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Property Division 101: Introduction to Sharing Family Property in Ontario Divorce

Dividing Your Property

Among the legal rights of individuals seeking a divorce is the right to an equal share of the family’s property. In family law, this is referred to as an “equalization” of “net family property” (NFP).

Each partner’s NFP is calculated by subtracting his or her debts from his or her assets. Once the NFP is calculated for each spouse, the spouse with the lower NFP is entitled to one-half of the difference between the two amounts.

However, the rights of common-law spouses differ from those of legally married spouses.

In order to ensure that our clients receive their fair share of the family’s assets, we begin each case by facilitating the exchange of financial disclosure between the parties to determine how much each party is entitled to receive.

Exchanging detailed financial disclosure with your ex-spouse or their lawyer is extremely important, as it provides a framework for determining which of the family’s assets and debts should be split and which should not.

The reason for this is that not all property will be subject to sharing between the spouses. For example, if one of the parties receives an inheritance, that money may or may not be excluded for that party’s “net family property,” depending on how the funds were treated.

Therefore, there are ways to protect certain funds from being split between the couple upon separation and divorce. Once we determine the amount for equalization for your particular case, we help you negotiate how the property will be divided, according to your goals and interests.

For many couples, the home in which they lived throughout their marriage will be their most valuable asset. The law takes this into account, and provides for special treatment of the “matrimonial home.” Clients often wonder:

  • Will I lose my right to the home if I move out?
  • Can my former spouse kick me out of the house?
  • Do I have any right to the home if my name is not on title?

If you have already separated from or divorced your former spouse, you should seek legal advice immediately, as the Family Law Act places limitations on the time that a former spouse has to make a claim for equalization.

5 Steps to Dividing Family Property

In Canada, the Divorce Act does not deal with sharing your property or debts. Each province and territory has its own law that sets out the rules for dividing the property and debts you and your spouse have.

 

1. Consider what is Family Property

” Property” includes such things as the home you and your spouse shared, its contents, any other real estate, pensions from employment, Canada or Quebec Pension Plan credits, RRSPs, investments, bank accounts and cash. Debts include such things as amounts you owe on your credit cards, your mortgage, and any loans you have. Some provinces or territories also include business assets in their definition of property. It is very important to receive legal advice on property division.

 

2. Set Out in Writing What You Have Agreed To

Usually, people who are separating come to an agreement about how to divide the property and debts fairly. This agreement may become part of the written separation agreement.

 

3. Detail all your assets and Consider Getting Legal Advice

For separation agreements to be legally binding, they usually require independent legal advice and full financial disclosure.

 

4. Do Not Wait Too Long to Divide your Property

In some provinces and territories, if you wait too long after your separation or divorce to make a claim, you may lose all your rights to share in family property or spousal support.

 

5. Also Consider Your Canada Pension Plan Credits

Canada Pension Plan (CPP) credits are a special category of property. Once you and your spouse are separated, and if you meet other basic requirements, you or your spouse can fill in a form to ask the CPP to divide equally the CPP credits you both earned while you were married. The Quebec Pension Plan (QPP) also allows you to split your pension credits.

 

When Should Sharing be Unequal

This question of whether the NFP should be divided unequally comes up often: among other things courts must consider whether one of the spouses behaved in a manner that makes an even split unfair. Here are some of the categories of spousal misdeed that can come under the court’s scrutiny:

 

1. Reckless Investing

In a case called Lamantia v. Solarino, 2010 ONSC 2927, the question was whether the husband should be held accountable for deceit and various financial misconduct designed to hide his reckless investments in the stock market. He had forged the wife’s signature, and had borrowed from credit cards for which she became liable without her knowledge. He also took active steps to keep the wife from learning the true state of their financial affairs; for example, he made sure their bank statements were sent to another address. Furthermore, he continued to play the stock market even though the wife had asked him to stop. Those bad investments led to significant capital losses for the couple.

In finding that the NPF should not be equally divided, the court found that the husband had engaged in a pattern of deceit and engaged in conduct that made it unconscionable for the NFP to be divided equally.

 

2. Spending to Feed an Addiction

In a second case, Dillon v. Dillon, 2010 ONSC 5858, the husband was a severe alcoholic, who incurred debts to feed his alcohol addictions. He lost many jobs over the years, and took pains to hide the dire family financial circumstances from the wife, who was completely unaware.

Given that their financial circumstances were spurred by the husband’s need to incur debt to feed his addiction, the court found this was a situation completely out of the wife’s control. Because of his reckless behaviour, she had effectively contributed significantly more than the husband toward amassing their family assets which formed the NFP – for example a cottage worth $260,000, and RRSPs funds amounting to $150,000. She had also paid over $50,000 towards the husband’s debts in order to keep things afloat for the benefit of their children.

