How to Sell Your Home After Divorce?
It is estimated that somewhere between 38% and 40% of all marriages in Canada end in divorce, so chances are that when you entered your marriage you probably were not considering divorce. The ending of a marriage and subsequent divorce can be incredibly stressful emotionally and financially. Divorce becomes even more complex when you have children and/or own property together. Thus, the need to sell your home after divorce.
The ending of a marriage and subsequent divorce can be incredibly stressful emotionally and financially. Divorce becomes even more complex when you have children and/or own property together. Thus, the need to sell your home after divorce.
If the prospect of potentially selling your home, the home that you share or have shared with your spouse scares you, stresses you out, or is anxiety-inducing, take a moment and a few deep breaths. Breathe, be compassionate and gentle with yourself. The anxiety and stress as well as, all of the feelings and emotions you are experiencing related to your relationship ending and potentially moving, are totally normal and valid. Moving and divorce rank in the top five most stressful life events.
Chances are that you found this article since you live in Ontario and are considering selling your home because you are getting divorced or have already gotten divorced. You might know what some of your rights are but are unsure about the legalities and specifics of selling your home, what your options are, or how property is divided when you are legally married in Ontario. If this is the case or you have other questions about selling your home when or after you get a divorce in Ontario, this article is meant to help address your concerns and answer your questions.
In this article, we will explain what the matrimonial is in Ontario, what your rights are regarding the matrimonial home in Ontario, what your options are for selling your house after getting divorced in Ontario, and things to consider when selling your home in Ontario after divorce.
What is the matrimonial home in Ontario and how does this affect me?
The Ontario Family Law Act refers to the matrimonial home as any residence or property that one or both spouses have an interest in or a home that is owned and ordinarily occupied by both spouses and their family or by the spouses and their family on the day of separation, Given that the matrimonial home is a family residence, the matrimonial home could technically include any type of housing including condos and mobile homes. The matrimonial home can be a home that spouses rent together or a home that they own together.
There can be even more than one matrimonial home as long as the additional home or homes on the date of separation that technically could meet the requirements of being a matrimonial home. This means that you legally could have two or more matrimonial homes.
For example, if your family’s principal residence is in Toronto, your family’s home in Toronto and if you also have a vacation cottage you visit most weekends, this could also be considered your matrimonial home. Additional homes that you and your spouse own that are not your principal residence can constitute a matrimonial home but this subject to Ontario’s Family Law Act’s specific rules. If you are unsure about which properties you own constitute a matrimonial home, you should consult a divorce lawyer since your vacation home might technically be considered a matrimonial home.
Your rights in relation to the matrimonial home in Ontario
Both you and your spouse have equal right to stay in the matrimonial home until it is sold or if a judge grants a court order that orders one spouse to move out.
If you are a married couple that then becomes legally separated were both living in the matrimonial home and one spouse moves out, there are no legal grounds that allow for the spouse who remains living in the matrimonial home to be able to change the locks.
Under Ontario’s Family Law Act, the matrimonial home has a unique legal status, both spouses under the law have an equal right to possess it. The right of equal possession of the matrimonial home will continue after the spouses have legally separated. It is unless or until all parties involved reach a separation agreement.
It could also happen when a court order is granted that establishes that one of the spouses is exclusively entitled to have ‘exclusive possession’ of the matrimonial home pending a family court trial. Once a court order that means that exclusive possession is granted to one of the spouses, they will have the sole right to live in the home, regardless of whoever technically has the legal title of the home.
This means that unless you create a formal separation agreement which covers the matrimonial home or one spouse is granted exclusive possession of the matrimonial home, neither spouse can legally change the locks to ensure that the other spouse is locked out.
Technically, both spouses will be legally allowed to stay and live in the matrimonial home until they reach a formal resolution regarding who possesses the home. In many cases, if a couple has children together, the children will stay in the matrimonial home. However, in many cases, it is not realistic or recommended for both spouses to keep living together even if they legally separated or are getting divorced since most divorces tend to be stressful and extremely tense.
So, if one spouse moves out of the matrimonial home, technically they are not entitled to come-and-go from the matrimonial home at will. Instead, if they are coming and/or going they must provide adequate and reasonable notice to the other spouse regarding any intention they might have to return.
For example, if one spouse moves out and they need to collect personal property that they left behind in the matrimonial home, they will need to provide the other spouse adequate and reasonable notice of their intention to return to the matrimonial home to collect the personal property they might have left behind.
What is an order for exclusive possession and how does it affect you?
