We bet you were surprised when your ex-partner’s creditors came after you.
Who knew you were liable for her debts? How could that be?
Would you be reassured to know most common-law couples don’t think twice about it?
Money Advice for Relationships
Simply put, you are common-law partners if you have lived together for awhile. How long varies by province or territory. In Ontario, for example, you are common-law partners if you have a child together, regardless of how long you have cohabitated.
Once the ‘honeymoon’ is over, you need to know:
- You are liable for debts you sign together.
- If your partner defaults after you split, you may still be liable.
- Co-signing loans is bad for your pocketbook.
Lenders and vendors want their money. They will go after you if your partner can’t pay. Having written agreements helps, but it won’t always protect you.
Check the fine print before you sign anything. You usually have up to four days to back out of a deal. Think it over. What do you know about your partner? Are they credit worthy? And trust worthy?
How About a Mortgage or Car?
Sanjay and Natalia break up after a long and happy common-law relationship. They had a beautiful home. Natalia used to pay half the mortgage. Now Sanjay is on his own. He insists Natalia, who has moved to another city, keep up her payments. Can he do this?
Of course. Sanjay and Natalia both signed the mortgage and co-own the house. Unless they sell and share the proceeds or Sanjay gets a new mortgage in his name only, the bank can force them both to pay.
If Natalia refuses, she could be sued by Sanjay, the bank or both. That would damage her credit.
The same may apply to anything you buy together, like a car.
But You Moved Out, Didn’t You?
Hedda and Sara sign a lease. Hedda moves out. Sara stays behind. Hedda is enjoying her new apartment when a bill arrives for Sara’s unpaid rent. How did that happen?
Hedda and Sara were common-law partners. They are each liable for all the rent for the townhouse where they lived together. This is called joint and several liability, meaning if Sara defaults, Hedda pays it all. Unless Hedda’s landlord agreed to release her from the lease, she could be stuck.
Time for Hedda to double check that the utility bills were switched over to Sara’s name. If Sara defaults, Hedda could be on the hook for those.
What if Your Partner Got the Better of You?
Let’s go back to Natalia. If the mortgage was in Sanjay’s name alone, but Natalia paid half the mortgage, she could lose out if Sanjay sells. What about her contributions?
It could be unjust enrichment if your ex-partner makes a profit you don’t share in. After all, your partner benefitted from your contributions. Why should they get all the benefits?
You could go to court to try to get a share. It may not be easy, but it may be worth it. Just remember there are time limits for filing your claim. Ask Axess Law for advice.
Top Tips for Common-Law Partners
- Have a cohabitation agreement.
- Keep records of everything you sign.
- List joint assets like real estate, cars, artwork, furniture or investments.
- If you separate, agree on how to split joint assets and deal with debts.
- Cancel joint credit cards or accounts.
- Ask Axess Law about dividing your pension or CPP.