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Joint Family Ventures: How is Property Divided When Unmarried Spouses Separate?
Do unmarried (cohabiting or “common-law”) spouses have the same rights as married spouses?
No. In Ontario, common-law spouses do not have the same property rights as married spouses. The division of property of married spouses on separation is governed by the Family Law Act. Under the Family Law Act, married spouses are entitled to apply for an equal division of property accumulated during the marriage, subject to some exceptions. This “equalization of net family properties” is an automatic right for married spouses.
Unfortunately for common-law spouses, there is no legislation in Ontario that deals with the division of property of common-law spouses. This leaves many common-law spouses wondering if they will get a fair portion of property accumulated during the relationship if the decision to separate is made. It is not enough to keep property in separate names in the current court cases regarding cohabitation.
The absence of legislation governing the division of property upon breakdown of common-law relationships has resulted in the establishment of legal tests by the courts. Two legal tests that are important for separating common-law spouses to be aware of are “unjust enrichment” and the determination of whether or not a common-law relationship is a “joint family venture”.
What is “unjust enrichment” and why does it matter?
When one common-law spouse thinks that the way property has been divided upon the breakdown of the relationship is unfair, that spouse may try to establish that an “unjust enrichment” took place. This is done by showing that one spouse benefited at the expense of the other. For example: Spouse A stays at home to look after the home and family. This enables spouse B to be free to work and pursue a career. Upon breakdown of the relationship, Spouse A can claim that Spouse B has been unjustly enriched as a result of Spouse A’s contribution and sacrifice, while Spouse A has been deprived. If Spouse A is successful in his or her “unjust enrichment” claim, financial compensation may be ordered. In some cases, where a monetary remedy is not sufficient, courts will order a transfer of property.
One difficulty with determining whether “unjust enrichment” took place, especially in long-term relationships, is that couples rarely keep detailed record of how finances were divided and which spouse paid for what. Couples also rarely discuss and keep record of the acquisition and sharing of property. Therefore, determining the intent of the parties at the time of acquisition of property is often difficult or even impossible.
What is a “joint family venture” and how does this claim change property division?
The Supreme Court of Canada’s decision in Kerr v. Baranow has made it easier for common-law spouses to obtain a fair division of accumulated wealth if the relationship can be described as a “joint family venture”. A “joint family venture” is found in a relationship where the contributions of both spouses have resulted in an accumulation of wealth. If the Court is satisfied that a “joint family venture” existed and that a remedy for “unjust enrichment” should be awarded, the Court must find that wealth was created as a product of the couple’s joint efforts and that one spouse ended up with a disproportionate share of that wealth. The Court will then divide the accumulated wealth during the relationship in a way that fairly reflects the contributions of the spouses, by way of financial compensation and/or property transfer(s).
Not every common-law relationship will be a “joint family venture”. The specifics of the relationship at hand have to be examined to determine if the relationship qualifies. These are some of the factors and questions that courts will typically look at to determine if a “joint family venture” existed:
- Did the couple work together toward common goals?
- Did the couple pool their efforts and teamwork?
- Did the couple make the decision to have and raise children together?
- How long was the cohabitation?
- How extensively did the couple integrate their finances, economic interests and economic well-being?
- Did the couple have any joint assets?
- Did the couple intend to form and function as a joint family unit?
- Did the couple hold themselves out to others to be a family unit?
- Did the couple use their funds for family purposes?
- Did one spouse assume all or a greater portion of domestic work to free up the other spouse to pursue a career?
Priority of the Family
- Did the couple give property to the family or to their mutual well-being in their decision making
- Was there any detrimental reliance in the relationship by one spouse for the sake of the family? (i.e. one spouse staying home to raise children, one spouse giving up a career or education for the sake of the other’s advancement)
- Was there financial dependence or interdependence or any arrangements for financial support between the spouses?
- How was property acquired during the relationship?
- How was the acquired property used by the couple?
Recognition and use of the concept of the “joint family venture” by courts indicates that common-law spouses are one step closer to obtaining the same rights as married spouses. Unfortunately, proving the existence of a joint family venture may be a costly process in court if the parties do not agree about its existence.
What can common-law spouses do to make the division of property easier on separation?
Individuals in common-law relationships can set out property interests, rights and whether or not they intend to act as a “joint family venture” by entering into a properly negotiated and well- drafted Cohabitation Agreement. If the relationship does end, such an Agreement will save the couple a great deal of time, effort and expense in attempting to determine a fair division of accumulated property. Other issues, such as spousal support, may also be addressed in an Agreement.
A Cohabitation Agreement remains in force upon marriage, so it should address the division of property upon marriage as well. Such contracts provide a road map for couples to govern their own rights if they separate, rather than relying on lawyers or judges to do so.
For more information, please contact us.