Living Common-Law

Courtesy of Dynamic Mutual Funds, Posted 06 Jun 2014

My friend's 25-year-old son just suffered the heartbreak of a relationship breakdown. The young couple had been living in his condo for almost two years and one day his girlfriend came home and said she was leaving.

While the unexpected dumping left him heartbroken and emotionally devastated, it didn't leave my friend's son broke. Their "living together" arrangement was more like two adult room mates – he owned the condo, she paid him rent. They split groceries and utilities but most consumer purchases were made separately. It was easy to determine what belonged to whom after the break up.

Living together is certainly a growing trend in Canada. According to the 2006 Census, 16% of Canadian couples are living common-law. That compares to only 7% twenty years ago. In fact, these latest census numbers said that for the first time ever, there were more unmarried people in Canada than married people.

When it comes to divvying up a common-law couple's assets in the event of a break-up, there are varying rules and regimes that determine what rights you have.

For example, a Supreme Court of Canada's 2002 ruling said that common-law couples breaking up don't have the same financial or property rights as divorcing couples. Instead their rights are usually limited to the actual financial contribution they made to the partnership. If the couple bought something together, it will have to be divided. However, if they bought something individually, it's typically theirs to keep.

The federal government considers couples common-law for tax purposes if they were living together for the previous year. This could affect certain tax credits. Some federal legislation such as the Canada Pension Plan accommodates common law partnerships but most provinces do not. And, in fact, provincial laws about common-law rights vary across the country. For example, the Ontario Family Law Act says a couple is considered common-law and can seek spousal support only after living together for three years, or as soon as you have a child together. In British Columbia under the Family Relations Act you are not living common law if the relationships is less than two years long.

There is certainly a lot to think about if you are considering "shacking up" with someone – including the fact that common-law relationships break up four times more than marriages.