Common-law partners do not have the same property rights as legally-married persons in the Province of Ontario. For legally-married persons, the Family Law Act sets out a comprehensive scheme for dividing property on the breakdown of a relationship, but common-law partners are not subject to that same regime. For that reason, there can be considerable uncertainty for common-law couples when it comes to resolving issues of property.
As a general rule, the starting point for division of property between common-law spouses is that property in the name of one spouse alone belongs entirely to that spouse. Also, property that is owned jointly is shared equally (i.e. the asset is usually sold, and the proceeds divided equally), unless the spouses entered into some earlier agreement stating that their interests in the jointly-held property were not equal.
Where that starting point is not adequate to resolve the issues, common-law spouses often resort to the law of unjust enrichment in order to make claims against one another’s property. A claim for unjust enrichment can be thought of as a situation in which one of the spouses has benefited at the expense of the other. To establish that unjust enrichment has occurred, one of the spouses will typically claim that he or she made a contribution (i.e. financial, material, or “sweat equity”) to property owned by the other and that, as a result, the other spouse has been enriched in a manner that s/he would not otherwise have enjoyed. The spouse making the contribution has to establish that s/he has thus been deprived of a benefit, and that there is no pre-existing reason for that imbalance to survive the breakdown of the relationship.
As a simple example, suppose that Spouse 1 and Spouse 2 are in a common-law relationship and that they live in a home that is solely-owned by Spouse 1. During the relationship, Spouse 2 buys building materials and spends her spare time extensively renovating the property. Assume that the renovations increase the value of the property. The relationship then breaks down, and Spouse 1 says that Spouse 2 is not entitled to any of the value of the home since Spouse 2 is not a registered owner of the property. Spouse 2 could then make a claim for unjust enrichment saying that she made a contribution of money and labour, that Spouse 1 has been enriched by virtue of the increase in the home’s value, that she (Spouse 2) has been deprived of the fruits of her investment and labours, and that there is no legally-recognized reason (i.e. perhaps a contract for labour in exchange for living in the home) for that imbalance to survive the breakup.
When faced with unjust enrichment cases, the courts in Ontario have increasingly applied the joint family venture analysis to decide the issue. This can be thought of as a more generalized assessment of unjust enrichment, where the court is looking at whether the common-law spouses had intertwined their affairs in a manner suggesting they both expected to benefit from any increase in wealth accumulated during the relationship. The court considers a number of factors, and if a joint family venture is found to have existed then the court may conclude that any increase in wealth over the tenure of the relationship needs to be divided on terms other than “what’s mine is mine, and what’s yours is yours”. This evolution in the law has moved the division of property rules for common-law spouses closer to those that apply to married couples, but the joint family venture analysis is complex and often can only be resolved in a courtroom.
In order to avoid the complexities and expense of common-law property claims, it is always advisable for unmarried couples to enter into a cohabitation agreement that clearly sets out how property will be handled in the event of a future relationship breakdown.