Cohabitation agreement boundaries

[proactive]

Hello,

I would like to begin by introducing myself and complimenting the administrators for putting together a very interesting and, apparently, responsive and well maintained forum.

My question is regarding cohabitation agreements. We (my partner and I) have done a fair bit of reading on common law definitions and rights in Ontario (which is where we intend to live) and have read through the forums and information on this site, but are not clear on the full scope of what is implied by a cohabitation agreement and how it translates into a marriage contract. We have been dating for about 1.5 years and we share the ideal of getting married in the future, but not yet. Before getting married, we would like to live together for a period of time to fully gauge our compatibility. We are both busy professionals and time passes quickly, so it is hard to say how long it might take us to decide to get married. One of us has a significantly larger number of assets and an unstable job, while the other has fewer assets and a more stable job with a higher salary. Our plan is to either rent together or co-purchase a property and make an equal contribution to downpayment and ongoing payments. We are interested in drafting a co-habitation agreement that makes terms of separation very clear in the unfortunate event that we should separate, regardless of whether 3 years of continuous cohabitation has elapsed. Our questions are as follows:

1) Many standard co-habitation agreements are titled cohabitation/prenupital agreement/marriage contract. Should we sign such an agreement together, does this mean that we are instantly considered a common law couple even though 3 years of continous co-habitation has not elapsed?

2) Before marriage, we intend to keep finances separate with the exception of a joint account which will be used for paying common expenses. We would like to draft a co-habitation agreement that specifies that we will each pay half of the rent on a rental or that we each pay half of downpayment/ongoing payments into the purchase of a property. We would like the agreement to state, as the only financial consequence of separation, that rent be paid as per the agreement up until the rental agreement is terminated which would be ASAP after separation, or that co-owned property be sold ASAP after separation and that proceeds be divided evenly. That is to say that we would like to say in advance that we do not expect compensation for anything futher (ie avoid potential unjust enrichment battles), nor do we expect support payments upon separation regardless of circumstance or how long our relationship has endured outside of formally getting married via signed contract. Is this possible and legal?

3) Most cohabitation templates have each partner list all assets at the time of signing. We are open with each other about assests and have no problem doing this. It is commonly stated that the cohabitation agreeement eventually becomes the marriage contract. If we do get married, would NFP be calculated from the time of signing the co-habitation agreement, or could this be re-visited before formal marriage? Does this automatically become a marriage contract after 3 years of living together? If the answer to any of these is no, what would be the other practical purposes of listing our assets in a cohabitation agreeement in our situation? My understanding is that, even if we become a common law couple, assets that are not jointly owned are not divided.

Many thanks in advance for any consideration of our questions.

Best regards,

Proactive

[pmmpa]

Cohabitation agreement, Prenuptial agreement, and Marriage Contracts (Ontario):

Under Ontario's Family Law Act, a cohabitation agreement will AUTOMATICALLY become a prenuptial agreement once the parties get married (unless the agreement says otherwise). That's why there are generally two types of cohabitation agreements: ones that terminate on marriage and ones that continue past marriage and essentially become a prenuptial agreement or marriage contract.

Signing a cohabitation agreement creates private contractual rights between the parties. But it also has an impact on legislation - such as the workings of the Family Law Act. If you acknowledge something in a private contract - even though a statute says otherwise - then the other party can make a claim against you for breach of that contract (if you indeed breach it).

Finally, with respect to ownership and division of property, common law couples do not benefit from the equalization of net family property regime contemplated in the Family Law Act. In essence, property is divided along the lines of ownership, unless other legislation (e.g. Succession Law Reform Act) or principles of trust, equity or the common law apply. For example, a common law spouse could try to claim an interest in property of the other spouse based on the doctrine of unjust enrichment.

Remember: with respect to married couples, the Family Law Act looks at the net increase in wealth during the course of the marriage (so cohabitation period isn't included). If you want the Family Law Act's division of property not to apply (such that you can include the period of cohabitation in your calculations), then your agreement could theoretically say so.

I have written a number of extensive blogs and eBooks about cohabitation agreements, prenuptial agreements, and marriage contract in Ontario. I also sell Cohabitation agreements, Prenuptial agreements, and Marriage Contracts (Ontario) which avoid creating financial obligations on the parties. These legal form packages are lawyer-prepared, customizable, and come with free guidance (video tutorials and written guides). All for a fraction of the price a lawyer would charge. Check it out...