Although there’s no way to know just how many common-law couples are buying homes today, we do know that the existence of these unions are at an all-time high across Canada. The last census count indicated there was a 13.9% rise over the course of five years, totaling out at 1,567,910 common-law families. The swift growth also resulted in the country being home to more common-law families than lone-parent families for the first time on record. With mortgage rates being what they are, many common-law couples are seizing the opportunity and purchasing homes together. If you’re about to take the home-buying plunge without tying the knot, you should be aware of these four things first.
1. There’s No Standardized Definition of Common-Law
Canada leaves it up to individual provinces to determine whether couples are considered common-law, so while you may be in one region, you might not be in another. Generally speaking, the more your lives are intertwined and the longer you’ve been together, the more-likely the courts will view your situation like a partnership. Living in the same house or buying property together doesn’t necessarily make you common-law, but if you share bank accounts, responsibilities, and have been together for many years, you might be.
2. You May Have No Rights to the Property if You Break Up
If a couple purchases property together, courts usually award each party what he or she gave towards the down-payment. If one person paid towards the monthly mortgage payment, but gave nothing towards the initial down, that individual would not be able to get any of the investment back after a breakup. It’s generally thought of as rent, rather than a mortgage payment. This is true even if a couple has children together, which can be a difficult situation if the person who didn’t put money down on the home also stayed home with kids. While a court may lean towards a common-law ruling in this situation, it isn’t necessarily so.
3. You May Have No Rights if Your Significant Other Dies
Sadly, the law can become even murkier if one party dies. If the couple is not considered common-law, and the homeowner passes away without a will, the home would then belong to his next-of-kin. This means that the decedent’s family may claim ownership of the home, and the surviving half of the couple receives nothing.
4. You Should Protect Yourself and Establish Guidelines with Legal Documents
Because the laws are not universal, it’s worthwhile to hammer out these legal issues well in advance, when the relationship is strong.
- Will: It’s important to have a will to ensure your significant other, and your children (if you have any), are looked after in the event of your passing. This way, you can be certain that nobody else will be able to claim any part of the home or its value.
- Cohabitation Agreement: Couples should also create a cohabitation agreement. It’s a legal document that should clearly state who paid what towards the down payment, how monthly expenses are to be paid, and who will be responsible for paying for emergency repairs. These portions are beneficial simply to avoid conflict while you live together, and they also help open up important discussions every couple entering into financial arrangements should have. Much like a prenuptial agreement, the cohabitation agreement should also clearly stipulate how property and assets are to be divided if the relationship ends. Each party should have his or her own lawyer examine the document to make sure it’s fair and that nothing has been overlooked. Because circumstances change, it’s a good idea to include clauses for possible life-changing events, such as the birth of a child. This way, you can spare yourselves the expense of having it rewritten later.
While some people feel it’s unromantic, or a sign that you don’t trust your significant other if you ask him or her to complete a cohabitation agreement, it may actually be one of the most caring things you can do. It eliminates potential future squabbles over money, has the potential to protect your partner, and gives you the opportunity to have frank discussions over finances and the sharing of household duties. In the end, the government may or may not consider you to be common-law, so this is one simple way put the decision-making power in your hands, where it belongs.