When is the Best Time to Draft a Cohabitation Agreement?

Common-law partners are given more freedom to make key decisions thanks to cohabitation agreements. If the parties want to equally share finances, assets, and debts, they are able to plan for this through a cohabitation agreement. In essence, parties can use a cohabitation agreement to have more control over their own assets and financial situation.

What is a Cohabitation Agreement?

A cohabitation agreement outlines the parties' respective rights and obligations should the relationship cease. The Agreement will facilitate the preservation of personal interests and property rights within the common law relationship.

Living common law means that you are living in a conjugal (refers to the nature of the relationship between the couple) relationship with one person who is not your married spouse, and at least one of the following applies:

• The person has been living with you in a conjugal relationship for at least 12 continuous months.
  • 12 continuous months includes any period you were separated for less than 90 days because of a breakdown in the relationship.
• The person is the parent of your child by birth or adoption.
• This person has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on them for support.

In Ontario, common law spouses do not have the same property rights as married spouses under the Family Law Act (FLA). This means that without a cohabitation agreement, one party could potentially lose out on their fair share of the property acquired during the relationship. It is important to note that once you marry, the cohabitation agreement automatically becomes a marriage contract.

Spousal and Child Support

The FLA outlines that a cohabitation agreement cannot stipulate conditions regarding decision-making, parenting time, or support of a child. These issues can only be addressed when a separation occurs. Also, a cohabitation agreement cannot waive child support obligations. The best interests of the child are always paramount, and any agreement that attempts to waive child support will not be upheld by the courts.

If the agreement outlines how the matrimonial home will be treated, these provisions may require modifications if the couple chooses to marry. In a formal marriage, both parties possess an equal right to occupy the matrimonial home, a fact that cannot be altered by either a cohabitation agreement or a marriage contract.

Spousal support CAN be solidified and established in a cohabitation agreement. The recipients claim may be compensatory or non-compensatory (needs-based). In a cohabitation agreement, parties can decide whether to waive their respective rights to spousal support or establish an agreed upon amount should they separate.

Why Should You Get One?

The most common reason is to protect the separate property, debt and income of both partners. This can be useful to prevent either partner from making claims on the other’s assets.

A cohabitation agreement will also be useful if both or either partner has substantial assets they are bringing into the relationship. They might want to protect their assets if they have an expectation of a significant raise in income or a financial windfall after the start of the relationship. 

Our Recommendation

Although it can be signed at any time during the relationship, we recommend that an unmarried couple sign a cohabitation agreement before they move in together. Otherwise, it may be more difficult to have financial discussions as the relationship progresses.

If you or someone you know could be a good candidate for a Cohabitation Agreement, do not hesitate to reach out to the experienced and trusted Family Law lawyers at Sorbara!