Selling the Matrimonial Home & An Introduction to Ontario Divorce Laws
Selling Your Home: “We’re Officially Separated – Can I Change the Locks on the House?”
When a couple first separates under contentious circumstances, I will often get questions about what each party’s respective rights are in the early stages, i.e. before the long process has started of formally dividing up their assets and dealing with any support and child-related issues. 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.
10 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.
6. Special status.
The matrimonial home has special “protected” status under Ontario law. As such, there are certain things that spouses can and cannot do. Most notably, one spouse is not allowed to unilaterally do any of the following, without the other spouse’s consent:
• Lock the other spouse out of the matrimonial home;
• Sell the home;
• Mortgage or re-mortgage the home.
7. Court can make Orders.
Depending on the nature and objective of the family litigation, an Ontario court is entitled to make an Orders that can affect your spousal rights to the matrimonial home. The court’s powers in this regard arise under the authority granted to it pursuant to the Ontario Family Law Act, the Family Law Rules, and the Courts of Justice Act.
8. Scope and nature of court Orders.
There are a variety of Orders that a family court can make in connection with the matrimonial home, including an Order that only one spouse is entitled to be in possession of (i.e. live in) it, and an Order that one spouse may sell, mortgage or encumber it.
The last type of Order may become necessary in a case where (for various reasons) it is prudent for the home to be sold, mortgaged or otherwise encumbered, or where it makes sense in all the circumstances that one spouse has possession, but where the spouses cannot agree. The court in such cases has the power to make the necessary Order.
9. Mandated considerations.
Needless to say, courts don’t take their powers lightly; whenever a court is poised to make an Order that deprives one spouse of his or her rights or interest in the matrimonial home, the court will consider a broad array of well-established factors and considerations. For example, if a court is considering making an Order giving one spouse exclusive possession of the matrimonial home, the court is obliged under the Family Law Act to take into account the following:
• The best interests of the children who may be impacted by the order. Under this heading, the court must consider 1) the possible disruptive effects on the child of a move to other accommodation; and 2) the child’s views and preferences, if they can be reasonably ascertained.
• Any existing court Orders relating to family property, including existing Orders for support;
• The financial position of both spouses;
• Any written agreement between the parties;
• The availability of other suitable and affordable accommodation; and
• Any violence committed by a spouse against the other spouse or children.
10. Other rights not suspended.
Finally, the fact that a family court might be entitled to make an Order in connection with the matrimonial home does not mean that other litigation has to cease; a third party (i.e. not either of the spouses) might have rights in connection with a matrimonial home that can be enforced as usual. To give the most common example, there may be a mortgage on the home, which the bank can realize upon if it goes into default.
When couples separate, there are many issues that they have to tackle, one of which is what to do with their home. The rules relating to the home differ depending on whether you are married or in a common law relationship:
Definition of Matrimonial Home
- A matrimonial home is a home which is owned by one or both married spouses and ordinarily occupied by the family at the date when the parties separate.
- There can be more than one matrimonial home, for example, a cottage.
The family home may be the most valuable asset that parties own. As such, decisions relating to the home may be emotionally difficult. There are really three options available to you and your spouse regarding the home:
- You can buy out your spouses’ share in the home and remain in the home;
- Your spouse can buy out your share of the home and he/she can stay in the home;
- You and your spouse can put the home up for sale and divide the equity in the home.
Rights Associated with the Matrimonial Home
- Both you and your spouse have an equal right to stay in your homes until it is sold unless a judge decides that one of you have to move out.
- Neither you nor your spouse can sublet, rent, sell or mortgage the home without the other’s permission.
- The decision to sell your home has to be made jointly, however, if your spouse does not cooperate, you may have to initiate an application with the court for the sale of the matrimonial home.
Considerations Prior to Selling the Home
- Where will you go?
- What will be the cost to you of maintaining the expenses relating to the home?
- What steps do you have to take to get the home ready for sale? Are there any major or minor repairs needed on the home?
- What will be costs of selling the home? Lawyer’s cost? Real Estate Commissions? Mortgage Penalties?
- How will selling the home affect your children?
- How will the proceeds of the sale of the home be divided?
- Are there debts, joint or otherwise, that need to be cleared from the proceeds of the sale, prior to distribution?
- Are there any deductions that have to be made from one party’s share of the proceeds of the sale of the home for expenses paid by the other spouse after the date of separation?
- Do you have an agreement with your spouse regarding custody, access, child support, spousal support and division of your property?
- Will the proceeds of sale of the matrimonial home have to be held by the real estate lawyer because you and your spouse do not have an agreement regarding the division of your property?
Common Law Couples
- Common-law couples do not have statutory property rights in Ontario.
- A common-law spouse does not automatically have the right to stay in the family residence if it is not in his/her name.
