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Common Law Couples: Dividing Property In The Event Of A Relationship Breakdown

Common Law Couples: Dividing Property In The Event Of A Relationship Breakdown

Common Law Couples Need To Know The Law, Or Lack Thereof, Governing Their Property Rights

Common Law Couples: Dividing Property In The Event Of A Relationship Breakdown

Dividing property in common law relationships can be a grey area.

There is no legislation in Alberta governing how the property of common law spouses should be divided. However, there is judge made or common law that provides principles relating to the division of common law spouses’ property. The basis for a distribution of property during a common law relationship can be a resulting trust, unjust enrichment, quantum meruit or, most commonly, constructive trust.

It is important to note that a claim for their remedies must be commenced within two years of the date of separation or the claim will be statute barred as a result of the Limitations Act.

What is a Constructive Trust?

  1. A court can impose a constructive trust in the event the court finds unjust enrichment. Unjust enrichment occurs when: one party receives a financial benefit or advantage;
  2. the other party suffers a corresponding loss or financial disadvantage; and
  3. there is no juristic or legal reason to justify the financial gain.

In determining whether there has been unjust enrichment sufficient to warrant the imposition of a constructive trust, the court will consider a number of factors, including: whether there was a reasonable understanding between the parties that the person who suffer the loss would receive a share of the property; whether or not there was a connection between the type of property and the services provided by the party who suffered the loss; and the length of the relationship.

Generally common-law relationships must last a number of years before a constructive trust action will be successful. In the event the court imposes a constructive trust the person that suffered the loss will be entitled to financial compensation or a share in their partner’s property. A spouses share in their partner’s property can range from 0% to 50%.

What is Quantum Meruit?

The legal doctrine of quantum meruit provides compensation based on what a third-party would be paid for rendering the services that the spouse performed such as house keeping, cooking, and repairs.

What is a Resulting Trust?

A resulting trust occurs in the event one party helps pay for property in the other parties’ name. This will arise in the event the parties have an agreement to share in the ownership of the property despite the property being held in one person’s name alone but can also be found even without any agreement. In order to determine whether it is appropriate to find a resulting trust despite there being no express agreement to share property a court will examine the intention of the parties and how the parties handled the property prior to separation.

Specific Division of Property in Common-Law Relationships

Ultimately, the specific division of property during a common-law relationship will be in the discretion of the justice or arbitrator that decides your case, unless you are able to reach an agreement on the matter. The justice or arbitrator will examine the specific details of your case and decide what he/she considers fair and appropriate in light of all the circumstances. Generally speaking, the longer the relationship and the more intertwined the personal and financial affairs of the parties were during the relationship, the greater the likelihood that assets owned individually but acquired during the relationship will be divided equally or close to equally between the parties.

Conversely, the shorter the relationship and the more independent the personal and financial affairs of the parties were during the relationship, the greater the likelihood that assets owned individually will not be shared to a significant degree, and possibly not at all.

If you are in a common law relationship and want help drafting an Agreement to protect your assets in the event of a relationship breakdown, connect with us!

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