Property Division & Equalization
Can a Third-Party Creditor Have Priority Over a Former Spouse to Jointly Held Property?
September 15, 2023
In Ontario, couples are considered to be in a common-law relationship if they cohabitate for a period of at least three years or if they are in a relationship of some permanence and have a child together by birth or adoption. Once a common-law partnership is established, the parties may become entitled to certain financial entitlements if the relationship ends.
Many people make the mistake of assuming common-law status entitles them to the same rights as a married couple, but this is incorrect. The rules with respect to a common-law separation are unique, as described below.
Common-law spouses do not have an automatic right to share equally in the increase in value of property accumulated during the relationship. In contrast to the equalization regime for married spouses set out in the federal and provincial legislation, common-law spouses retain the property held in their own name, and the value of jointly owned property is typically shared equally. However, parties may also be entitled to property that is not in his or her name if they can establish that they contributed to that asset by way of monies or labour other means, which we can discuss with you. It is also possible to create additional rights to property using a cohabitation agreement or to agree to increased entitlements upon separation.
There is no legal concept of a “matrimonial home” when it comes to a common-law relationship. If both common-law partners are listed as legal owners of the home, they will each retain rights to the property. However, if one person owns the home in their name, the other partner does not have an automatic right of possession to the home, or necessarily, to any of its value when and if it is sold.
There are certain circumstances that may give way for a legal claim by the non-owner spouse, including a claim based in constructive trust or unjust enrichment. Unjust enrichment is a legal concept to help create equity when one person has been enriched at the expense of another. A constructive trust is a similar remedy where a court can infer a trust in favour of one person over certain property if that person contributed to the property. For example, if the non-owner paid part of the mortgage each month or made other significant financial contributions to the home, they may be entitled to a portion of its value.
Ontario’s child custody, access, (now called decision making and parenting time) and support laws apply to all parents, regardless of their relationship status. A parent’s financial obligations to their child are not impacted or altered by their marital status. When a common-law couple separates and they share children, it will be necessary to determine child support payment amounts, frequency, and other issues such as the apportioning of extraordinary expenses. Extraordinary expenses include the cost of items such as daycare, post-secondary education, some extracurricular activities; other educational expenses and certain medical costs, amongst other things which we can assist you with.
In addition to child support obligations, spousal support may also be imposed on those leaving a common-law relationship. If there is a dispute with respect to whether or not support is warranted, it may become necessary to go to court to resolve the matter. In such cases, various factors will be considered in the decision to impose spousal support, including:
While the law does not provide many automatic entitlements to common-law couples, you can opt to set your own terms by creating a cohabitation agreement during the relationship. This will enable you and your partner to make your own decisions with respect to property and spousal support in advance. Some issues cannot be determined in a cohabitation agreement, however, such as any parenting matters.
If you are separating and don’t have a cohabitation agreement in place, it’s still possible to define your own terms through a separation agreement. If you and your partner wish to divide certain property or create an obligation for spousal support, this can be done at the time of separation. If you share children by birth or adoption, you’ll need to create a parenting agreement at this time as well, regardless of whether you have a cohabitation agreement.
At Shariff & Associates, our family lawyers frequently assist common-law clients and have considerable experience drafting and reviewing both cohabitation and separation agreements. No matter how complex your situation may be, we have the experience to help reduce your stress throughout the separation process.
At Shariff & Associates, our family law lawyers regularly advise clients entering or leaving common-law relationships with respect to their rights. We will review your circumstances with you and ensure you have a full appreciation of your rights and obligations in the event of a separation. We will also work with you to create a comprehensive cohabitation agreement or separation agreement to protect your rights. To review your matter with a member of our team, please reach out to us online, or call us at 905-591-4545.
September 15, 2023
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