Under the FLA, married and unmarried spouses often have a right to half of all property, assets and debts accumulated during cohabitation if the relationship breaks down. Every relationship is different, and you and your partner may not want to share everything 50-50 for several reasons. Perhaps one party is entering the relationship with an established business or significant debt, or a couple wants to keep their bank accounts separate as they adopt different investment strategies.
Like a marriage agreement (sometimes referred to as a “prenup”), a cohabitation agreement is a legally binding contract that can outline, among other things, how assets and debts will be distributed if an unmarried couple separates.
A cohabitation agreement can be drafted at any point during a relationship. The scope of the agreement can relate only to a single item (for example an investment property, business, or student loan) or can relate more generally to all family property between the parties. Spousal support obligations in the event of a breakdown of a relationship can also be referenced. The purpose of a cohabitation agreement is to stipulate if and how the FLA will be adhered to, amended, or wholly altered in the event of a breakdown in a relationship.
Prior to drafting a cohabitation agreement, we meet with the client to discuss their needs, goals, and intentions for the agreement. The client will then provide complete financial disclosure to ensure the thoroughness of the agreement in the context of the relationship. We then work with the client to create a draft agreement, discussing their rights and responsibilities arising out of the agreement at each stage, before providing the draft to the other party.
Once the agreement is drafted, the other party retains independent legal advice to review the agreement. Their lawyer will advise them of their rights, responsibilities and liabilities (for example, entitlements they may be waiving by signing) and often after some negotiation, both parties sign the contract.
Discussing a cohabitation agreement with your partner might be a tough or awkward conversation, but it is important. The end goal of a cohabitation agreement is not to unfairly prevent the other party from receiving a portion of property. Instead, a well-drafted cohabitation agreement aims to provide clarity and certainty for a couple based on their mutual understanding and intentions on how their family property and debt would be divided in the event of a breakdown in the relationship. This allows parties to make financial decisions throughout the course of the relationship with confidence knowing that they are on the same page.
If you live with or plan to move in with a romantic partner, here are some considerations to discuss with your family lawyer.