In many—if not most—divorces, the family home is the couple’s largest asset. It can also be a very emotional item. Very likely, you and your spouse decided in happier times that it was where you wanted to spend your lives together, and it may be where your children have lived most of their lives. This can make it difficult to let go and to assign a value to it. Because the house is so valuable and so important, it can be the biggest part of negotiations for a property settlement. Deciding what you’re going to do with the house often helps put other property issues into perspective, both financially and emotionally.
Before we even look at your options, let’s review what the Ontario Family Law Act stipulates so that we understand what your rights really are. The following information from Ontario.ca is an extremely useful place to begin your understanding of how the law works in Ontario when it comes to dividing property when a marriage or common law relationship ends in Ontario.
In Ontario, property division upon breakdown of relationship is set out in the Family Law Act. The Ontario Family Law Act divides property in two categories: Family Property and Excluded Property. Property acquired during a marriage must be split equally when a marriage ends for any reason. This can include your: home, car, business, furniture, pension, money.
For property that you owned before the marriage, any increase in value is usually divided equally.
You must share the full value of the family home, even if: one of you owned the home before you got married, you received it as a gift, you inherited it. This is called the ‘matrimonial home’.
Money owed to either spouse is called an equalization payment, or an equalization of net family property.
Common law couples are not legally required to split property acquired when they lived together. We will look more at common-law relationships a little later on in this guide.
There are time limits.
If you need to go to court for a decision on the amount of an equalization payment, you have six years from the day you separated, or two years from the day your divorce is final (whichever comes first) to do so.
Other ways to divide your property.
If you both agree, you and your spouse can divide your property any way you want in a separation agreement. You should each have your own lawyer look over your separation agreement before you sign it. You cannot easily change your separation agreement later.
Exceptions.
There are some exceptions that allow one spouse to keep property they own. This is called excluded property. Examples of excluded property include:
property (other than the family home) that you inherited or were gifted from someone other than your spouse during your marriage.
money you received from an insurance company because someone died.
money you received or have a right to as a result of a personal injury, like a car accident.
property that you and your spouse have agreed to exclude through an agreement.
As mentioned above, if the family home was gifted or received as an inheritance, it does not count as excluded property. It must be divided equally unless you and your spouse agree to a different split.
If the family home is on a large piece of property that is also used for other purposes, only the house and the small area around it are considered the family home. For example, if your family home is on a dairy farm, the whole farm would generally not be considered the family home.
The court can only divide property differently in very special situations and if a 50-50 (equal) split would be extremely unfair to one of you. Talk to a lawyer for more advice.
Marriage contracts or cohabitation agreements.
A marriage contract is a legal document signed by couples before they get married to protect their rights if they split up in the future, including rights related to property. Couples in a common law relationship can sign a similar document, called a cohabitation agreement.
These contracts/agreements can set out terms if the relationship ends, such as: how much spousal or child support you will pay, how you will divide your property and who will move out of the home. It can’t say who will have decision-making responsibility or parenting time with respect to your children.
Both of you must sign a marriage contract or cohabitation agreement in front of a witness for it to be legal. The witness must also sign the contract/agreement. Once you have signed it, you must follow what it says. You can negotiate changes to the contract/agreement if they are made in writing and signed in front of a witness.
If you have separated and do not agree with the terms of the contract/agreement, you will have to go to court and ask a judge to make a decision if you and your spouse cannot agree about changing the terms.
You and your partner should speak to different lawyers and exchange financial information before signing a marriage contract or cohabitation agreement.
What you might be owed.
Adding up the value of your property and dividing it between you and your spouse can be complicated.
This section includes a general overview from the Ontario Government on how to calculate what you or your spouse might owe each other. It’s a good idea to consult a lawyer about how the rules apply in your case.
You must be fair and honest when you do this. If you go to court, you must prepare a full financial report of all your property, debts and income. You must swear that it is accurate.
Follow the steps on the following page to calculate what you might owe or be owed by your spouse.
Step 1: Add up the value of property you owned as of the day you separated and deduct the value of your debts and excluded property as of that date. Property can be located anywhere and include: homes, businesses, cars, furniture, jewelry, savings in the bank including retirement savings, tax free savings accounts and registered education savings plans, an Ontario pension (ask the pension administrator for information about the value of a pension), anything else that is in your name or belongs to you.
If you own some property together in both names, you should each put half the value of the property on your list. Examples of excluded property include: property (other than the family home) that you inherited or were gifted from someone other than your spouse during your marriage, money you received from an insurance company because someone died, money you received, or have a right to get, as a result of a personal injury like a car accident, property that you and your spouse have agreed to exclude through an agreement.
Example of debts include: money owed on credit cards, the amount left to pay on your house (mortgage), car loans.
Step 2: Subtract the value of property you owned, minus the value of your debts, as of the date of marriage. First, add up the value of all the property you owned on the day you got married. Do not include your family home, even if you owned it on the date of your marriage. When your marriage ends, the full value of the family home must be shared even if one of you owned the home before you were married, received it as a gift or inherited it.
Next, subtract all the debts you had as of the date of your marriage, except for debts that were owed for the family home (for example, a mortgage).
Step 3: Calculate the difference. Subtract the number you get in Step 2 from the result you got in Step 1. Now you know your share of the value of net family property. If your share is a negative amount, it is considered to be zero.
Step 4: Find out if money is owed to either spouse. Compare the value of your share of the family property to the value of your spouse’s share. Subtract the smaller amount from the larger amount and divide the difference by two. This is the amount that the spouse with the larger share must pay to the spouse with the smaller share. This is called the equalization payment.
Common law couples.
Common law couples are not legally required to split property acquired when they lived together.
Furniture, household items and other property belong to the person who bought them. Common law couples do not have the right to split an increase in value of the property they brought with them to the relationship.
If you contributed to property your spouse owns, you may have a right to part of it. Unless your spouse agrees to pay you back, you may have to go to court to get back your contribution.
Although there is no requirement to divide property on separation, common law spouses may choose to enter into a domestic contract such as a cohabitation agreement or separation agreement that sets out their respective rights to property.
Get legal advice.
Getting separated or divorced can be an emotional and complicated process. A lawyer can help you understand your rights around dividing property.
The Law Society Referral Service can provide you with the name of a lawyer who practices family law and will provide a free initial consultation of up to 30 minutes. If you are unable to use the online service because you are in a crisis, you may call 416-947-5255 1-855-947-5255. The Law Society of Ontario also maintains a list of lawyers in Ontario.
If you can’t hire a lawyer for your whole case, you may choose to hire a lawyer who is willing to give “unbundled legal services” or “limited scope services.” This means that the lawyer provides you with initial advice or helps you with specific steps in your case.
If you choose to go to court, you can represent yourself. It’s important to understand that judges and court staff cannot give you legal advice. Only lawyers can give you legal advice. People who represent themselves are responsible for informing themselves about the law and the court’s procedures. You will be held to the same standard as people who have lawyers representing them.
The division of property can be daunting and confusing - having a good support team is essential. Krista Lachapelle is a specialist in the Real Estate needs of people going through a separation or divorce. Reach out today to learn more. She has skills to help you reduce conflict and to save money in the long run and to ensure that you can make the big decisions effectively with as much awareness, open communication and educational support where needed, as possible.
Contact Krista Lachapelle today (905) 251-9699.