On Sale of Matrimonial Home: Appeal Court Ponders “Economic Value” of Spouse’s Right of First Refusal
In the recent decision in Barry v. Barry, the Ontario Court of Appeal revisited a topic that has come up periodically over the decades of its Family Law jurisprudence: The question of the scope and value of one spouse’s right of first refusal to buy out the other spouse’s interest in the matrimonial home, after a separation or divorce. And more importantly, whether it is really a “right” in the traditional sense of the word.
In that case, after a four-day trial to resolve lingering financial issues in their divorce, the trial judge ordered the husband to make an equalization payment to the wife. Importantly, the trial judge also granted him the “right to conclude the purchase” of the wife’s interest in their jointly-owned matrimonial home within 30 days of the ruling, after he obtained a fair market value assessment.
The wife appealed that aspect of the order, since she wanted to have the home sold on the open market, and to have the net proceeds of the sale divided between them.
The Appeal Court allowed the wife’s appeal. Citing its own prior decision in a 1992 case called Martin v. Martin, the Court noted that the right of first refusal is indeed a “substantive right”, but that it also has “economic value”. The Court observed:
It falls outside the boundaries of what is ancillary or what is reasonably necessary to implement the order for sale of the matrimonial home. It distorts the market for the sale of the matrimonial home by eliminating the need to compete against any other prospective purchaser, thus reducing the amount the joint owning spouse realizes on the sale.
In this case – and absent the wife’s consent to giving the husband the first refusal right, which was not forthcoming here – the trial judge should not have granted this part of the order. If the husband really wanted to buy out the wife’s interest in the home, he should be required to bid against and compete with other potential buyers who were at arm’s length.
The Court of Appeal accordingly ordered the trial judge’s ruling should be amended to read, “The matrimonial home shall be listed for sale immediately”.
For the full text of the decision, see:
Barry v. Barry, 2020 ONCA 321
Martin v. Martin, 1992 7402