Cohabiting/Married Partners and Joint Property

Jack Hauptman | April 13, 2021

So you are married or living together and one of you owns a property, and you are thinking about putting it in joint names. Tread carefully, this can be a minefield.

Putting a property in joint names (joint tenancy) means that if either of you dies the property will automatically go to the survivor. This can be a good thing if you never separate or divorce, however, if you do there are other consequences.

On a separation or divorce, if the property has not been transferred, the person who doesn’t own the property rarely has a claim against the owner’s original equity in the property. Generally, claims can only be made against any increase in value to the property that occurred during the relationship.

On the other hand, if the property has been transferred into joint names our Courts have held that the original owner does share part of the pre-cohabitation value with the new joint owner. This can be an expensive lesson as the following example illustrates:

Say Fred and Ginger have been living together for three years. Ginger owns a house worth $400,000 that has a mortgage of $200,000. Ginger’s equity in the house is therefore $400,000 minus $200,000 equals $200,000. Assume that Fred and Ginger separate five years from now and by that time the house has increased in value and is worth $450,000 and the mortgage has been paid down to $150,000. The equity will then be $450,000 minus $150,000 equals $300,000.

If the property had remained in Ginger’s name alone, Ginger would be entitled to her original equity of $200,000 and the remaining $100,000 in equity would be shared between Fred and Ginger, likely 50/50. This would give Ginger a total of $250,000 and Fred $50,000.

If they had put the property into joint names during the relationship, Ginger would only be entitled to one half of her original equity which is $100,000. The remaining $200,000 in equity would be divided equally between Fred and Ginger with each getting $100,000. Ginger’s overall share would therefore be $100,000 plus $100,000 equals $200,000 and Fred would be entitled to $100,000.

You can see from this that if there was a separation or divorce the simple act of putting the property into joint names would cost Ginger $50,000 and benefit Fred by $50,000. That’s fine if this was intended, but often this is not the intended result.

This situation arises from Court decisions and would not be apparent to anyone who is not trained in Family Law. This type of situation can be avoided with a properly drawn cohabitation or nuptial agreement. In Fred and Ginger’s situation there are many possible options. Perhaps Ginger wants to ensure that she keeps all of her original equity and only share the future increases with Fred. An agreement could provide for that.

The agreement could also deal with how any increase in value would be shared. It could be 50/50 or perhaps Fred should receive less because it was Ginger’s property in the first place and she pays the mortgage. The parties might agree on 75/25, 60/40 or 90/10. It doesn’t matter what the percentages are as long as Fred and Ginger agree. The important thing here is that Ginger and Fred reach an understanding now when they are on good terms, not when they are separating and may not feel the same way about the situation.

Do not try to prepare an agreement like this without the assistance of a Family Law Lawyer. These agreements must be in writing and must comply with the requirements of the Family Property Act. Each of the parties will require independent legal advice from a different lawyer before signing the Agreement.

We hope that you will never have to enforce an agreement like this, but if you separate you will be glad you have one.

For guidance on this and other similar issues contact your Registered Collaborative Family Law lawyer.

Jack Hauptman

Family Lawyer
Shourie Bhatia LLP

Jack has been a lawyer for over 40 years. He is one of the most senior family law lawyers in Edmonton.

During his career Jack has obtained experience in many areas of the law including family law, civil and criminal litigation, real estate transactions, corporate matters and employment issues. Since 1990 Jack has concentrated his practice on the area of family law, and since 2002 in the area of Collaborative Divorce and Mediation.

Jack’s broad experience, training, and expertise sees him working with clients who are most often business owners, executives, professionals, senior employees and retirees who are going through a separation or divorce. Jack works in the Collaborative model along with other Collaboratively trained professionals to avoid litigation and create unique settlements by using interest based negotiation. Jack’s practice also involves advising on and the preparation of Prenuptial Agreements and Cohabitation Agreements.

Jack is actively involved in the education of young lawyers, and the continuing education of lawyers. He has presented papers to the legal profession on a variety of family law topics. He has been a family law speaker at many public forums, taught the Parenting after Separation Seminar for ten years and was a Child Support Resolution Officer for eight years.

Jack has served on the Board of Directors of the Association of Collaborative Family Professionals (Edmonton) for 6 years, and continues to be an active committee member.

In his spare time Jack enjoys his grandchildren, travel, curling, photography and woodworking. He has had Edmonton Eskimo Season Tickets for over 40 years.

Filed under: Collaborative Process, Dividing assets, Mortgage

Tags: cohabitation, equity, family law lawyer, joint names, married, mortgage, nuptial agreement, property