Order for exclusive possession is a court order that judges grant which means that only one spouse is legally allowed to live in the matrimonial home. An order for exclusive possession means that the other spouse will be legally required to move out of the matrimonial home, and they will have to live somewhere else.
So, if a court grants an order of exclusive possession of the matrimonial home in your favour, this means that they will be only the spouse who is allowed to live in the matrimonial home. If domestic violence is occurring in the matrimonial home, you might also consider applying for an order for exclusive possession.
When orders of exclusive possession are granted, the court may order that the locks to the matrimonial home(s) will be changed assuming that there are circumstances that create a situation where the locks to the matrimonial home need to be changed.
Orders for exclusive possession of the matrimonial home will usually be for a specific period of time and will allow the other spouse to periodically re-enter the matrimonial home for specific purposes, providing that they are giving the other spouse advanced notice.
Furthermore, you must understand that when a court grants an order for exclusive possession for the matrimonial home, the court is only giving one spouse the exclusive rights to live in the matrimonial home without the other spouse. An order of exclusive possession does not provide the spouse who is remaining in the matrimonial home with the right to sell or dispose of any of the furniture or other belongings until a court has fully resolved all of the issues related to separation and divorce, this includes the equalization of net family property.
It is important to note that having the court grant an order for exclusive possession in your favour or in your spouse’s favour, this does not affect your property ownership rights. This order for exclusive possession is not meant to be the court deciding on who owns the property. Orders for exclusive possession are usually temporary since they are meant to provide you time to get a separation agreement completed with your spouse.
Neither you nor your spouse is allowed to sublet, rent, sell, refinance, mortgage or place a line of credit on the matrimonial home without the other spouse’s written permission.
You cannot do anything too major regarding the matrimonial home without your spouse’s written permission this is because of the special protected legal status granted to the matrimonial home under Ontario’s Family Law Act.
The decision to sell the matrimonial home must be made jointly by both spouses. However, if your spouse agrees to sell the matrimonial home, but they do not cooperate with your efforts to sell the matrimonial, you may need to initiate an application with the court to help make it possible for you to sell the family home.
If this happens to you, you should consult a divorce attorney about what your options are to ensure that your house gets sold and ensure that your spouse does not create obstacles for selling your house.
What you need to know about the rules of ownership for the matrimonial home
First and foremost, no matter whose name is on the title or deed for the house, if both of you lived there together before the date of your separation, it is still the matrimonial home.
Yes, you could have even bought the house before you ever met your spouse and married them, but once your spouse moved into this home, following your marriage this automatically becomes the matrimonial home. In other words, it does not matter if you owned the home before you married your spouse, the moment that your spouse moves into your home it becomes the matrimonial home.
This also means if that the matrimonial home was gifted to you or you inherited it before you were married and your spouse moved into the matrimonial home, it is still the matrimonial home. But your inheritance will be exempt from division UNLESS you put money from your inheritance into the matrimonial.
Additionally, if your parents or someone else gift you the money for the down payment to buy your matrimonial home, your spouse will not be legally required to repay the gifted funds for your down payment. You can always try to negotiate this with your spouse, but the courts will not make any rulings about this. The matrimonial home will always be divided unless you have a prior marriage contract that deals with the matrimonial home in a different way than how one would normally deal with it.
Another thing you should consider is that if you are listed on the mortgage for the matrimonial home, you will still be responsible for paying the mortgage on the matrimonial home, even if you are not living there. If you decide to buy your spouse out, once your divorce is finalized, your ex-spouse will not be responsible for paying your mortgage on the matrimonial home. You might be able to receive spousal support, but you will need to qualify for your own mortgage without your spouse.
If you are buying your spouse’s share of the matrimonial home without a formal separation agreement, you will be responsible for paying the applicable municipal and provincial land transfer taxes on your purchase of your spouse’s share of the matrimonial home. So, for example, if you are buying out your spouse’s share of the matrimonial home without a formal separation agreement in place, you would be responsible for paying Toronto’s Municipal Land Transfer Tax (MLTT) and Ontario’s provincial land transfer tax (LTT). [How much does the Land Transfer Tax in Ontario cost and who is responsible for paying it?]
You might be wondering what happens to the matrimonial home if you and your spouse cannot come to an agreement about what to do with the matrimonial home? If this happens, you or your lawyer will file for an order of partition and sale, on your behalf.
If an order of partition and sale is granted, the court will then order for you and your spouse to sell the matrimonial and to then split the proceeds from the sale. If you are ordered to sell the matrimonial home, there is not a right of first refusal when dealing with the matrimonial home for Ontario family law. If the court orders the matrimonial home, whichever spouse who wants to keep it they must make an offer and bid for the house in an open real estate market with all other potential buyers.