- If one common-law spouse owns the home, he/she can sell or mortgage it without the other’s spouse’s permission.
Selling the Matrimonial Home – What if One Spouse Won’t Co-operate?
A recent decision called Ivancevic-Berisa v. Berisa shows what Ontario courts can do if one spouse refuses to co-operate in selling the matrimonial home post-separation.
When the husband and wife separated in 2010, they signed a Separation Agreement to the effect that the husband could say in the matrimonial home until it was sold, but that it had to be sold within a year, with the selling costs to be split between the parties. Subsequently however the husband – despite numerous requests by the wife – had refused to list the house for sale and demonstrated a “militant resistance” to doing so. More to the point, he told her that notwithstanding the Separation Agreement he did not intend to put the home up for sale, but rather planned to keep it for himself. He also said he would destroy all renovations and upgrades to it that they had made since they had purchased it as their matrimonial home.
Indeed, almost two full years later, the house had still not been sold, and the husband was still living in it, even though he had ample time to find new accommodation. In that time, he had been uncooperative with real estate agents, had refused the wife access to the home in order to get it appraised, had refused to pay for his share of the appraisal costs, and had refused to sign a listing agreement. Essentially, by failing to co-operate and refusing to give his consent, he was unilaterally blocking the ability to sell the home.
As a result, the wife was forced to bring a motion to the court for an order dispensing with the husband’s consent to take the necessary steps to list and sell.
In the end, the court allowed the wife’s motion. For one thing, the terms of the Separation Agreement reached between the parties – by which they agreed to sell the home, not have the husband buy out the wife – clearly governed the matter. Next, the Family Law Act clearly allowed a court to authorize a home to be sold if one spouse is unreasonably withholding consent. Here, the husband had acted unreasonably in refusing to co-operate.
The wife was therefore allowed to proceed with the sale of the home without the husband, and at an appraised price set by her agent. The husband’s consent to the process was dispensed with, including eliminating the need for his to sign the listing agreement, as long as the 3.5-percent total commission that had been negotiated by the wife with the agent remained intact. The court further stipulated that the wife would be entitled to arrange showings of the home through the agent as long as she gave the husband 24 hours’ notice by email.
Finally, the husband would be allowed to stay in the home until closing, on one condition: that he co-operated with what was required of him under the order, namely to preserve the home and its contents, and keep it clean and presentable for showings. The court also warned that if the husband failed to comply with all of the terms of the Order, he could expect that the wife would seek an order for exclusive possession and he would potentially face contempt proceedings “which can have a very serious outcome.”
Husband Reneges on Post-Separation House Transfer – What Do Courts Do About Broken Promises?
Broken marriages are often filled with broken promises. And sometimes those broken promises extend well into the separation and divorce process, as was the situation in the recent Ontario case of Dymon v. Bains.
When the spouses decided to split, they continued for a while to live under the same roof, but separate and apart for legal purposes. The wife wanted to stay in the matrimonial home, but the husband refused to move out.
They devised a solution: Under the terms of the separation agreement they had reached, the husband bought a new home for the wife and their children. At the time of the purchase, the home was registered only in the husband’s name, but the agreement was that he merely holding it in trust for the wife, and that he would formally transfer it within 30 days of signing another agreement. This meant that title would then be in their joint names, and the mortgage was also intended to be transferred to both their names.
However, when it came time to make the transfer, the husband refused to take the necessary steps.
As part of the couple’s divorce trial, which included orders relating to spousal and child support and related matters, the court was asked to make a ruling about the reneged-upon house transfer. It reviewed – and dismissed – the purported legal arguments on which the husband relied.
In a nutshell: The couple had clearly agreed that the home would be transferred into their joint names. There was absolutely no reason for the husband to go back on this promise. The court therefore ordered the husband to make the transfer, sign all necessary documents, transfer the mortgage to both of their names, pay land transfer tax, feeds, and disbursements, and make certain mortgage payments.
Selling the Matrimonial Home: Is $37,000 for Home-Staging and Prep-Costs Reasonable?
In a recent Ontario case the couple, both of whom were physicians, separated after a 31-year marriage. The wife remained in the matrimonial home while the parties prepared to divide their assets, which included a property in Italy, several automobiles, expensive jewellery, and several joint accounts.
As part of this division process, the home was scheduled to be sold on September 1st. However, when the husband’s friend visited in late August to retrieve certain items for him, he noticed that the wife had not prepared the home for the new occupants as she was obliged to do. In particular, the home was in disarray, there were still boxes everywhere, and more than 100 bottles of valuable wine – collectively worth about $200,000 – still remained on the premises.
