Property Sharing for Common Law Partners

property sharing for common law partners

For spouses and partners who are not married, there is no legislated property-sharing regime in Ontario.

Understanding what common-law spouses may be entitled to claim from the other upon separation is important for clients before they plan to cohabit.

Legal Ownership

Property brought into a relationship remains the property of the partner who owned it prior to cohabitation, or who acquired it after shared residency commenced.

Jointly owned bank accounts, the family home, and gifts given to both partners entitle each partner to an equal share in the asset’s value.

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 towards a common objective, such as raising children or opening a family business.

In a common-law relationship where the spouses pool or integrate their economic resources and jointly contribute to an important mutual family goal or enterprise, a true partnership is demonstrated. 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 the 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, in this ownership arrangement, if one owner dies 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 death of one common-law spouse 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 therefore find him- or herself 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.

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 spouses fades, an inventory of jointly owned assets and debts should be considered and the type of ownership reviewed.

Effect of a Domestic Contract

If the clients have entered into an enforceable Cohabitation Agreement, they may have already confirmed that neither will share any value of property owned by the other. The Agreement overrides the obligations set out in law, and no division of property occurs. Whatever each spouse came into the relationship with or individually acquired during the marriage is divided according to ownership. (Joint ownership is typically divided by an equal sharing of the value of the asset or debt.)

On the other hand, the Agreement may only exclude the division of value of specified assets, with the balance of commonly held property to be shared according to applicable law.