What you need to know when dividing assets with your spouse when it comes to the matrimonial home vs. other assets such as a bank account
Within Ontario’s Family Law Act, the matrimonial home is treated differently than other assets. For other assets that are not the matrimonial home in Ontario, each spouse is allowed to deduct the marriage date value of any property or assets they brought into the marriage from the value of the property or asset on the date of separation. You might be wondering what this might look like? But with the matrimonial home, the full value of the matrimonial home must be shared upon separation.
This might not apply for the division of marital assets for every single divorce case in Ontario, but this generally applies to most divorces in Ontario. If you have questions specifically about your case and how assets would be divided for you and your spouse, do not hesitate to consult a divorce lawyer. It is important to note that this division of assets might not apply to you if you have a specific marriage contract. However, here is an example that might make it easier for you to understand how the division of assets might work for you and your spouse.
Imagine the following scenario, you entered a marriage with a bank account with $425,000 that remained the same until the date you separated. During the marriage, you earned $75,000 in interest for this account and on the date of separation, your account is worth $500,000. In this scenario, neither spouse has any other assets or debts. You would then pay your spouse one half of the accumulated interest on the bank account when you separate, or $37,500.
Now imagine instead of having a bank account with $400,000 upon the marriage date, you had a house worth $400,000. After marrying your spouse, your spouse moves into the home and during the marriage, the equity in your house increases to $500,000 on the date of separation. In this scenario, neither you or your spouse have any other assets or debts.
You would now owe your spouse one half of $500,000, or $250,000. In this scenario because the matrimonial asset in question is a matrimonial home instead of a bank account you would be responsible for owing your spouse $212,500 more than you would be paying them otherwise if you had a bank account.
This payment that you would be making to your spouse is known as an equalization payment, this meant to help ensure that assets are ideally divided equally between spouses. It is important to remember that once a marriage legally ends, the property-division provisions that constitute the Family Law Act are set into motion and property is meant to be divided equally between spouses. Of course, this division of property between spouses is subject to specific rules and exceptions, one of the biggest exceptions is the division of property in relation to the matrimonial home.
Special considerations about the matrimonial home for people in Common-Law relationships in Ontario versus people who are or were legally married
It is important to note that if you are not technically married but are a common-law couple (in Ontario couples who live together for at least three years are technically common-law married) the law regarding the matrimonial home might not apply to you. In common-law relationships in Ontario, generally, the home belongs to the person who the home is registered to. Generally, with common-law relationships, whatever was yours when you came into the relationship will be yours whenever you leave the relationship.
Common-law couples in Ontario do not have the same statutory property rights as married couples. This means you will not automatically be legally entitled to stay in the family home if it is not in their name. If one common-law spouse owns the home, they can sell a home, mortgage it, etc. without asking the other spouse for permission. This is true no matter if you have lived with your common-law spouse for three years or for twenty years, you do not have the same legal rights as a legally married couple in Ontario.
It is important to keep in mind that the family home might be one of the most valuable assets that spouses might own together. This means that the decision to sell your home after divorce financially and emotionally challenging. You have four options when disposing of marital property when dealing the matrimonial home in Ontario (note this only applies if you are legally married)
First, if you have not already made a decision about what is happening to your home, you need to consider your options.
When you are getting legally separated or divorced, this assumes that you are getting divorced and will not be living with your spouse anymore, you have four options when dealing with the matrimonial home. Keep in mind that the matrimonial home that you own or home that you and your spouse rent together.
1. You keep the home and buy your spouse out
In this scenario, you keep the matrimonial home and buy your spouse’s share in the matrimonial home. While this might seem like a simple enough solution, consider this. If you are buying your spouse’s portion of the matrimonial home, half of the equity in the house, this means you are taking on the existing mortgage for the house and probably will need to increase your mortgage include the amount of money you owe your spouse.
For example, if your home is worth $600,000 and you have a mortgage on your home for $200,000, this means that the total equity in your home would be $400,000. In this situation, your spouse would get half of the total equity in your home ($200,000).
So, if you have decided to keep the matrimonial home, you will need to assume the existing mortgage of $200,000 and increase it by another $200,000 to pay your spouse for their share of the equity in your home. Now you solely will be responsible for paying a new mortgage for $400,000.
