Things You Should Know About the Division of Property After Divorce in Ontario
Approximately 38% to 40% of all marriages in Canada will end in divorce. This means that two in every five marriages in Canada will end in divorce. Chances are that most people getting married are not considering divorce when they are getting married.
The end of a relationship can be extremely difficult and stressful because not all marriages end amicably. Many marriages end contentiously. This can make getting divorced emotionally draining as your marriage ends and you are forced to figure out how you and your former partner are supposed to divide assets.
If you are getting divorced in Ontario and own property with your spouse but are not sure what you can expect when it comes time to determine how your property and assets will be divided this guide is for you.
It is important to note that if you have specific questions related to your specific situation you should consult a divorce attorney and maybe even consider consulting a real estate attorney who handles divorce sales.
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This guide is meant to be a primer on how property is divided when a couple divorces in Ontario and meant to help you figure out what your rights concerning the matrimonial home and how the matrimonial home is viewed differently under the eyes of Ontario’s Family Law Act than other properties and assets.
This guide is not intended to be the be-all or end-all on the division of property in Ontario. This article is meant to help you understand what the matrimonial home is, what your rights are to the matrimonial home, and what your options are when dealing with the matrimonial home. Additionally, we will provide a brief overview of how you can expect to divide other assets that are not a part of the matrimonial home and how equalization payments work.
For the purpose of this article, “married” is defined as a couple who have or had a legally recognized marriage. A legally recognized marriage means that this couple had a marriage ceremony performed by an individual who had the legal power to marry them, such as a judge, a justice of the peace, religious official, etc.
It is important to note that couples who live together as spouses in Ontario for at least three years but are not legally married to each other are considered to be in a common-law relationship. You might have lived together for many years with your partner, have children together and even refer to your common-law partner as your “husband”, “wife”, or “spouse” does not mean that you and your partner are legally married to each other.
For family law issues in Ontario such as spousal support, child support, custody, and access, in the eyes of the law, it does not matter if you and your spouse are or were legally married or living in a common-law relationship. The rules are the same for these issues.
However, the rules are different for couples who are or were living in a common-law relationship than for couples who are or were legally married, when it comes to dividing property, who is allowed to stay in the family home or make decisions about selling the family home, who is entitled to receive the benefits from the sale of the family home, and dividing property in your spouse’s will.
With these issues being in legally recognized marriage versus being in a common-law relationship will make a difference with your rights to the property. For example, a married couple automatically shares the value of a property if they separate or if one spouse dies. This is not the case for common-law couples.
Later in this article, we will address the different rights that married couples and common-law couples have when it comes to property, the division of property and other assets when they get divorced or their common-law relationship ends.
The matrimonial home: everything you need to know about the family home
What is the matrimonial home?
The matrimonial home under the Ontario Family Law Act refers to any residence or property that one or both spouses have an interest in or a home that is rented or owned and ordinarily occupied by both spouses and their family or by both spouses on the day of separation.
Since the matrimonial home, the matrimonial home technically can include any type of housing including condos and mobile homes. In at least one case in Ontario, the sailboat a couple owned together was considered to be a matrimonial home. If you have any doubts about what property or properties you own and whether or not they might be considered a matrimonial home in your specific case, you should consult a divorce lawyer.
In fact, there can be multiple matrimonial homes, as long as the additional home(s) on the date of separation technically fulfilled the requirements of being a matrimonial home. You might be wondering how couples could have more than one matrimonial home?
Picture this. You and your spouse’s principal residence is located within the City in Toronto. But you also own a vacation cottage that you frequent most weekends, this cottage could technically be considered an additional home. Any additional homes that you and your spouse own, that are not your principal residence, but you and your spouse occupy regularly, could technically constitute a matrimonial home under Ontario’s Family Law Act.
If you have any additional properties with your spouse i.e. a second home and are not sure if this would be considered a matrimonial home gave that your second home could be considered a matrimonial home, you should consult a divorce attorney.
What are your rights concerning the matrimonial home?
It is important to note that under Ontario’s Family Law Act, the matrimonial home is treated differently than other assets or properties that you own(ed) individually or with your spouse. Since the matrimonial home under Ontario’s Family Law Act is granted a unique legal status, if you are/were legally married, i.e. your marriage to your (current or former) spouse is/was legally recognized, this makes dividing this asset more complex. Figuring out what to do with the matrimonial home can be incredibly challenging because this home is often the largest or most valuable asset that many couples might ever own.
