The Benefits of a Cohabitation Agreement

Article By Erin O’Leary

A cohabitation agreement (often called a “cohab” or sometimes a “prenup”) is a written legal contract for two people who live together in a marriage-like relationship. It can be used whether or not the couple plans to marry. In plain terms, it sets out the financial “rules” for the relationship—what happens with property, debts, bills, and (in some cases) support—both while you are together and if you separate.

If you are living common-law in Ontario and one partner already owns a home, a cohabitation agreement can be especially important. Common-law partners do not automatically have the same property rights as married spouses. A cohab should clearly state the following:

• who currently owns the home (and other property)
• how you will handle any increase in value or contributions during the relationship
• how ownership of any new property you buy together will be treated

A cohab can also help with estate planning—especially in second relationships or blended families (especially where one or both partners have children from a prior relationship). It can spell out what each person intends to happen if one partner dies, which can reduce conflict later. Without an agreement and a will, the law may not treat a surviving common-law partner the same way it treats a surviving married spouse.

A cohabitation agreement works best alongside a properly prepared will. Together, they can say who receives which assets, and they can be coordinated with trust planning where appropriate. This matters because some laws (including Ontario’s Family Law Act and Succession Law Reform Act) give certain automatic rights to married spouses that common-law partners may not receive automatically.

A cohab can also protect a family business. If one partner owns (or has an interest in) a business before the relationship, the agreement can say that the business stays that person’s separate property—even if the couple later marries. This can help avoid disputes about whether the other partner has a claim to the business or to any increase in its value, and it can help protect other owners or family members involved in the business.

You can update (amend) a cohabitation agreement over time as your circumstances change. If you later get married, the agreement can often be converted into a marriage contract.

Bottom line: A cohabitation agreement is a practical way to protect a pre-owned home, set clear expectations about money and property, support estate planning in blended families, and help shield a family business. It reduces uncertainty and makes it easier to resolve issues if the relationship ends.

If you’d like to put a cohabitation agreement in place, or you have questions about whether you need one, contact our Family Law team.