The number of common-law couples in Canada rose 13.9 per cent between 2006 and 2011, according to the latest data from Statistics Canada. While there’s no Canadian data on how many of those couples choose to purchase instead of rent, a 2013 study in the U.S by Coldwell Banker Real Estate found that 17 per cent of couples bought a home before they were married, with that number rising to 24 per cent among millennials. This trend is part of the larger shift in how millennials — and, increasingly, society at large — view marriage.
There are a few things young couples need to consider prior to buying a house together. Various government agencies, such as the CRA may recognize marriage like relationships, however Canada does not have true common-law marriage. This means that automatic rights to property are not included but, couples who act like they’re married and buy property together can be entitled to most of the same protections that the law affords legally married couples. The main difference between a married couple and common law couple is that a married couple is considered a partnership from the date of ceremony regardless of who is depositing and withdrawing from the bank account. Upon the breakdown of the marriage, everything is divided equally, usually benefiting the lower earning spouse.
An unmarried couple, on the other hand, is afforded this protection only insofar as their habits indicate: Do they have a joint bank account? How long have they been together? The longer you live together, the deeper the roots and the more you will resemble a legally married couple.
Since there is no federal legislation surrounding common-law couples and couples who buy property together may not even want to be considered common-law, having a lawyer draft a cohabitation agreement, similar to a marriage agreement will help to define the rights and responsibilities of each person. This forces the couple to discuss their finances honestly, as well as lay out a plan on who would pay for what and how things would be divided in the event of a separation.
Not to have a road map as to what you’re going to do in the event of a breakdown, whether it be common law or marital could lead to expensive lawyer bills, added stress and an empty wallet.
Five questions you need to answer before you buy a house together
1. What sort of living situation do you want?
He wants a big house in the suburbs, you want a semi-detached downtown.
2. Who’s covering the down payment?
If you’re not married and break up in the first few years, the house will likely be divided proportionally according to who contributed to the down payment. If only one-half of the couple can contribute to the down payment, it’s possible the other party could be left with nothing, even if he or she helped pay the mortgage or for renovations.
3. Have you thought of all the monthly, extra expenses?
If only owning a house was as simple as paying the mortgage. One of the biggest mistakes people make is they crunch the numbers but then they’re not really considering setting aside money (for) any emergency things that come up.
4. Have you drafted a cohabitation agreement?
To avoid he said/she said arguments later on, write down how you’ll divide the household responsibilities and who is entitled to what if you separate.
5. Have you gotten professional legal help?
A lawyer will sit down with you and help you draft a fair cohabitation agreement, and advise you on your province’s common-law provisions.
Source: Danielle Kubes, Financial Post