However, if your marriage was legally recognized in Ontario, you will have many rights concerning the matrimonial home that you would not have for example if you were in a common-law relationship.
Both you and your spouse have the equal right to stay in and continue living in the matrimonial home, until the home is sold, or a judge grants a court order ordering one spouse to move out.
If you were married and then become legally separated while living in the matrimonial home, and one spouse moves out, you will not be allowed to legally change the locks when your spouse moves out. In fact, under Ontario’s Family Law Act, you will no legal grounds that will allow you to change the locks once your spouse moves out.
More importantly, under Ontario’s Family Law Act, the matrimonial home’s unique legal status means that both spouses have an equal right to possess the matrimonial home. The right to equal possession for the matrimonial home continues after the spouses are legally separated, unless or until both parties reach a separation agreement or a family court judge grants a court order, establishing that one spouse is exclusively entitled to maintain ‘exclusive possession’ of the matrimonial home pending a family court trial.
Once a family court judge has granted a court order for exclusive possession in favour of one of the spouses, this spouse will be the only spouse with the sole right to live in the home, no matter whoever legally holds the title for the home.
Therefore, until or unless you and your spouse create a formal separation agreement which includes the matrimonial home or one spouse is granted exclusive possession of the matrimonial home, neither spouse can prohibit the other one from living in the matrimonial home. And neither spouse can change the locks on the matrimonial home as to lock the other spouse out.
Under Ontario’s Family Law Act, both spouses are allowed to stay and live in the matrimonial home until a formal resolution is reached regarding the possession of the matrimonial home. In many cases, if a couple has children together, chances are that their children will probably stay in the matrimonial home. While you might legally maintain the same right to possession of the matrimonial home, it might not be advisable or realistic for you and your spouse to continue living together while you are getting divorced.
In the event that one spouse moves out of the matrimonial home, they will not be entitled to come-and-go from the matrimonial home at will. If they will be coming and/or going from the matrimonial home, they are required to provide the other spouse living in the matrimonial home, with reasonable and adequate notice of any intention they might have to return.
For example, if you stayed in the matrimonial home and your spouse moved out before you two legally separated, and they needed to return to the matrimonial home to collect some of their personal property, that they left behind in the matrimonial home, they will need to provide you with adequate and reasonable notice of their intention to return to the matrimonial home to collect the personal property they left behind. In other words, your spouse cannot just show up on your doorstep one day without giving you any prior notice to see you or get some of their items from the matrimonial home.
What is an order of exclusive possession and what does it mean for you?
An order of exclusive possession is a court order granted by a family court judge which means that only one spouse is allowed to live in the matrimonial home. Order for exclusive possession means that the other spouse will be legally required to move out of the matrimonial home, and they will be forced to live somewhere else.
If a family court judge grants an order of exclusive possession of the matrimonial home in your favour, this will mean that you will be the only spouse who can legally live in the matrimonial home. If domestic violence is occurring in the matrimonial home and you are the victim in the situation, you might consider applying for an order of exclusive possession. However, if you believe that you are a victim in a domestic violence situation and you need support, you should probably find an advocate who works with others in your situation, can help support you through this, can inform you of your rights, who can help you devise a safety plan.
In some cases, when a family court judge grants an order of exclusive possession, the court might order that the lock(s) for the matrimonial home(s) are changed if there are circumstances that create a situation where the locks to the matrimonial home will need to be changed.
It is important to note that orders of exclusive possession of the matrimonial home are usually supposed to last a certain period of time. Usually, orders of exclusive possession are meant to allow the other spouse to have the right to periodically re-enter the matrimonial home providing they are giving the spouse who is living in the matrimonial home adequate and advanced notice.
Additionally, you need to understand that when the court grants one spouse an order of exclusive possession of the matrimonial home, the court is ONLY giving one spouse the exclusive right to stay in the matrimonial home without the other spouse.
An order of exclusive possession of the matrimonial home, DOES NOT provide the spouse permitted to stay in the matrimonial home with the right to legally sell or dispose of any furniture or other belongings until a court has fully resolved all of the issues related to separation and divorce, this includes the equalization of any net family property.
In other words, if an order of exclusive possession is granted in your favour, this does not give you a license to sell or dispose of all of your spouse’s belongings or any shared items. This is not the time when your spouse has been forced to vacate the matrimonial home when you think to yourself that now is the time when you can sell or get rid of their belongings that you do not like.
If you were to do this, you could end up having a lot of problems down the road. Remember, there are healthier, more constructive and productive ways of dealing with your feelings about your divorce and your spouse that will not potentially mean legal trouble for you.
