Should Real Estate Downtown Be Factored into Realtor’s Income for Support Purposes?
Many of you will know that for child and spousal support purposes, the amount of annual income that a support-payor earns is tied to the amount of support that he or she must pay (although this is subject to other considerations as well). In a recent Family Law case from B.C. the husband, a prominent and highly- successful real estate agent, argued that the volatility and uncertainty in the real estate market should be factored into assessing his income for use in his divorce proceedings.
As background: Under federal divorce and child support law, courts extrapolate a support payor’s income using the past three years of his or her earnings. In this case, that amount averaged about $2 million per year. The husband’s realty company – of which he was the sole shareholder – had done extremely well, with 7-year earnings of over $13 million.
Nonetheless, the husband claimed that his past earnings were not necessarily reflective of his future earnings, because of the uncertainty in the West Vancouver real estate market in which he worked. He predicted an imminent downturn sparked by the government’s Foreign Buyer’s Tax (among other things), which in turn would impact his ability to pay support for his former wife of 17 years and for their two children. Although they had lived a lavish lifestyle in the past, he asked the court to take note of a pending market downturn and adjust his support obligations in a commensurate manner.
As the court explained his argument:
The [agent husband] argues that it would be devastating to him if his income for support purposes is based on an average of the realty company’s past three years’ net income. He says that the real estate market slowed down from 2016 to 2017 and is likely to slow further down in 2018. He argues that the slow down has been caused by the foreign buyer’s tax, the tightening of residential mortgage insurance rules, and the increases to the Bank of Canada interest rate. The [husband] says these have resulted in a general tightening in the mortgage financing marketplace. Further, he says there is a hesitancy in the real estate market due to uncertainty over what steps the NDP government might take, some of which have been announced since the [husband] swore his affidavit.
The court essentially accepted some – but not all – of the husband’s argument. It agreed that the upward trajectory of Vancouver-area real estate prices has likely ended, and accepted that the husband had “reason to be pessimistic about the real estate market and hence his income.”
However, the court found it reasonable to conclude that any negative impact has already been felt by now. The court accordingly looked at the husband’s 2017 income figures, together with his income for 2018 thus far, and set the child and spousal support figures accordingly.
For the full text of the decision, see: