same legal effect that you intend it to have, and to ensure it complies with the formal validity requirements of domestic contracts. It is generally best for both parties to have independent legal advice before signing the agreement. Also, if you do decide to get married, the cohabitation agreement automatically becomes a marriage contract and remains valid. However, at that point, it is wise to update your agreement, because, as we have seen, the law lays out different rules for common-law partners and married spouses.

    If you have more questions about your family law matter contact our Family Law department by calling 416-449-1400.

    “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”
    By Fauzan SiddiquiBlog, Family Law

    What marriage contracts or cohabitation agreements cannot do

    A previous blog discussed the many benefits to having a marriage contract or cohabitation agreement. That blog described how couples can have certainty in their lives, if they are married through a marriage contract, or if they are living together through a cohabitation agreement. There are many ways that they can set up their lives to be better than they would be if the couples stayed under the provisions of the Family Law Act, or went to court to resolve the matters between them.

    However, the law prohibits marriage contracts from doing eight important things:

    • Marriage contracts cannot set parenting terms (address issues regarding custody or access). Judges always have the right to make the custody or access order that they feel is in the “best interest of a child”, regardless of an agreement between the parties. While the Family Law Act specifically allows marriage contracts and cohabitation agreements to address the educational and moral training of children, the Act also says that judges can override the contract if doing so is in “best interest of the child”.
    • A marriage contract or cohabitation agreement cannot restrict either married spouse’s right to be in a possession of a matrimonial home. On separation, married spouses have an equal right to stay in any matrimonial home, and there can be more than one. Marriage contracts cannot require one spouse to leave a matrimonial home. They also cannot authorize one spouse to sell, mortgage or otherwise encumber or dispose of a matrimonial home before the spouses are divorced or they have a separation agreement or court order addressing the issue. Only married spouses can have matrimonial homes, so this restriction does not apply to cohabitation agreements unless the parties marry with the agreement still in effect. (Note: A cohabitation agreement could create rights to a property that are same as matrimonial home rights for parties who are married.)
    • A marriage contract cannot opt parties out of the Child Support Guidelines unless the provisions benefit the child as much or more than the Child Support Guidelines. In any event, the court always has the right to make an order that is in accordance with the Child Support Guidelines if the judge does not like the terms of the agreement.
    • A marriage contract cannot require that the parties go to mediation or arbitration instead of court after separation. The Family Law Act only allows parties to agree to mediation or arbitration after the dispute between them has already arisen. The parties can say that they would like to maintain a good relationship and use a more amicable process than court after they separate, but those terms in the marriage contract are not binding on the parties.
    • Marriage contracts are not recognized under the Income Tax Act with regard to the treatment of support. Periodic spousal support paid during or after the marriage pursuant to the terms of a marriage contract or cohabitation agreement will not be deductible to the payer and taxable in the hands of the recipient. Unless the parties sign a separation agreement, or obtain a court order, confirming those terms. People who are living together cannot agree that one will pay support to the other to shift the tax burdens to the person who pays tax at the lower rate.
    • Marriage contracts cannot waive a spouse’s entitlement to receive disclosure before signing the contract or signing a separation agreement. The Family Law Act gives judges the power to set aside any marriage contract, cohabitation agreement, or separation agreement that was negotiated without the parties receiving full financial disclosure.
    • A marriage contract or a cohabitation agreement also cannot waive a spouse’s right to obtain independent legal advice on either the marriage contract, cohabitation agreement, or a subsequent separation agreement. Again, judges always have the power to set aside an agreement that one or both spouses did not understand. The best evidence that the spouses understood an agreement is for them to have had independent legal advice.
    • A marriage contract or a cohabitation agreement is also not enforceable in relation to circumstances that the parties did not contemplate at the time that they signed it. If the couple wants their marriage contract or cohabitation agreement to be enforceable no matter what circumstances happen in the future, it is important that the agreement state that they have contemplated all possible future happenings and have still decided that, no matter what happens, they wish to be bound by the marriage contract or a cohabitation agreement. (Ensuring that a marriage contract meets this requirement is one of the trickier aspects of marriage contracts and it is another reason why lawyers need to be involved in the creation of a marriage contract.)

    The above are some of the restrictions on the creation of marriage contracts or cohabitation agreements. As long as couples stay away from the above restrictions, they will likely have an agreement that the court will enforce that will give them some certainty with regard to their affairs after marriage breakdown.

    By Fauzan SiddiquiBlog, Family Law