As a result, the deal fell through for the September 1st closing. The wife also stalled subsequent efforts to sell it, by being difficult in connection with signing back various offers from the potential buyers. Eventually, the house did sell for a reduced price of $2.2 million, which represented a $250,000 shortfall from its true market value. (And this was achieved only after the husband agreed under some duress to sign a document committing to pay the wife $125,000, in order to compensate her for the shortfall in the selling price. This purported agreement was ultimately struck down).
Against this background, and in the context of dividing up the proceeds of the sale, the wife submitted her expenses in the form of a bill for almost $37,000. This included a home staging fee, and the cost to hire cleaning staff and assorted others to help with getting the home ready. It also encompassed the fees charged by various physicians whom she apparently hired to replace her at her medical practice while she was involved in preparing the home for sale.
The court was asked to rule on whether this $37,000 fee was reasonable.
The wife’s success was mixed: The court found that she was entitled to 50% of the expenses –but only for those items that were supported by invoices. She was not entitled to the costs of hiring replacement physicians to cover her absence at work, as she had failed to prove that her absences were directly and exclusively related to the time needed to prepare the home for sale. In fact, the court lamented that the wife had fallen far short of her obligation to provide either oral testimony from those people she claimed had provided services, or at the very least, documentary evidence in the form of receipts. Failing either of those, she should have provided the court with an explanation as to why this evidence was not available.
In the end, the wife was awarded only about $9,000 in total to cover her claimed expenses.
Cottages as Matrimonial Homes
Sometimes the status of a particular property falls into the “grey zone”, or separated/divorcing spouses may disagree as to whether it should be included as part of their matrimonial home. In such cases it may be necessary to go to court to get a declaration one way or the other.
The recent case of Logotech v. McConnell included this kind of application – but it was actually a lender who dragged the married couple to court to get the declaration. This is because there were several other elements in the mix, namely: the lender, a failed investment, a mortgage in default, a looming power of sale, the husband’s bankruptcy, and an injunction application. All of this “thickened the plot”, legally speaking.
The husband had mortgaged certain Muskoka cottage property he owned as part of a family compound of several cottages. To do so he swore a declaration – which the court later concluded was likely false – to the effect that the properties were not occupied by him and his wife as family residences, and that a different property had been designated as a matrimonial home. This technically eliminated the need to get his wife’s written spousal consent to the cottage mortgage, so it was all arranged without her knowledge.
When the husband allowed the mortgage to go into default, the lender asked the court to declare the cottage excluded from the “matrimonial home” designation, so that it could take unimpeded steps to enforce it security by way of power of sale. It also asked for an order forcing the couple to give up possession.
The wife resisted, and in fact asked the court for an injunction to stop the lender’s mortgage enforcement process until the entire matter could be brought to a full trial.
The court looked at the facts, and found many of them in dispute. Contrary to the husband’s sworn declaration, there was actually strong evidence that the family regularly used the cottage during both the summer and the winter each year since 2002. There was also strong evidence that the lender knew the property was a cottage and was used as such. Finally, the validity of the lender’s mortgage was up for debate, they had been arranged by the husband without the wife’s knowledge and without the spousal consent as required by law.
As part of applying the test for an injunction, the court remarked that the wife would naturally suffer irreparable harm if she had to give up possession, pre-trial, of a property in which she likely had a legal interest. When viewed in the balance against the risk of harm to the lender if the injunction is not granted, it was evidence that the wife faced a much more severe risk of harm.
The court granted the wife’s request for injunction, which prevented the lender from taking mortgage enforcement steps, and ordered that the question of whether the cottage was a matrimonial home should be fully explored at trial. The validity of the mortgages would also be given scrutiny by the court at that time.
Can a Sailboat Be a “Matrimonial Home”?
The definition of “matrimonial home” is generally defined by Ontario Family Law Act as being any property “ordinarily occupied” by the spouses and their family on the separation date. This can include any type of housing including condominiums and mobile homes; in some cases the definition will even extend to cover a frequently used second-home, most often a family cottage.
But what about a sailboat? Can it be a “matrimonial home” too?
This was the question in the older case of Clark v. Clark. After separation the wife and youngest daughter continued to live in the house that they all had previously shared, but when he moved out the husband took with him a 29-foot sloop. The court found that the family “generally had a tradition on this boat during the summers for a good number of years”.
While dismissing the husband’s stated concerns over the wife’s competency and ability to maintain and take care of the sailboat, the court declared the home an alternative matrimonial home and transferred exclusive possession to the wife for a particular long weekend that she had requested, to be returned to the husband afterward. In this context – and after adding that it had assessed the wife’s ability to manage and care for it – the court concluded that the wife was capable of operating the boat in a satisfactory manner, but added that she “should not take the boat under any circumstances unless she is assured, as well as the husband, that there is sufficient insurance on the boat and that it is effective while she has the boat in her possession.”