The summer season is slowly coming to a close. For those who are lucky enough to have a recreational property, the cottage season is sadly winding down as well. This means the temporary end of family togetherness in a relaxed and peaceful setting, with the family cottage being the focal point of many good memories.
But in some families and marriages, the good times may have faded like a beautiful sunset over the lake – only permanently. A separation and divorce might be looming on the horizon.
This raises the question of how the family cottage is legally dealt with, after a marital split.
Cottage as “Matrimonial Home” on the Separation Date
Many cottages and recreational properties will be considered a special kind of family asset. This is because the Ontario Family Law Act (FLA) is structured to acknowledge that a married couple can have more than one “matrimonial home”. A family cottage – even a seasonal one – can be implicitly recognized as a second “matrimonial home” in the right circumstances.
Note: This is only true if the cottage meets the legal test of being “ordinarily occupied” by the family at the time of separation. There is abundant case law on what this means from a legal sense, and there is a lot of understandable squabbling and litigation between divorcing couple over whether a cherished family cottage is/is not covered by that deemed designation.
But once a cottage meets that threshold, it has full “matrimonial home” status and effectively circumvents the FLA’s normal treatment of assets brought into the marriage. (This would otherwise see the cottage excluded as an asset under any equalization of NFP).
The same special status is granted to a cottage that was purchased by the couple during the marriage – it is brought under the “matrimonial home” umbrella as of the time of separation, and is valued and dealt with in a divorce in the same manner as their primary family residence – provided it was “ordinarily occupied.”
Cottage Received as a Gift or Inheritance
For those lucky people whose family cottage was handed down or gifted to them, there are related considerations that arise from that deemed “matrimonial home” status.
Normally, gifts or inheritances that are received by the spouses during their marriage are generally considered to be excluded property when it comes to calculating NFP. However, if that gift is made towards the spouse’s matrimonial home – including an eligible cottage – there is no exclusion from NFP.
Likewise, the value of a cottage that is inherited by a spouse either before or during marriage is not excluded. Instead, it gets caught up as part of the matrimonial home, the value of which is equally divided between the spouses if they separate.
What About the Increase in Cottage Value?
Focusing on the mechanics of the NFP calculation for a moment: Regardless of when the family cottage came into the family (i.e. before or during marriage), and irrespective of how it got there (i.e. purchased by one or both spouses, gifted, or inherited), if it meets the test for “matrimonial home”, then it is treated like one under the FLA for valuation purposes. Any increase in its value over the course of the marriage will be simply shared between both spouses when they divorce.
All of this might sound complicated – and it certainly can be. If you have questions about how to deal with your cottage in a divorce, please call Russell Alexander Collaborative Family Lawyers.