Finally, having a court grant an order of exclusive possession of the matrimonial home in your spouse’s favour or in your favour does not impact your property ownership rights. When a court grants an order of exclusive possession, a court is granting a temporary order that is meant to provide you and your spouse with some time to craft a completed a separation agreement.
In granting an order of exclusive possession of the matrimonial home, the court is not trying to imply that the spouse who gets to stay in the matrimonial home is allowed and who is not allowed to own the matrimonial home.
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.
The unique protected legal status granted to the matrimonial home under Ontario’s Family Law Act means that you cannot do anything major to the matrimonial home without receiving your spouse’s written permission first.
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 your spouse does not cooperate with your efforts to sell the matrimonial home, you might need to initiate an application with the court to make it possible for you to sell the matrimonial home.
If you are in this situation, you should speak with a divorce lawyer about what your options are so you can ensure that your spouse cannot create obstacles that prevent both of you from selling your home and ultimately sell your home.
The rules of ownership for the matrimonial home and how these relate to the division of the matrimonial home
First, no matter whose name is currently on the title and deed for the house, if both of you lived there together as a married before the date of your separation, it is still the matrimonial home. Yes, you could have bought and owned this home before you even meet your spouse and married them.
HOWEVER, once you and your spouse got married and your spouse moved into the home with you following the marriage, this home automatically became the matrimonial home. It does not matter who owns or owned the house, once you and your spouse moved into this home after you were married before the date of separation, this home is now the matrimonial home.
Also, if the home that became your matrimonial home was gifted to you or you inherited it before you were married and your spouse moved in after you were married before the date of separation, this home is still considered to be a matrimonial home. Your inheritance will be exempt from division with your spouse UNLESS you are putting money from your inheritance into the matrimonial home.
Additionally, someone gifts you the funds for your down payment to buy your matrimonial home, your spouse will not be legally required to repay you for the gifted funds for the down payment. While you can always try to negotiate with your spouse to have them repay the gifted funds for your down payment, the courts will not legislate this. The matrimonial home will always be divided unless you have a prior marriage contract that specifies how the matrimonial home will be divided.
Special considerations about the matrimonial home for people in common-law relationships in Ontario versus people who have or had a legally recognized marriage
If you are in a common-law relationship in Ontario, as mentioned earlier you are considered to be in a common-law relationship if you and your spouse have been living together for at least three years, the rules about the matrimonial home might not apply to you.
If you are in a common-law relationship, usually, the matrimonial home belongs to whomever the home is registered to. This might not be the case for you if you have a signed cohabitation agreement with your partner which specifies who is allowed to live in the matrimonial home and how the value of the matrimonial will be divided. If your cohabitation agreement is recognized as legally binding you must follow this agreement.
Generally, with common-law relationships, whatever was yours when you came into the relationship will be yours whenever you leave the relationship. Given that common-law couples in Ontario do not enjoy the same statutory property rights as married couples you might not be legally entitled to stay in the family home if it is not in your name if it is in your partner’s name.
Since common-law couples do not enjoy the same statutory property rights as married couples in Ontario, if one common-law spouse owns the matrimonial home, the spouse who owns the matrimonial home will be able to sell the home, mortgage it, rent it, etc. This holds true no matter whether you have lived with your common-law spouse for five years or twenty-five years. If you are a common-law relationship in Ontario you will not enjoy the same legal rights of property ownership as married couples in Ontario.
However, if your common-law partner is abusing you, you might be able to stay in the matrimonial home even if the home is not registered to you. To stay in the matrimonial home when your common-law partner is abusing you, you will need to apply and have a restraining order granted that specifies that your abuser is prohibited from entering the property, that will allow you to keep living in the matrimonial home.
If you are in this situation, you should consult a lawyer and learn more about your options. However, it is important to note that it might be difficult for you to get a restraining order which prohibits your abusive common-law spouse from entering the matrimonial home and allows you to stay there.
Property rights in Ontario when you are dividing assets and property during a divorce
For the purpose of this article, property includes money (investments, cash, etc.), pensions, Registered Retirement Savings Plans (RRSP), insurance policies, and disability benefits, other financial assets, real estate, businesses, frequent flier miles, and any other assets that a couple has. Property is being defined as anything you own.
The property, when you are dividing up property and assets with your spouse is everything that was previously mentioned, and this could also cars and other vehicles, personal items including clothing, jewellery, and artwork, household items, such as furniture, appliances, electronics, antiques, etc.