Whenever one spouse is buying out the other spouse’s half of the equity in the matrimonial, the value of the home will be based on a formal appraisal completed by a professional appraiser. [Differences Between a Home Appraisal and a Current Market Assessment in Ontario]
However, keep in mind that if you are getting a new mortgage to buy out your spouse’s portion of the house, each bank will usually have their own list of home appraisers that they prefer to work with. In other words, you might benefit from arranging for an appraiser who is appraising your home for mortgage purposes to do this appraisal so you can avoid paying twice to have your home appraised.
Before you try to buy out your spouse’s portion of the house, your spouse buys out your portion of the house, or you jointly sell your home to a third-party buyer, you will need to have a separation agreement finalized. Whenever dealing with anything related to changing homeownership you should have a formal Separation Agreement that describes the financial terms of your divorce and division of property and assets.
Separation Agreements are important in real estate transactions when you are getting separated and/or divorced because a formal Separation Agreement will be required for you to instruct your attorney on how you want to distribute the proceeds upon the sale of your house.
If you do not have a formal separation agreement in place, equity funds from the proceeds of the sale of your home will be sitting in your real estate lawyer’s trust account until a separation agreement is put into place which provides instructions for the lawyer about how you want them to distribute the funds from the sale of your home.
2. Your spouse keeps the home and your spouse buys you out
This is a similar version of the first scenario described above but instead of you buying out your spouse, they buy you out, paying for your half of the equity in your home.
3. You and your spouse decide to sell or rent the home and split the proceeds
If you and your spouse are selling your home to a third-party, you will be selling your home for however much you can sell it for not for however much one spouse’s equity share is. If you and your spouse are renting your home to earn rental income, the same rule will apply, you should be renting it out for however much you can get for it.
When you are selling your home, you should ensure that your separation agreement has been finalized before you sell your home because if your separation agreement is not finalized before you sell your home, the real estate lawyer you will be working with will be holding the proceeds from the sale of your home in trust until you have finalized your separation agreement.
4. One spouse stays in the home for an agreed-upon interval of time, this might be until their child graduates from high school
This is a slightly less common solution, but it could work for some couples, one spouse might want to stay in the matrimonial home until their children are older and then once the couple’s children have reached a certain age, they will sell the house together.
What happens to your mortgage if you want to sell your home after divorce?
Another important consideration when dealing with the matrimonial home is what happens to your mortgage since most people will have a mortgage or financing from a bank or other financial institution to help them be able to afford to purchase their homes.
If you are trying to get a new mortgage, it is important to note that ALL Canadian banks are going to require you to show them your legal Separation Agreement before they will approve you for a new mortgage without your spouse.
It is important to remember that you will be required to qualify for a new mortgage based on your income and debts alone regardless of whatever is outlined in your Separation Agreement. However, banks will consider spousal support payments and other support payments as part of your total debt to income load when banks are reviewing your new mortgage application.
Finally, if both spouses are still on an existing mortgage then in the eyes of a bank, both spouses will be responsible for paying the mortgage and property taxes until one of the spouses is removed from the mortgage.
Questions you need to ask yourself before making any decisions about the fate of your matrimonial home
Before making any major decisions about the fate of your matrimonial home, here is a list of questions that you should be asking yourself. These questions are meant to help you how to figure out how you will proceed and what your next steps are when dealing with the matrimonial home.
- Where will you go if you sell your matrimonial home and are not buying out your spouse?
- How much will it cost you to maintain your home?
- Will you be able to reasonably afford to be solely responsible for covering the costs related to maintaining and keeping your home?
- What do you need to get your home ready to sell? Do you need to do any repairs, big or small before you list your home for sale?
- How much will it cost you to sell your home? You should be considering: lawyers’ and legal fees, the commission a real estate broker or agent who is representing you as the seller will be taking, mortgage penalties, other potential costs, and the costs associated with getting your home ready to sell.
- If you have children, how will selling your home and moving out affect your children? How will you approach explaining your separation, divorce, and moving out to them?
- How will the proceeds from the sale of your house be divided? If you have specific questions about how this works, you should consult a divorce lawyer and/or a real estate lawyer who has experience handling divorce sales, how the proceeds from the sale of your home.
- Are there any debts, you have as a couple jointly or otherwise that will need to be paid from the proceeds from the sale of your house before the proceeds can be distributed to you and your spouse?
- Are there any deductions that will need to be taken from one spouse’s share of the proceeds from the sale of your home to cover the expenses the other spouse covered after you two were formally separated?
- Do you have a formal agreement in writing with your spouse with regards to custody, access, child support, spousal support, and the division of property if and when the marriage ends, or you become legally separated?
- Will a real estate attorney need to hold onto the proceeds from the sale of your matrimonial home because you and your spouse do not a formal agreement in writing that dictates the division of marital property?
