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When the economy took a huge step back in March, some clients may have taken a huge step forward: moving in with their significant others. Clients who made the decision quickly may not have considered the longer-term implications.

While rules for property division in some provinces apply to those living together after a certain period of time, there’s no property regime for cohabiting people in Ontario, says Jacqueline Peeters, a partner at Cohen Alves Peeters Yates LLP in Toronto.

“Equalization provisions in Ontario only apply to married folks,” she says.

For spousal support to be a consideration after a relationship breakdown, Ontario’s Family Law Act says a couple must be cohabiting for three years, or have a relationship of some permanence and have a child.

Considering a cohabitation agreement

Despite Ontario’s lack of property rights for cohabiting couples, entitlement can be established through the length of time living together, the presence of children, commingled finances and other factors.

The more a relationship looks like a marriage, the more a court is willing to find a way to effect property division, says Grant Gold, a partner at Ricketts Harris LLP in Toronto.

With no clear rules, however, a property dispute can result in substantial legal costs, Peeters says.

She suggests common-law partners discuss their expectations for property within the first couple years of living together, and outline in a cohabitation agreement how property will be dealt with upon relationship breakdown.

Clients who moved in together during the pandemic may want to establish a record of their finances now in preparation for creating an agreement later, she says — especially if their finances are complex.

Gold says the cohabitation agreements he drafts are typically for clients getting married for the first time who are older and have built wealth on their own, or for those who will receive generational wealth.

In the latter case, negotiating the agreement tends to go smoother upon moving in together than after two to three years, he says.

“It’s easy to say my parents have some wealth, and it’s part of their estate plan that every [child] moving in together needs a cohabitation agreement,” he says.

If the couple subsequently marries, the cohabitation agreement becomes the marriage contract, unless otherwise specified.

Another option is a standstill agreement, whereby the parties agree to no marital rights until such time as they create a marriage contract, he says.

Creating the agreement

When a cohabitation agreement is created, full financial disclosure is required to make it enforceable, and each person must have independent legal advice, Peeters says.

Gold describes financial disclosure as “a complete open book,” including business financial statements, RRSP statements, non-registered investment statements and, if the client is the shareholder beneficiary of a trust, the trust’s estimated value. More disclosure helps to demonstrate an informed decision, he says.

The cohabitation agreement must also be in accordance with contract law, Gold says. A client can’t be under duress or undue influence when signing an agreement.

In addition to property, Ontario’s Family Law Act says a cohabitation agreement can include support obligations (as well as details about children’s education).

For example, clients may want to establish that support be paid only if the relationship lasts a certain number of years, Peeters says. However, she suggests couples refrain from delineating too many details regarding spousal support, because circumstances change.

“You don’t want to undermine your whole agreement by going into territory that isn’t appropriate,” she says.