By concealing the extent and timing of his “financial perdition” (as the court called it), the husband deprived the wife of an opportunity to prevent his destructive behaviour, or to prepare herself for retirement. The court found that the husband had “taken advantage of the [wife’s] selfless act of placing herself in a position of vulnerability in the best interests of her children.” An unequal division of NFP was ordered.

 

3. Spending Money on an Affair Partner

Finally, in a case called Hutchings v. Hutchings (2001), 2001 CanLII 28130 (ON SC), 20 R.F.L. (5th) 83 (Ont. S.C.J.), the husband was engaged in an extra-marital affair, and used family money in to order to travel with his mistress to Europe and Quebec. The wife was suspicious, and accused the husband of spending money on not just this but other affairs as well; however she was never able to prove the allegations. In this case, the court also ordered that the husband had engaged in reckless and intentional depletion of the NFP and that there should be an unequal division.

 

Changing The Locks On The Home

One of the most common questions is whether the spouse who remains in the matrimonial home after separation can change the locks in order to exclude the other spouse.

In Ontario, the short answer is: No.

If the now-separated married couple were living in the matrimonial home, and one of them has moved out, neither the Family Law Act nor other legislation entitles the remaining spouse to change the locks. This is because under that legislation the matrimonial home is afforded special status: both spouses are expressly granted an equal right to possession of it. This right of equal possession subsists even after separation unless or until:

1) there has been a separation agreement reached between the parties; or

2) a court order has been granted to establish that one of the spouses is entitled to what is known as “exclusive possession” of the matrimonial home pending a family trial. (And note that once exclusive possession has been granted to one of the spouses, he or she obtains the sole right to live in the home, regardless of who owns legal title.)

Unless one of these mechanisms is in place to override what is otherwise each spouse’s equal right to stay in the home, neither can formally lock out the other. In fact, both spouses will have a right to actually live in the home until a resolution on possession of the home is reached. For obvious reasons, however, this is usually untenable because most separations occur under very high-conflict, emotional-charged circumstances.

But even if one spouse has moved out, he or she is not entitled to come-and-go at will. Rather, there must be adequate and reasonable notice given of any intention to return, for example to retrieve any personal property that has been left behind. Similarly, if a court order for exclusive possession has been obtained in favour of one spouse, it will usually be a term of that order that the other spouse can periodically re-enter for specific purposes, with notice in advance. In this context the court may also order the locks to be changed, if the circumstances between the parties warrant it.

Finally, it is important to note that the order for “exclusive possession” is merely that; it does not give the remaining spouse the right to sell or dispose of any of the furniture or other belongings until all of the separation and divorce issues, including equalization of net family property, have been fully resolved by a court.

 

5 Things That Make the Matrimonial Home Unique

In Ontario, once a marriage ends the property-division provisions of the Family Law Act are triggered and property is divided essentially in equal portions between the spouses, subject to certain rules and exceptions. One of those exceptions relates to the matrimonial home.
There are several aspects that make the matrimonial home unique.

 

1. The “matrimonial home” is strictly defined by the Act.

The term refers to any residence that is owned and “ordinarily occupied” by the spouses and their family on the day of separation. Provided it is a family residence, this can include any type of housing including condominiums and mobile homes. Note that there can be more than one matrimonial home: as long as it meets the legislative definition, even a second home such as a frequently-used family cottage can constitute a matrimonial home which is subject to the Act’s special rules.

 

2. Original ownership of the home becomes irrelevant after marriage.

If a spouse brings a home with them into the marriage and that home becomes the family residence, then the law deems it to be the matrimonial home, even though that spouse held title and was the home’s registered owner prior to marriage.

 

3. Once a home is designated a matrimonial home, both spouses are equally entitled to possession of it upon separation.

Once the spouses separate, neither of them can legally exclude the other from the matrimonial home, no matter who owned the home prior to marriage.

 

4. The matrimonial home is treated differently when dividing assets on separation.

Under the Family Law Act, the full value of a matrimonial home must be shared upon separation. This forms an exception to the normal rule that applies to the division of other matrimonial property, i.e. that on separation each spouse is entitled to deduct the marriage-date value of any property he or she brought into the marriage.

 

5. A matrimonial home can only be sold if both spouses consent.

If one spouse attempts to sell the home without the consent of the other, then any purported purchaser will take the property subject to the legal interest of the second spouse, or the transaction may be set aside by a court in the right circumstances. This same rule applies to an attempt by one spouse to mortgage or otherwise encumber the home without the knowledge or consent of the other.

