Posted on Thursday May 11, 2023

The importance of a cohabitation agreement for common-law couples

In Canada, two people who live together without being married are considered common-law partners. Like newlyweds, lovebirds who decide to build a life together as common-law partners look to the future with excitement and optimism. But even the best-laid plans don’t always work out.

If they don’t, what are the legal consequences of separation? From a legal perspective, married and common-law couples don’t have the same rights or responsibilities. The province or territory you live in with your common-law partner and the number of years you’ve been together are just some of the factors that come into play in the event of separation.

Marriage and common law: Two distinct realities in the eyes of the law

The law defines a common-law relationship as two people living together without being married. Common-law couples don’t enjoy the same protections and benefits as married couples. For example, common-law spouses are not required to contribute to household expenses proportionally to their income and are not subject to the rules of the Marital Property Act. That’s why it’s important for common-law partners to enter into a domestic contract outlining the rights and responsibilities of each partner so as to prevent unequal treatment in the event of separation or other unforeseen events.

What about same-sex couples? In New Brunswick, they now have the same rights and obligations as any other common-law couple.

Why and how to enter into a cohabitation agreement

Since the law distinguishes between common-law unions and marriage, a contract such as a cohabitation or separation agreement between common-law partners clarifies grey areas and helps prevent things from getting messy in the event the relationship goes sour.

For a cohabitation agreement to be valid, both parties must be of legal age and able to make informed decisions and freely consent. Keep in mind, however, that a cohabitation agreement does not have the legal value of a will. To make an agreement that takes into account the division of property and the parties’ wishes in the event of death, you will need to consult a lawyer.

There are cohabitation agreement templates available online, like this one on LawDepot. These simple, practical and inexpensive templates will guide you through the steps in drafting an agreement without the help of a lawyer. Bear in mind, however, that the provisions of this type of agreement may be invalidated in court in the event of a challenge. You’re better off hiring a specialist who can explain the ins and outs of your rights and obligations to you.

Cohabitation and separation agreements

In New Brunswick, the contract outlining the rights and obligations of common-law partners, including ownership, division of property and support, is called a cohabitation agreement.

A separation agreement is a contract that allows common-law partners to determine their rights and obligations in the event of separation, including child support. It includes everything that may be agreed to with respect to parental roles, child custody and access rights. When drawing up a separation agreement, it’s also a good idea to include a provision for revising the agreement in the event of a significant change in the life of one of the partners after separation.

Since the agreement is customizable, you can include whatever you consider relevant for managing your life together, from repayment of the mortgage or car loan to the share each partner pays for household bills and so on. Think of it as having a life jacket on a plane: you don’t want to have to use it, but you’re glad to know it’s there!

Provision for periodic review

The advantage of a cohabitation agreement is that it can evolve in step with changes in your situation as a couple. This type of agreement can be amended or annulled, as long as both parties agree. Most legal specialists agree that cohabitation agreements should be reviewed at least once a year and updated accordingly. For example, one partner’s contribution to household expenses may change if their income changes.

Laws also change

Changes to Canada’s Divorce Act came into effect on March 1, 2021, and similar changes have also been made to the Family Law Act in New Brunswick.

While the Divorce Act only applies to married couples who are divorced or going through a divorce, the Family Law Act applies to both common-law couples and to married couples who are not yet divorced or who are in the process of a divorce.

Drawing up this kind of agreement is relatively simple, but too many people still forgo the protection it provides. As the saying goes, better safe than sorry. So do yourself a favour and put it in writing. You’ll spare yourself many a hassle in the event of a separation.

Feel free to contact a financial advisor for guidance in managing your finances or to open a joint account that makes it easier to handle shared expenses.

*This article is for information purposes only. This information is of a general nature and is not intended to provide legal, tax, financial or other advice. Consult a professional for advice tailored to your situation and information on the applicable legislation in your jurisdiction. The Caisse cannot be held liable for the content or accuracy of this information (in whole or in part), nor can it be held responsible for any decisions made based on this information.