Often the largest assets that couples will need to divide upon divorcing are their real estate holdings. Whether you only have a single home or have multiple properties including cottages or other vacation homes, it is important to understand how real estate is divided when considering a divorce in Ontario.
Unlike common law couples, married individuals in Ontario are subject to the equalization regime. While they can settle outside of a court without equalizing their net family properties, married spouses are presumptively entitled to such equalization. Either spouse can apply for equalization under the Ontario Family Law Act (“FLA”) once they separate. In simple terms, the spouse with the net worth that has increased the most from the date of marriage to the date of separation, will share half of that increase with their spouse. Subject to few exceptions, real estate forms a part of said calculation.
The Matrimonial Home
Per section 18 (1) of the FLA, a matrimonial home is “Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home”.
If the spouses own a matrimonial home rather than merely renting it, it will form part of the assets that will be equalized in the net family property calculation. Unlike other kinds of real estate which will be discussed further below, the matrimonial home cannot be excluded from the equalization calculation. This means that even if you bought the home entirely on your own before the marriage, you still have to share your entire equity from the date of marriage to the date of separation, with your spouse.
One method of getting around this situation is to make a different property your matrimonial home before the date of separation rather than the one you brought into the marriage. This might mean selling the current property and moving into another one. When that original property ceases being the matrimonial home, before the date of separation (i.e. when you sold it and moved elsewhere), you can then deduct your share of the equity from the calculation of your net family property.
In cases where there is only one spouse on title for the matrimonial home – there is an important nuance that should be noted. Though a non-titled spouse will share in the increase in value from the date of marriage to the date of separation of the matrimonial home- they have no presumptive right to any post-separation increases in value. For example, if a couple marries in 2010 and separates in 2020- the titled spouse will share the increase in value of that house from 2010 until 2020, with their non-titled spouse. Yet, if the house is later sold in 2022, the non-titled spouse will not share in any increases in value the house may have had from 2020 to 2022. Generally, it is only jointly-titled spouses who would share any increases in post-separation value of the house.
Vacation Homes and Other Properties
Second or third homes, cottages, or other vacation properties will typically follow the same treatment as the matrimonial home that ceases to be a matrimonial home before the date of separation.
Spouses that bring a property into a marriage can have its date of marriage equity deducted from their net family property calculation if they can provide proof of their equity on that date. The ultimate ownership of said property presumptively follows the title ownership of the asset in that non-titled spouses do not have an automatic right to share in them.
If the property is located in another jurisdiction (i.e. out of the country), its value will still be included in the equalization calculation. However, a Court lacks the ability to enforce Orders pertaining to the actual possession or sale of such properties. As such, a Court will typically refrain from making certain substantive Orders regarding foreign properties, such as Orders for possession or partition and sale.
There are of course exceptions to the general rules of the division of real estate assets in a divorce under Ontario Family Law. For example, a non-titled spouse might make a trust claim over a piece of real estate that their spouse owns, which they might otherwise have no right to share in. While that is beyond the scope of this article, it is important to consult a licensed Family Law Practitioner to understand these complexities and how they might apply to your situation.