- If you have a mortgage, what happens to your mortgage when you get divorced?
Things to consider when you are selling your house to a third unrelated party
First, do not advertise your home like a divorce sale. You might wonder why you should not let potential buyers know that you are selling your home because you are getting divorced. It is not recommended to advertise a divorce sale since potential buyers might believe that you are desperate to sell your home because you are getting divorced.
This might sound strange but it is recommended that you stage your home to make it look like you are your spouse are still living together, i.e. have some of their stuff and some of your stuff so if you are selling your home, while you are still living there, buyers do not get the impression that you are selling your home because you are getting divorced.
While there are many things to consider when moving and selling your home, especially when you are selling your home before you get divorced, while you get divorced, or after your divorce, selling your home while getting divorced does not have to be extremely hard.
While there are certain legalities and technicalities related to the division of assets, who has the title or deed to the home, the mortgage, the division of proceeds after the sale, your relationship with your spouse, etc. the actual process of selling your home is not extremely different from what you would go through if you were selling your home if you were an unmarried single person, or you and your spouse were still together.
Many of the same rules regarding staging your home and negotiation tactics you can use when selling your home still apply if you are selling your home because you are getting divorced.[How much will home staging cost in Toronto?]
Although, your experience selling your home, the circumstances surrounding the sale of your house, how the proceeds from the sale of your house will be divided, the technicalities, and logistics of selling your house when getting divorced means that there are things that will be different than a non-divorce sale.
You should be prepared for the possibility that selling your home because you are getting divorced might take longer and be a more involved process than if you were selling your house under different circumstances. Selling your home, moving, and getting divorced can be extremely stressful individually, but together this can be a lot to handle. This brings us to our next thing you should remember when you are getting divorced.
This cannot be said enough but if you are selling your home and are separated, divorced, and/or are getting divorced you would benefit greatly from working with a real estate broker or agent who you trust and believe you would work well together with who has experience handling divorce sales, a real estate attorney who handles divorce sales, and a divorce lawyer. [How to choose the right mortgage broker in]
Selling your home and moving is hard enough as it is, on their own, but adding divorce to the mix means that you will need guidance and support from those who are used to work with other people who are in your shoes. [Buying or Selling a Home in the GTA During Divorce Just Got Easier ]
Things to consider when selling your home after getting divorced in Ontario
The tax implications associated with selling your home when you are separated versus when you are divorced
Ideally, if you know you want to sell your home to someone who is not your spouse, it is recommended that you consider selling your home before you process your divorce. You will experience tax benefits if you sell before your divorce goes through. Canada’s present capital gains law states that if you are married and selling your primary residence where you and your spouse have been living for at least two of the last five years, you can exclude $500,000 in profit.
However, if you wait to sell your home until after you are divorced, you can only exclude $250,000 in capital gains. This is one of the reasons why it is recommended that you consult a financial advisor before making any significant financial decisions.
Additionally, it is important to remember that second homes and investment properties in Ontario are subject to different rules and regulations, which are described in the Family Law Act. However, you might find that you, your spouse, and your financial advisor agree that it is better for you to wait to sell your home.
You might consider waiting to sell your home to help ensure that your kids can stay in their family home for a bit longer, if you want to keep a property as an investment or income property if you find that your home does not have a lot of equity in it, or it is not a good time to be selling your home because of economic conditions and/or conditions in the housing market.
Hopefully, after reading this article, you will have learned about your rights to marital property in Ontario, what the matrimonial home is in Ontario and what this means for you if you are getting separated and/or divorced in Ontario, and how to sell your home in Ontario. Whenever a relationship ends, especially when a marriage ends this can be a challenging and stressful time for everyone involved.
However, having a team of experts who work with people who are getting divorced, such as a divorce attorney, mediator who works with couples getting divorced, real estate agent or broker experienced in dealing with divorce sales, financial advisor, and others who help people through their divorces should ideally make getting divorced and the splitting of assets easier.
However, it needs to be said that there are many things you will need to consider when selling your home when you are legally separated, in the process of getting divorced, or after you have gotten divorced. If you have any questions about this process or need more specific guidance regarding your unique situation, it is recommended that you speak with a divorce lawyer.
Get in touch as well with a real estate agent or broker experienced in handling divorce sales, and/or a real estate attorney who has experience in handling divorce sales. If you have other questions related to selling your home or buying another home, feel free to check out our blog and other articles on buying and selling in Toronto and the Greater Toronto Area (GTA) and real estate trends in Toronto. [How to choose the right mortgage broker in]