Buying Out a Common-Law Partner's Share of the Home in Ontario

After a common-law relationship ends, it is common for one partner to want to stay in the home and pay the other out. That can work well, but it involves several moving parts: what the other person's share is, what happens to the mortgage, how the transfer is registered, and what tax applies.

This article walks through those steps in plain language. It is general information, and the details turn on your title, your mortgage and your agreements, so a lawyer can confirm them for you.

Start with who owns what

Unmarried partners are not spouses for property equalization. Common-law couples are not legally required to split property acquired while living together, and they have no right to split the increase in value of property brought into the relationship. So the amount of any buyout is not set by a formula.

Instead, it starts with title and with contributions. If you contributed to property your partner owns, you may have a right to part of it, but unless your partner agrees to pay you back you may have to go to court. Unmarried partners can claim unjust enrichment, and where there is a joint family venture the remedy is a proportionate share of the wealth accumulated, linked to contributions. There is no presumption of a joint family venture, and intent and conduct weigh heavily.

If you hold title together, check whether you are joint tenants or tenants in common. Land conveyed to two or more people is treated as tenants in common unless the document shows otherwise.

Valuation and the number

How the home is valued in a buyout depends on your situation, so it is worth confirming with a lawyer. How far contributions adjust the number depends on the facts and is worth discussing with a lawyer.

• Agree on how the value will be set, for example by one appraiser both of you accept.
• List the mortgage balance and any other loans or lines of credit against the home.
• Document each person's down payment, payments, renovations and other contributions.
• Decide the date the value is measured and the date you will close.

The mortgage and the lender

Whether a buyout between the two of you changes the lender's records depends on the lender and your mortgage, so it is worth asking the lender directly. A joint borrower becomes equally responsible for repaying the unpaid balance. If your name stays on the loan after you have given up ownership, you may still be responsible for it.

Lenders set their own conditions for removing a borrower, and the process, whether a refinance or another arrangement, varies. Ask the lender early what it needs, including whether the remaining partner qualifies alone. Ideally, the release from the mortgage and the transfer of title happen together.

Tax, transfer and the written agreement

Transfers between spouses or former spouses can be exempt from Ontario land transfer tax in three cases: the only consideration is assuming an encumbrance such as a mortgage, the transfer complies with a written separation agreement that the parties agreed to live apart, or the transfer is under a court order. For this purpose, spouse has the Family Law Act support meaning, which includes unmarried partners who have cohabited for at least three years, or who have a child and a relationship of some permanence.

The ministry says a buyout where one partner pays the other for their interest, beyond assuming the mortgage, does not fit the first exemption category. Taking over a mortgage counts toward the value of the consideration. The affidavit must say that the parties are spouses and name the exemption relied on. Whether another category applies to your buyout is a question for your lawyer.

Put the deal in writing. A written agreement that you both sign is the clearest record of what you agreed, and a lawyer can confirm what form it needs for your situation. Whether an agreement can later be challenged depends on how it was made and what it says, so it is worth confirming with a lawyer. Full financial disclosure and independent legal advice make the deal more reliable.

If you cannot agree

Any person interested in land may bring an action or application for partition, and the court may order a sale instead if that is more advantageous to the parties. This is the route when co-owners, including unmarried partners, cannot agree to sell or buy out.

Time limits apply to claims such as unjust enrichment: the basic period is two years from the day the claim was discovered, with a 15-year ultimate limit. Do not let a long negotiation run past a deadline without advice.

What to do next

• Obtain your title search, mortgage statement and any agreements you signed.
• Collect proof of contributions to the purchase, mortgage payments and improvements.
• Ask the lender what it requires to remove one borrower.
• Arrange an appraisal that both of you accept, if possible.
• Have a lawyer review land transfer tax, the transfer documents and a written agreement before you pay or sign.

Frequently asked questions