If a consensus cannot be reached, then either spouse may apply to the court for an order that the home be sold.

 

Family Pets and Animals

Pets and Separation

The court considers pets to be property of the marriage, much like your pots and pans and says that they must be divided between the parties. The court has previously determined that they do not have the jurisdiction to deal with custody of pets and will often refuse to help if the parties cannot agree who should keep the pet.

The refusal of the court to engage may be more of an issue that the court simply does not have the time and resources to deal with pets when there are potentially more pressing issues to determine. The only predictable way of dealing with pets in a separation is by coming to an agreement between the parties.

Hiring lawyer’s or mediators can help keep your pets out of the court system which is not properly equipped to deal with these types of problems.

 

Pet Custody Battles

Despite the fact that most pet owners treat their pets as if they are members of the family, there are no pet custody battles in Ontario Courts. The court will typically refuse to determine custody of a pet. The court may refuse to deal with the issue of pets at all but if not they almost always will determine the issue as if the pets are property.

 

Pet Support

Since the court will not determine custody of a pet, they will also not determine pet support
Since the court will not determine pet support this means that they will not enforce any agreement for pet support either.

 

Pets as Property

Normally when dividing property the court will either have the parties split up their property, or if the parties are unable to do so the court will order that the property be sold and the proceeds split equally.

It is obvious that a pet cannot be split in two and it is also clearly not appropriate for a pet to be sold so that the proceeds can be divided. It is unclear what the court will do if forced to make a decision regarding who gets the pet and will depend greatly upon the judge who is deciding the matter Your lawyer’s may be better able to help you deal with this issue.

 

Pets in the Court

There are a couple of cases where the court has helped determine who will keep a pet but for the most part they will simply state that they do not have the jurisdiction to address the issue of pets and leave the parties to decide the issue themselves.
In some situations the court has decided that the person who can prove ownership of the pet (who paid for it) gets to keep the pet. This also implies that they will owe some sum of money to their spouse in the equalization process as a result. In very rare situations a judge may make a decision based on who has cared for the pet

 

Common Law Relationships and Pets

As with other property items in common law relationships pets will be divided based on who can prove ownership of the pet.

You will not be able to make any claims to partial ownership of the pets as is often done with property owned by one party but enjoyed by two in a common law relationship.
Separation Agreements and Pet Custody.

If the parties are able to come to an agreement outside of the courts, a pet custody schedule is a possibility. In a separation agreement the parties are free to come to any agreement which they would like.  The parties can each have the pet one week on one week off, or they can have the pet one year at a time, it is completely up to them.

The parties should keep in mind that pet custody schedules will not be enforceable by the court or the police but such a clause may still be useful for scheduling and the threat of a court battle may prevent straying from the schedule.

 

Separation Agreements and Pet Support

Along with custody arrangements, parties can also agree upon Pet Support in a separation agreement.

Keep in mind that if one party fails to pay the agreed upon pet support then the court will probably refuse to take any action to enforce the support.

There is also no equivalent for the Family Responsibility Office for pets. If you cannot agree on a way to pay the pet support to your spouse you will not be able to garnish wages or anything of that nature.

 

Lottery Winnings and Sharing Property

Lottery wins are a once-in-the-lifetime stroke of good fortune.   (At the least, they certainly happen less frequently than anyone hopes).

But in the case of married or common-law couples who buy the winning ticket, the joy of having a monetary windfall can quickly become tainted if they later separate or divorce, because issues often arises as to who gets the money, or how it is to be split.

Here are some interesting lottery points from cases from across Canada:

  • Despite being divorced people who live in a spouse-like relationship, may be required to be share lottery winnings equally
  • Day-to-day living arrangements may support the equal sharing of the prize
  • Depositing winnings into a joint account and treating the money as if both owned it, paying off the mortgage, buying joint GICs, and new car may lead a court to conclude you are in exclusive, committed, common law relationship with a measure of economic interdependence and be required to share lottery winnings equally
  • If you buy a lottery ticket even while briefly being separated, the court may find that the ticket was bought from joint funds and that the winning ticket had been similarly paid for jointly and require that the winnings be shared
  • The fact that you and your spouse may be geographically prevented from seeing each does not mean they that you will be considered separated and the court may order that lottery winnings be shared

Courts across Canada seem willing to go out of their way to ensure that lottery winnings are shared equally between husbands and wives.

But like many other areas of law the facts of each particular case will play a significant role in the outcome.