You had intended to spend the rest of your lives together but decided you didn’t want the formality marriage. Now the time has come to separate and you had assumed that you would have the same legal rights as you would have within a legal marriage. Unfortunately, in Ontario you don’t.
Many couples enter into a common law relationship with the assumption that the division of assets will be 50/50. While The Family Law Act varies province to province, the province of Ontario does not allocate the same division of property laws or equalization payment laws to common law relationships. In this blog we will cover the basic outline of the Family Act within Ontario. Of course, we strongly advise that you seek legal advice and, or, legal representation. Our blog is a basic overview of what can be a very complex situation and is not to be considered legal advice.
Under the Family Act in Ontario there is no formal registration for the term Common Law. It doesn’t exist. The term “Common Law” is more of a layman’s term to describe the relationship. However, for simplicity we will continue on with the term.
To be considered a Common Law relationship in Ontario you must be living together in a conjugal relationship for 3 years or 1 year if the couple has children together.
Common Law relationships within Ontario do not have matrimonial property. Usually what you come into the relationship with is what you leave with. During the relationship who is on title is who is entitled to the proceeds after separation. You do not automatically have a claim to the home or to the increase in the value of the home. However, Ontario does use the law of constructed trust to protect property rights. So what does that mean to you?
Let’s say, for example, that you had $25,000 in savings and a new car worth $45,000 when you entered into the common law relationship. Your partner purchased the home you both lived in with a down payment of $125,000. Only their name is on title. The home was purchased for $320,000 and now, at the time of your separation is valued at $400,000. Many couples assume that the home would be divided equally or that only the $125,000 down payment would be given to the one partner. Others believe that the difference in value the $120,000 would be divided 50/50. The reality is that the spouse would keep their home and the increase in value. The other would leave with what the came with, what was left of $25,000 and their car. Only property or assets that are jointly owned, both names on title, would be divided equally. Upsetting, yes. However, there are 2 claims that can be explored by the partner. The Unjust Enrichment Claim and the Constructive Trust Claim.
When one, or both, of the common law spouses have made significant contributions to the property of the other, there are 2 claims that may entitle the spouse to a monetary award or an interest in the property. Both claims are based on the spouse’s claim that they have been contributing to the home that the party owns either by monetary means (renovations, mortgage payments etc) or by contributory means (caring for children, etc). They are Unjust Enrichment Claim and Constructive Trust Claim.
For an unjust enrichment claim 3 factors must be proved:
1. That the spouse received an enrichment
2. The other spouse has been deprived or suffered a loss because of it and
3. There is no legal reason for the enrichment.
An example would be a stay at home spouse that was deprived of an ongoing salary and career advancement due to the decision to raise children rather than work. Their contribution the home may be recognized as well as their loss because of it.
Once an unjust claim has been proven then the court remedy may be a monetary award or if the spouse can prove there is a casual connection between their contributions and either the purchase of the property or the maintenance or improvement of the property or that the monetary award is not sufficient. A constructive trust remedy gives the spouse an interest in the other spouse’s property.
Please note that both claims can be very difficult to prove and can be quite tricky to navigate. Legal counsel is strongly recommended.
Of course, if you are just entering into a common law relationship then you and your spouse may want to consider a cohabitation agreement. The Cohabitation Agreement set the boundaries for entitlement during the course of the relationship and in the event of a separation of the relationship. It covers all aspects of property and assets. Who owns what, who will contribute, what they will contribute and what each will leave the relationship with. The agreement allow both you to know upfront what to expect in the event of the dissolution of your common law relationship. It also would outline entitlement in the event of one of the spouses death without a will. Under Ontario law the common law spouse would be treated as a stranger in the event of death without a will. The surviving spouse would have no legal claim to either the property or assets if their name is not on title.
Whatever you and your spouse decide try to do it quickly. There is a 2 year time limit after separation for any claim on the property. After the 2 year time limit your spouse may successfully argue that the limitation has passed and your claim invalid.
You will be dealing with so much at this time. Avoiding long drawn out legal proceedings would be a blessing in a situation that is already fraught with emotion. A cooperative approach is always in the best interests of all concerned.