Toronto Estate Lawyers

COMMON LAW & JOINT INVESTMENTS by Gillian Bookman

You’re in love and happily move in together. You’ve both been married before, have grown children, and see no need to marry. You are looking forward to retiring together and are happy making future retirement plans. You both decide to buy a home that you can retire to. Meanwhile, you rent it out and pay off the mortgage. You anticipate moving into it permanently after you both retire. But life happens and the relationship ends before that dream is realized.

What happens when a common law couple purchase an investment property together and the relationship ends? Common law couples are not protected under the equalization of family property regime set out in Ontario’s Family Law Act and the remedies available to them under the common law can be both time consuming and expensive to obtain. If title to the property is held in both names you have some protection of your future interest if the relationship breaks down. However, if the property is purchased in your partner’s name only, you may have a serious problem if you break up.

One of the few remedies you have may be a ‘constructive trust’ claim against your spouse who holds title to that home. You may bring a claim based on unjust enrichment and a portion of the equity held in the home may be awarded to you if the unjust enrichment is proven. In order to establish that there is or has been an unjust enrichment it is necessary to meet all of the elements of a three-part test:

1. An enrichment of one party over the other
2. A corresponding deprivation
3. Lack of juridical reason for that deprivation.

Commonly unjust enrichment claims are grounded in the services of the common-law spouse who raises children and/or runs the household, often women. These services are monetarized by the Court and valued to provide a remedy for the non-titled partner.

The law is not well-established, however, for common law spouses who jointly-own a property and do not reside in it together. A recent client of mine found herself in a position that required litigating and incurred substantial costs, both financial and timely.

Both parties had been living together for a period of several years and had both been previously married and divorced. In anticipation of retirement the parties had jointly purchased a property outside of the province in hopes that they would generate income from its use as a rental property and that, upon retirement in 15 years, they would move into the home. As it happens, their relationship ended and they remained joint tenants of the out of province property.

The rub in this case was that one party had contributed over 80 per cent of the monies to the purchase of the property. That spouse sought to be reimbursed for her overpayment of the down payment, the mortgage payments and the mortgage discharge. After that the distribution of the net equity could be shared equally between them.
The other party, her former spouse, claimed that they were joint and equal owners and her over-payments represented a gift to him.

The costs of continuing litigation were considered and in the end the parties agreed to a global settlement that provided some reimbursement to the overpaying spouse, although not the full amount. The acrimony between the parties made it hard for them to remain friends, despite wanting to do so.

How could they have avoided getting involved in an expensive and emotionally exhausting legal battle?

In cases like this it is best to protect yourself right from the beginning. Although many people don’t want to acknowledge that there is a significant risk of relationship breakdown regardless of how much they love each other; it is now a fact of life that close to 50 percent of relationships do end. The risk is higher for subsequent relationships. When large amounts of money are involved in purchasing property each individual’s interest is best represented in a well-drafted contract setting out the obligations and entitlements of each party in the event that the relationship ends.

Consulting a lawyer to draft such a contract is money well spent. You can retain a lawyer on a limited retainer for just such a purpose and for a few hundred dollars your substantial investment can be protected. Domestic contracts such as this are both contemplated and encouraged in Ontario’s Family Law Act. They are also encouraged by most family law lawyers. The best part is that once you have the contract finished and signed you can lock it away and never worry about it again – unless your relationship breaks down. Then you will be very, very happy that you took the time and made the effort to have it prepared and signed.

The cost of an agreement is but a fraction of the cost both in time and in money that will be incurred in the event of having to get your day in court to get what is rightfully yours.

GILLIAN BOOKMAN is a lawyer at Bookman Law Professional Corporation, a boutique family law firm located at 1881 Yonge Street, Toronto, Ontario. Gillian can be reached at [email protected] or at 416-488-2243, ext 25.

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