Common-Law Ontario: Minimize Financial Risks with a Cohabitation Agreement

Key Takeaways

• In Ontario, becoming common-law can trigger financial and legal obligations many couples don’t expect, including support, estate, and debt exposure.
• A cohabitation agreement enables couples to set clear rules for property, support, debts, and estate rights before potential disputes arise.
• Common-law partners may face spousal support claims after separation or death, without ever being married.
• Without a Cohabitation Agreement, courts may decide property interests, debt repayment, and support based on contributions and fairness.
• Drafting a Cohabitation Agreement early helps you protect your finances, reduce conflict, and avoid costly court proceedings.

In Ontario, a Cohabitation Agreement can protect you from unexpected legal and financial obligations that can result from becoming common-law. Many couples don’t realize that once they reach common-law status, a separation or death can trigger unforeseen legal consequences. 

Here, we’ll explore how drafting a Cohabitation Agreement can help you protect your finances and avoid legal obligations in a common-law partnership.

Legal Implications of Common-Law Status in Ontario

Drafting a Cohabitation Agreement can protect you and your partner from financial obligations and avoid complex court cases. After 3 years of cohabitation (or immediately after having a child together), an unmarried couple becomes common-law in Ontario.

Common-law status doesn’t automatically impose property-sharing rules like those of married spouses, but it can lead to significant financial obligations. These can include spousal support, property claims, and estate rights. A Cohabitation Agreement allows you to set rules in advance, instead of relying on legal outcomes or court decisions.

Regulating Spousal Support with a Cohabitation Agreement

According to the Family Law Act, a common-law spouse can seek spousal support once the relationship ends. An ex-partner may be entitled to ongoing monthly support payments depending on income, relationship roles, and other factors. Having a Cohabitation Agreement in place can limit the amount of spousal support required or prevent support payments altogether.

Protecting Your Property with a Cohabitation Agreement

Unlike married couples, common-law partners don’t automatically split property upon separation under Ontario law. That said, one partner can go to court and claim a financial interest in property that the other partner legally owns. 

This can occur if a partner demonstrates they’ve made financial or other contributions to their ex’s property during the relationship. A Cohabitation Agreement clearly defines property ownership and how contributions will be treated, reducing the risk of trust and contribution claims.

Addressing Spousal Support Through the Estate

If one common-law partner passes away, the surviving partner may apply for dependant’s support under the Succession Law Reform Act. This is the case when the surviving common-law partner is considered a dependant under Ontario law. 

Essentially, the surviving partner can apply for support payments from the estate. Even if the surviving partner wasn’t in the deceased’s Will, or if no Will exists, the court may still order support payments.

A Cohabitation Agreement serves as relevant evidence, as the court looks at it to examine the following:

• Whether the surviving partner accepted limits on support
• The degree to which the deceased intended to support the surviving partner
• What level of support is appropriate now (if any)

These factors help a court determine the amount of support to be ordered, or whether any should be ordered at all. If an Agreement states that one partner doesn’t intend to provide estate support, this can reduce the likelihood of support being ordered.

Clarifying Debt Repayment Responsibility

In Ontario, you aren’t automatically responsible for your partner’s debts if you become common-law. However, common-law status doesn’t protect you if finances become intertwined. 

Once you live together, debts can become shared in practice, even if the law doesn’t clearly assign responsibility. You might use a joint credit card, co-sign a loan, or contribute to payments for a debt only in your partner’s name. You may also cover household expenses while your partner takes on debt. 

If the relationship ends, there’s no legal rule that clearly determines who should repay what. This can lead to disputes over whether one partner should be reimbursed for debt repayment or continue contributing.

A Cohabitation Agreement can affirm that each partner is responsible for their own debts, whether incurred before or during the relationship. It can also outline debt repayment responsibility, who will continue making payments once the relationship ends, and whether reimbursements will happen.

Creating an Agreement while the relationship is healthy reduces the risk of being pressured, sued, or stuck with debt that isn’t yours.

Avoiding Complex Court Cases

A Cohabitation Agreement helps reduce future litigation, saving you frustration, money, and time. Without a contract in place, you might wind up in a long and expensive court battle. A Cohabitation Agreement may prevent the courts from making personal decisions for you, as it outlines your wishes.

Draft a Cohabitation Agreement Today

For a couple in Ontario, becoming common-law can quietly give rise to legal and financial obligations they didn’t anticipate.

A carefully crafted Cohabitation Agreement allows you to set expectations around support, property, debts, and estate claims before disputes arise. This allows you and your partner to make decisions about your finances, reduces uncertainty, and keeps personal matters out of the courts.

Protecting your finances has never been easier. Draft a Cohabitation Agreement with NotaryPro’s free Cohabitation Agreement template, then have it commissioned online in 7 minutes for added credibility.