In the first blog in our series on what common-law couples should know, we discussed the concept of the matrimonial home and the fact that the concept does not exist outside of a marital relationship. In part two of the series, we will provide an overview of net family property and how Ontario treats this concept with respect to common law separations.
What is “Net Family Property”?
Net family property refers to the value of assets belonging to each half of a couple, minus the value of any of their debts or liabilities. When a married couple makes the decision to separate, they will be required to equalize, or apportion, the value of their net family property between them. This process can become quite complex, particularly with respect to high net worth families with complex finances, families with international considerations, or families who share a business.
Each party has to provide the value of their assets and liabilities at the time of the marriage and the date of separation. After deducting the net value of their assets at the date of marriage from the net value of their assets at the date of separation, the spouse with the greatest value of property will then be required to make an equalization payment to the other spouse, in order to equalize the value of their respective property between them. There are some exceptions for certain property that can be excluded from these calculations, such as an inheritance or a gift kept separate from the shared family assets.
Common-Law Relationships and Division of Property
Unlike married couples, Ontario law does not grant a right to equalization of property to common-law couples. In the absence of any agreement to the contrary, each spouse in a common-law relationship will leave with the assets and liabilities they have at the end of the relationship. Common-law couples will not equalize any wealth accumulated during the relationship. The only exception to this rule would be if one spouse contributed in money or work towards building assets during the relationship in which case they may have a claim for some sharing in ownership or compensation. These claims can be hard and expensive to prove.
As discussed in the last blog in the series, there is no concept of a matrimonial home in a common-law relationship. If a couple resides in a home one spouse owned prior to the start of the relationship, that spouse will not be required to share the value of the home upon separation or at all.
Unjust Enrichment and Common Law Relationships
A common-law spouse may claim ownership of property that is in their former partner’s name, relying on the concept of ‘unjust enrichment’. A claim for unjust enrichment may enable one spouse to claim an ownership interest in a property or compensation for the value of financial contributions they made towards property owned by the other spouse during the relationship. For example, if one spouse starts a business during the relationship in her name, but the other spouse works in that business without being paid a market wage or contributes financially to the purchase or operation of the business, then the non-owning spouse may claim either ownership of the business in some amount or compensation for the contribution made.
Cohabitation Agreements Put Control in the Hands of Common Law Couples
Common-law couples can set their own terms for the division of property upon separation, instead of relying on the limited rights available to them at law. By designing and executing a custom cohabitation agreement at the start of the relationship, a couple can set the terms in advance with respect to how they will share and divide property in the event the relationship should come to an end.
For Advice Managing Property in a Common Law Relationship, Contact Boulby Weinberg LLP
At Boulby Weinberg LLP, our family law lawyers assist with drafting and reviewing cohabitation agreements and advise clients on how to protect their interests when entering into a common-law relationship. To arrange a consultation, please complete our confidential online questionnaire, which will provide you with valuable preliminary information tailored to your specific situation. A representative from our firm will contact you within one business day to discuss your matter further and arrange an initial meeting. To contact our firm without completing the questionnaire, please reach out to us online, or call us at 647-494-0113 ext. 102.