Common Law Relationships and Property Division in Barrie, Ontario

divorced couple tearing moneySo, you lived together in a common law relationship but now it has come to an end. Your friends say "When you separate, it's just the same as if you had been married. Everything is 50/50!"

This is an urban myth. In Ontario, it is more complicated. 

Of course, the starting point is that you keep the assets and debts in your name and your partner keeps the assets and debt in their name. The question is whether either of you have to share the value of your assets with the other. 

A recent decision of the Supreme Court of Canada (SCC) known as Kerr v. Baranow, radically changed how we look at the rights of common law partners upon separation regarding property division.

The SCC has now said that if there is a “joint family venture” there should be a fair division of the assets acquired during the relationship.

In lower court decisions since the SCC decision, if there is long term relationship, especially with children, and there has been an joint effort to work together for the betterment of both parties and an intermingling of the finances, there tends to be an equal division of the assets acquired during the relationship.

Although we don't have many cases decided since the decision at time of writing this blog, I think we will see a trend toward an equal division of property upon separation when the parties have been living together in long, stable relationship, especially if there are children, the parties have intentionally became financially intertwined and they worked collaboratively toward mutual goals. 

If you have lived together for a short period of time and you kept your finances and financial goals separate, you might not have a right to a share in any of your partner's assets at all. It may be that each party just keeps that which is in their own name and that jointly owned property is shared equally. 

Of course, your case may be in between the two extremes. You might have a right to some of your partner's assets.  It all depends on on the facts of your relationship whether you have a claim and the extent of your claim. 

Of course, another issue is spousal support. If you have lived together for more than 3 years or you have a child together and your incomes are different you may have a right to spousal support. Check out this article for more information. 

You are wise to seek the advice of a family law lawyer, just to get an idea whether you might have a claim to your partner's property when it is a common law relationship. It's murky water. 

 

Is a Common Law Relationship The Same as Marriage in Ontario?

There are many misconceptions floating around in the general population regarding what is commonly referred to as “common law relationships” and about the legal rights and responsibilities that common law partners have with respect to one another upon relationship breakdown. If you are in one of these relationships it is important to know that they are not the same as a marriage and that your rights and responsibilities upon relationship breakdown are different than they would be if you were legally married. This is why in some cases it is a very good idea to enter into a cohabitation agreement with your partner in order to define your rights and responsibilities upon relationship breakdown in a way that is fair to you both, particularly if you own valuable property in your own name that you owned acquired on your own without the assistance of your partner.

The greatest misconception regarding common law partnerships is how it is defined. Many people seem to think that you are “common law” after only one year of cohabitation. While this is true under some legislation, such as the Federal Income Tax Act, for the purposes of the support provisions of the Ontario Family Law Act, spouse is defined as a person who is married or thinks they are married as well as:

either of two persons who are not married to each other and have cohabited,

(a) continuously for a period of not less than three years, or
(b) in a relationship of some permanence, if they are the natural or adoptive parents of a child

What this means is that a common law partner does not have any obligation to support his or her partner (i.e. pay spousal support) until they have lived together for three years or more or have a child together. There is also a limitation period imposed on spouses applying for spousal support under the Family Law Act of three years from the date of separation, whereas there is no corresponding limitation period on applying for spousal support pursuant to the Divorce Act, which you can only do if you are legally married.

Another common misunderstanding is that common law partners share property upon relationship breakdown the same way that married people do upon marriage breakdown. There are two very important distinctions in this regard that you should be aware of if you are living common law. Firstly, the home that common law partners reside in together is not considered to be a “matrimonial home”, and as a result a party does not have an automatic right to share in the equity of that home or possession of the home under Part II of the Family Law Act if he she is not a legal owner (i.e. registered on title). Furthermore, there is no automatic right to share in any of the property of the other person upon relationship breakdown unless you have a legal ownership interest in the property.

When two people are legally married and their marriage breaks down, their property is “equalized” by virtue of s.5(1) of the Family Law Act which states that, “when a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them” . Equalization of Net Family Property is a process whereby a person’s net worth (i.e. assets – debts) at date of separation is compared to their net worth (assets – debts) at date of marriage. The change in each person’s net worth as of date of separation is their “Net Family Property”. The person who’s net worth has increased the most over the span of the marriage is ordered to pay half of the difference of the parties’ net worth’s as an equalization payment. However, the definition of spouse in Part I and II of the Family Law Act that deals with property and matrimonial homes, includes only persons who are legally married, or who thought that they were legally married. It does not include common law partners. This is why there is no automatic right for common law partners to share in the value of the other’s property upon relationship breakdown.

The fact that common law partners are treated differently than married partners when it comes to property division was challenged by a women in Nova Scotia, (where they have very similar family legislation that does not include common law partners in the property provisions) as being contrary to s.15(1) of the Charter of Rights and Freedoms that guarantees equality under the law. The Supreme Court of Canada surprised everyone by finding that the differential treatment was not discriminatory. The reasoning given for this is that:

Although the courts and legislatures have recognized the historical disadvantages suffered by unmarried cohabiting couples, where legislation has the effect of dramatically altering the legal obligations of partners, choice must be paramount.  The decision to marry or not is intensely personal.  Many opposite sex individuals in conjugal relationships of some permanence have chosen to avoid marriage and the legal consequences that flow from it.  To ignore the differences among cohabiting couples presumes a commonality of intention and understanding that simply does not exist.  This effectively nullifies the individual’s freedom to choose alternative family forms and to have that choice respected by the state.

\Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83

In other words, the Supreme Court said that people who are living common law have chosen not to marry and many have purposely chosen not to take part in the property division that applies to married couples. Based on the number of people I have spoken to that think that common law people are treated the same upon relationship breakdown as married people, I suspect that they did not really chose not to share in their partner’s property upon relationship breakdown.

There are ways of making a claim against a common law partner’s property using “equitable relief” claims such as constructive and resulting trust claims. The essential principle behind these claims is that if you have lived together for many years and have contributed both emotionally and financially to the other party’s property, it would unjustly enrich the party who is the sole owner of the property to allow him/her to walk away from the relationship without compensating the non-owner spouse for their efforts. These claims are very difficult to make out and do not guarantee you 50% of the value of the property in question.

There is one respect in which common law and married persons do not differ, and that is where it comes to their rights and responsibilities with respect to their children. In fact, even if you have never cohabited or married, you are legally responsible to support your children and have equal rights to custody and access of your children. This is thanks to the Children’s Law Reform Act that sought to even out the playing field as between children who were “legitimate” and children who are “illegitimate” so as to ensure that they are equally supported and cared for by both parents.

Nevertheless, if you are in a common law relationship or are contemplating living with somebody you should consider consulting a lawyer to discuss the possibility of negotiating a cohabitation agreement with your spouse that would protect you both in the event of relationship breakdown. Nobody wants to think about separating, but the sad reality is that common law relationships are generally less stable and of shorter duration than marriages and there is a good probability that the relationship will end at some point. You owe it to yourself and to your children to plan appropriately for the future so as to ensure that you will be financially secure with or without your common law spouse.