It is commonly acknowledged that cohabitation is on the rise. More and more couples are choosing to move in together without tying the knot. Whether you are moving in together or tying the knot, it is important that individuals enter these economic relationships with their eyes wide open. During my years practicing Family Law, I have learned that there are many widely held myths about cohabitation and property entitlements for unmarried couples. For example, I have often been asked in my practice whether each partner is entitled to 50% of the property once couples have lived together for a period of six months. The answer is almost always no.
In Alberta, property entitlements for individuals residing together in romantic relationships is certainly not straightforward. It may surprise people to learn that even if you think you are taking all the correct steps to ensure your appropriate entitlement, that may not be the case. For example, two people begin dating. At that point, they are each residing in their own properties but decide to take the next step in their relationship and move in together. They find a house that they fall in love with, they each contribute to the down payment for the purchase of the property, they are each registered as owners in joint-tenancy on Title and they are both equally liable for the mortgage obtained for the purchase of the home. The couple lives together for many years and they have two children together. Both spouses work full-time jobs and additionally, the mother is trying to set up her own business so she works a lot of evenings and weekends. Accordingly, the father is left to handle more of the household and family responsibilities, although it cannot be said that the mother is an absent parent at all. In circumstances such as these, it would not be surprising if you were to assume that upon separation both of these parents would be entitled to 50% of the equity built up in that home. This assumption may be wrong. It is an unfortunate state of our current law that if two roommates purchase a property together, being friends, family members, or unrelated parties, the law of property would apply to them and likely they would both be entitled to share in the equity of the property. If the purchasers are involved in a family relationship, the analysis becomes much more complicated when determining the property entitlement, unless the parties have executed a Cohabitation Agreement. Surprisingly, the Courts in Alberta have frequently decided that the mother in the scenario above, without a Cohabitation Agreement, is entitled to less than 50% of the family’s assets on separation.
A Cohabitation Agreement can be hugely beneficial to people as it sets out expectations and rules with respect to who is entitled to different forms of property and how a couple will arrange their finances. People with assets, a business interest, or who are contributing to a shared property may wish to prepare and execute a Cohabitation Agreement before moving in together.