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Property rights for married couples in Ontario
When you are separating or getting divorced in Ontario, the property that you acquired during your marriage must be divided equally. If your spouse owns property or assets that are worth more than your property or the assets that you own, they must pay you or give you half of the difference in value between their property and your property/assets to help ensure that both you and your spouse are leaving the marriage on equal footing.
If you need help with dividing up property and assets or are unable to come to an agreement about how to divide property and assets, you can always have the court to decide how to divide property and assets. However, you must claim this within six years after legally separating from your spouse and within two years of finalizing your divorce with your spouse.
The law in Ontario ensures that married spouses are required to equally divide all of the property a couple acquired during their marriage. In this situation, in the eyes of the law in Ontario, it does not matter who is paying for things or whose name the matrimonial home is in. The value of the matrimonial home is equally divided between spouses even if one spouse owned the matrimonial home before marrying their spouse.
However, there is one notable exception to the rule about dividing the value of the matrimonial home equally between spouses. If one spouse owned the home that the couple used as the matrimonial home and then the spouse who was the original owner of the matrimonial home and sold the home that was used as the matrimonial home before the marriage ended, the spouse who owned the home is allowed to count the value of the home on the date they married their spouse as property that they owned before the marriage and this value does not have to be divided equally.
In other words, if you owned the matrimonial home before you married your spouse and did not sell it before the marriage ended, you would be forced to give your spouse one half of the total value of the home upon the date of separation. If you owned the matrimonial home before you got married and sold it before your marriage ended, given that in this scenario you only would have to count the value of the house on the date of marriage and the date of separation.
You would calculate how much your spouse in the following manner: Total equity in the home (home’s total value minus debts/liens, etc.) on the date of separation minus the total equity in the home on the date of the marriage. Then you would divide the difference in value by half and give your spouse half of this change.
Here is an example to help illustrate how you would calculate what you owe your spouse assuming you owned the matrimonial home before the marriage and sold it before your marriage ended.
On the date of your marriage, your house was worth $300,000 and on the date of separation, your home was worth $600,000. In this scenario, you would calculate $600,000 – $300,000, the total change in the value in the home was $300,000. Now you would divide this $300,000 by two and you would be paying your spouse $150,000, to compensate for the increase in the home’s value while you owned it.
The section of this article which deals with the calculation of the equalization of assets and property when you are getting divorced in Ontario contains a formula that will help you to figure out how you would equally divide your property if you are unable to figure out how to divide property when you and your spouse finalize your separation agreement.
The Family Patrimony in Ontario
A family patrimony is a group of assets shared between spouses who decide to end their marriage or common-law relationship. However, these rules about the family patrimony mainly apply to couples getting divorced, this usually does not apply to couples ending their common-law relationship. Some assets are automatically included in the family patrimony, regardless of who they belong to, the items that are automatically included in the family patrimony include
- The matrimonial home or matrimonial homes
- Furniture and other items found in the matrimonial home
- Motor vehicles used for family travel
- Any money acquired in a pension plan during the marriage such as the: RRSP, Quebec Pension Plan, employer pension funds, etc.
The majority of pension plans are considered to be a part of the family patrimony, this includes profit-sharing plans, supplementary annuity agreements for high-income earners and unregistered annuity contracts (that were purchased with funds not coming from a pension plan).
What assets and properties are not part of the family patrimony in Ontario and might be excluded from consideration when calculating a spouse’s Net Family Property (NFP)?
Any property that is not designated as being part of the family patrimony is excluded, including income properties, bank accounts, stocks, bonds, jewellery, investments, and other personal property. This rule also applies to money, investments, and properties that were received as a gift from someone other than the other spouse or that one spouse inherited.
Gifts from someone who is not the other spouse and inheritances assuming the spouse did not use any money that they inherited into purchasing or making improvements to the family home are excluded from the calculation of a spouse’s Net Family Property (NFP).
It is important to note that if you spent the money from such gifts, such as life insurance or inheritance during the marriage, it often becomes more challenging to trace this money. Therefore, the amount of money gifted to the spouse in question cannot be excluded from the spouse in question’s Net Family Property (NFP) calculation.
However, there might be some assets not included in the family patrimony that may or may not be shared as if they were family patrimony under the terms of the matrimonial regime. A marriage contract can be helpful since it can go into the specifics of considering any potential additional property.
How the division of property when couples are getting divorced in Ontario is different than the division of property when couples are getting divorced in other provinces
When a marriage is dissolved in Ontario, in the eyes of the law, each spouse’s contribution to the marriage is taken into account. Any property acquired during the marriage that still exists at the end of the marriage must be divided equally.
