Does Equalization Apply to Common-Law Couples in Ontario?

If you have lived with a partner for years without marrying, you may assume you share everything equally when you split up. In Ontario, that is not how the property rules work.

This article explains what equalization is, why it does not cover unmarried couples, and what other routes may be open to you.

Why equalization does not reach unmarried partners

For married spouses, equalization works like this: when spouses separate with no reasonable prospect of resuming cohabitation, or a divorce is granted, the spouse with the lower net family property is entitled to one-half of the difference between the two. A court may award more or less than half only if equalizing would be unconscionable.

Equalization under Family Law Act Part I applies only to a spouse as defined in section 1(1). That covers people married to each other, or who entered a void or voidable marriage in good faith. It does not include unmarried cohabitants.

The same limit applies to the matrimonial home. The Part II right of possession of the matrimonial home does not apply to unmarried cohabitants either. Living together for many years does not change that.

Who keeps what

Common-law couples are not legally required to split property acquired while living together. Property belongs to whoever bought it. A partner who contributed to the other's property may have a claim to part of it, which may require going to court.

In practice, this means the paper trail matters a great deal.

• Who is on title to the home, and who paid the down payment?
• Who paid the mortgage, taxes, renovations and upkeep?
• Whose name is on bank accounts, vehicles and investments?
• Did either partner give up work or income to support the household or the other's business?

Claims beyond equalization

Even without equalization, a partner who contributed to property that the other partner holds may have a claim to part of it, and that may require going to court. How these claims work out depends on your situation, so it is worth confirming with a lawyer. Their time limits are different from the equalization deadline, so it is wise to get advice early.

A cohabitation agreement can also change the picture. A domestic contract, including a cohabitation agreement, is unenforceable unless it is in writing, signed by the parties and witnessed. A domestic contract also prevails over the Act unless the Act provides otherwise. If you signed one, read what it says before assuming the default rules apply.

If you share a mortgage, each joint borrower is equally responsible for repaying the unpaid balance, and separation does not change that contract with the lender. How a lender treats a name coming off a mortgage is up to the lender, so it is worth raising early with your lawyer.

Support, pensions and tax

Support is different from property. The support definition of spouse in Family Law Act s. 29 includes unmarried partners who cohabited continuously for at least three years, or in a relationship of some permanence as parents of a child. This gives support rights, not equalization rights.

Ontario's Pension Benefits Act also treats some common-law partners as spouses. Not every pension plan falls under that Act, so it is worth confirming with a lawyer which rules govern your plan. The Pension Benefits Act definition includes unmarried partners who have cohabited continuously in a conjugal relationship for at least three years, or in a relationship of some permanence if they are parents of a child. Where Family Law Act Part I does not apply, the family law valuation date for the pension is the date the spouses separated with no reasonable prospect of resuming cohabitation.

On tax, capital property such as a house, cottage or shares transferred to a spouse or common-law partner, or to a former one in settlement of rights arising from the relationship, rolls over at the transferor's adjusted cost base. No capital gain is triggered at transfer unless the transferor elects out. This applies only if both people are resident in Canada at the time. A tax professional can confirm how it fits your case.

Registered savings have their own rules. CRA Form T2220 is used to transfer all or part of an RRSP or RRIF directly to the current or former spouse's or common-law partner's RRSP or RRIF on breakdown of the relationship. If the holder instead withdraws the money and pays it to the other person, the amount is taxable income to the holder in the year received.

What to do next

• Note the date you began living together and the date you separated.
• Collect title documents, mortgage records, bank statements and receipts showing who paid for what.
• Find any cohabitation agreement or written understanding.
• Do not move out, sell or transfer property without advice on your position.
• Ask a lawyer about property claims, support and pension rights, and the time limits that apply to each.

Frequently asked questions