In recent years it has become the norm for two individuals who are in a relationship to live together before marriage. In some circumstances, there is a financial imbalance between the two partners. In a real estate context, this often means that one partner owns the home where the couple is living, makes most of the payments, and considers it to be “their” property.
We are often asked by our clients who own their own property but are planning to move their partner in to live with them, how to protect their interests should there be a breakdown of the relationship. This also often arises when the parents of one of the parties has purchased part or all of the home as their child’s inheritance and does not wish to see a portion of that value taken one day by that child’s partner.
In Alberta, individuals who are colloquially known as “Common Law” spouses, are defined as “Adult Interdependent Partners”. Generally speaking, the spouse who is not on title to the property, would not have an interest in the home on the breakdown of the relationship unless they fall within this definition. The Adult Interdependent Relationships Act provides that people are considered Adult Interdependent Partners when two people live together in a relationship of interdependence:
- For a continuous period of at least 3 years;
- Of some permanence (and less than 3 year) if the couple has a child together; or
- Who have entered into an adult interdependent partner agreement.
Whether you are in a “relationship of interdependence” is defined by a number of factors, but it is safe to say that most individuals in a romantic relationship fall within this definition.
If you become an Adult Interdependent Partner, and the relationship breaks down, your assets would be divided much like if you were married had a divorce, and in accordance with the Matrimonial Property Act. This would likely include the home, even if only one of you were on title.
The best way to keep the home as your own is to enter into a Cohabitation Agreement with your partner. This, much like a Prenuptual Agreement, sets out ahead of time the rights and responsibilities of each party, and the property they would receive should a breakdown of the relationship occur. The home can be exempted from division between the partners in the Cohabitation Agreement.
In addition to discussing the home, a Cohabitation Agreement can include division of debts, payment of expenses during the cohabitation (such as mortgage payments, utilities, taxes and so on), spousal and child support payments, and custody arrangements. A Cohabitation Agreement must be drafted by legal counsel to be enforceable and can be as simple or comprehensive as the couple requires.
Lawyers are of course expensive, and young couples in particular are averse to spending large sums to have Cohabitation Agreements drafted. We are often asked whether charging the non-owing partner rent would suffice to avoid being considered Adult Independent Partners. Unfortunately, it does not. Clients also try and put together an agreement themselves. Unfortunately the law is strict in this area, and only a Cohabitation Agreement completed and countersigned by a lawyer is fully enforceable.
If you have any questions or require further clarity, contact your lawyer.
In this, the sixth instalment of our series with Dan Hawkwood — an Associate Lawyer at Beaumont Church LLP in Calgary — Dan explains the issues surrounding cohabitation as it relates to real estate and the role a cohabitation agreement can play. Dan comes from a long line of farmers and ranchers in the Calgary area and brings the experience of his rural upbringing to his practice.