Cohabitation Agreements in Ontario
A cohabitation agreement is a written document that allows parties to decide in advance how best to resolve the possible breakdown of their relationship in the event that it were to occur at some point in the future. As such, parties can mutually agree upon how to divide their property, whether support will be available by one party to the other, or upon any other financial matter that is of interest to the parties. In essence, a cohabitation agreement can incorporate various provisions of the Family Law Act so as to provide the parties to the agreement with similar rights that married couples have in Ontario. Cohabitation agreements cannot however provide for the right of either parent to have custody of or access to their children. Provisions such as these are unenforceable in Ontario and are better addressed in the parties parenting plan that is drafted subsequent to the breakdown of the relationship. It is also important to know that either party to the agreement cannot contract out of their child support obligations.
Parties generally enter into a cohabitation agreement to protect their respective property rights as well as their financial interests. Often, one or both parties want to protect as much of what they own at the start of the relationship. This way both parties enter and exit the relationship with their assets accordingly. It may also be important for one party to protect their assets from the other's debts and liabilities. Protecting ones interests as such can help restrict creditors of the party with the accumulated debt to only be able to secure interests in that person's assets. Cohabitation agreements are also welcomed by parties who generally expect the duration of their relationship to be long, when one party has a substantial amount of assets going into the relationship, when one party earns a significantly higher income than the other, when the parties intend to live together in a house owned by one party at the outset of the relationship, when either party expects to acquire substantial assets during the relationship from an inheritance, gift, or court award, when one or both of the parties have substantial debts going into the relationship, when a party brings a child into the relationship and would like to contract out of becoming a loco parentis, when the parties wish to set out the division of household expenses, or if the parties intend to maintain separate or joint bank accounts throughout their relationship.
Cohabitation agreements can however be quite convoluted when it comes to the drafting process as it is not always easy to objectively predict the position of each party upon the breakdown of their relationship. For instance, one party may own a business at the outset of the relationship and years later when the relationship breaks down he or she may have several new affiliated businesses as well as multiple investments that became available solely because of the excess capital from the original business or its affiliated entities. As it is obvious, this makes tracing capital difficult which necessitates the need for a careful and thorough analysis when drafting the agreement.
All parties to the agreement should know that there are several common formalities that cohabitation agreements are subject to as per the Family Law Act in order to be valid in Ontario. These requirements include the agreement must be set out in writing, the agreement should be signed in the presence of a witness by each party, the parties should not be under the age of majority or suffer from any other legal disability, and the agreement must clearly identify each party and the nature of their rights and obligations to one another. In addition, both parties must enter into the agreement freely and without undue pressure, influence, or coercion. It is also important that each party disclose in full their finances and be represented by a lawyer or at a minimum receive independent legal advice otherwise the agreement may be less reliable in the future and can thus be open to dispute.