Splitting condo ownership fairly with your partner

Q: My girlfriend of three years and I are moving in together in the new year, once I close my condo sale. We both agree about my going on title, and I am hoping to also pay down some of her outstanding mortgage with some of my proceeds, and together we would also be splitting the mortgage payments thereafter.

We both understand that we would need to get an appraisal of her home for starters, but are hazy after that. What are the steps we then need to take? Do we need separate lawyers to accomplish our goal, or is this a simpler, more seamless process? We both sincerely want to pool our resources, to create a good and stable home environment for ourselves, and her daughters. Any advice, or even a template to follow?

—Michael S.

A: Hi Michael. Congratulations on the New Year goals and on closing on a condo. It certainly sounds like you and your girlfriend are talking and planning about financial matters, which is always a step in the right direction.

Now, it’s not immediately apparent from your question what your main concern is when it comes to your 2018 transition. Are you worried about a division of combined assets, should you and your girlfriend split in the future? Are you worried about proper estate planning—making sure you and your girlfriend inherit the assets, should something happen? Or are you concerned about saving tax? Because of these ambiguities, I’ll have to make some assumptions and provide answers accordingly.

What to consider if you’re worried about divorce

In relation to moving in together and you going on title: Under matrimonial law the home shared by a family unit is subject to divorce proceedings, even if only one half of the spousal unit is on title. In practical terms, if you and your girlfriend split and the relationship meets the common-law requirements (living together for one year in some provinces and as high as three years in other provinces) than you or your girlfriend can make a claim that the condo is the matrimonial home and should be added to the assets that must be divided in the divorce. The only possible way around this is to sign a contract (often referred to as a prenuptial agreement) that states what assets are to be exempt from divorce proceedings. I should warn you, though, that some jurisdictions may not honour a prenuptial agreement. It’s best to pay for proper legal advice when dealing with these matters.

The same difficulties apply when it comes to paying off debts. Under common-law, a family unit is responsible for all debt, and it also benefits from the acquisition of all assets. The break-up of that unit would split these obligations and benefits between the two spouses. Typically, no one in the unit will get dollar-for-dollar credit—primarily because the court also takes into consideration non-monetary contributions to the family unit, as well. Again, it’s best to seek out professional advice on these matters.

That said, I believe that you and your girlfriend are on the right track. By paying for a fair market appraisal on her home, you can establish when the home became your primary residence. This may help identify how much of a claim you have on this home should the two of you split in the future. Another option is to pay off some of her debt, but only after you both sign an agreement stating that this debt repayment should be credited to you should you both split in the future. By doing this, you are essentially providing your girlfriend with a loan that must be repaid should the family unit split. Again, see a family lawyer to get specific help on this as provincial laws will certainly dictate how this agreement should be worded.

Sorry I could not provide you with more definitive answers. I hope, however, that you have more clarity on how to proceed with the creation of a firm, financial footing for your family.

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Romana King is an award-winning personal finance writer, a real estate expert and speaker. She is the current Director of Content at Zolo.ca

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