Also, any property owned by either spouse at the beginning of the marriage whose value has increased throughout the marriage, the other spouse must share in the gain in this asset or property. When this sharing happens, a settlement might be given from one spouse to the other spouse. This settlement is known as an equalization payment because it serves to be an equalization of net family property.
However, gifts and/or inheritances received before or throughout the marriage from a person that is not the other spouse, that is not used towards the matrimonial home, can be considered excluded assets and property and will be excluded from an equalization payment.
Calculating the equalization of assets and property when you are getting divorced in Ontario
It is important to note that when a couple gets divorced in Ontario, each spouse is entitled to half of the cash value of the family patrimony that was acquired during the marriage. In order to determine, how much the family patrimony one and if applicable who will be receiving an equalization payment and how much that will be, you will be doing the following:
First, each spouse needs to calculate their Net Family Property (NFP)
To calculate their Net Family Property (NFP), each spouse needs to add up the value of everything they own. From this amount (the calculation of the value of everything they own), they need to subtract the value of whatever they owned before they were married, their debts, any inheritances, and/or gifts.
You will need to determine the market value of your assets and calculate the net value of the family patrimony less any debts (mortgage, car loans, personal loans, etc.)
If this applies to you, you will need to deduct the value of assets at the time of marriage, as well as money that you have received as a gift and/or inheritance that was used to pay for the matrimonial home. Also, if you owned the matrimonial home belonged to you before the marriage and sold it before your marriage ended, you could avoid paying your spouse for their half of the total value of the home, you only would pay your spouse half of the difference in your home’s equity from the date of the marriage to the date of the sale of your home when dividing assets.
Second, the couple needs to calculate the amount that will constitute the equalization payment
The equalization payment is a payment that the spouse with a higher Net Family Property (NFP) is required to make to the spouse whose Net Family Property (NFP) is lower than the other spouse. This is also known as a settlement. The amount of an equalization payment is half of the difference between the spouse who has a higher NFP and the spouse who has a lower NFP. Here is a sample NFP calculation worksheet you can use from the National Association of Women in the Law when calculating your NFP and an equalization payment.
The differences between dividing assets or property with your spouse with the matrimonial home versus dividing other assets such as a bank account
We have established already that Ontario’s Family Law Act treats the matrimonial home differently than other assets. For the matrimonial home, if you and your spouse bought the matrimonial home together you would be entitled to half of the total equity in the matrimonial home. For other assets that are not the matrimonial home, such as bank accounts the rules for calculating the value your spouse is entitled to are different.
With assets such as bank accounts, each spouse is permitted to do the following deduction: the bank account’s value at the date of separation minus the bank account’s value at the beginning of a marriage and halve this value. The following example usually applies to most cases but if you are not sure if and how this would apply in your case, especially if you have a marriage contract that dictates the division of assets once a marriage ends, consult a divorce lawyer.
Here is an example that should help illustrate how dividing assets such as a bank account versus the value in the matrimonial home are different when getting divorced in Ontario.
Imagine the following situation. You entered your marriage with $400,000 in your bank account and the balance of your bank account remained the same until you were separated. During the marriage, you earned $100,000 in interest for this account and on the date of separation, this bank account was worth $500,000.
Assuming that neither you or your spouse have any other assets or debts, you would divide the amount of money this account earned in interest in half. Therefore, your spouse would be entitled to receive $50,000, half of the interest the account earned. After paying your spouse $50,000 you would be left at the end with $450,000.
Now imagine that instead of having a bank account with a $400,000 at the beginning of your marriage, you owned a house worth $400,000. When you and your spouse are married, your spouse moves into your home and the moment your spouse moves into your home this home becomes the matrimonial home.
During your marriage, your home increases in value to $500,000 and your house is worth $500,000 when you and your spouse are separated. Assuming that you and your spouse have no other assets or debts, you would owe your spouse $250,000, half of $500,000. In this hypothetical situation, you would be paying your spouse $200,000 more than you would have paid your spouse otherwise if you had a bank account instead of the matrimonial home.
This payment you would be making to your spouse is known as an equalization payment. It is important to note that when a marriage ends, legally, the property-division provisions of the Family Law Act are set into motion and the property is then meant to be divided equally between spouses. However, this division of property is subject to certain rules and exceptions. One of the most notable exceptions with the division of property when a couple of divorces in Ontario concerns the division of the matrimonial home.
When would an equalization payment in Ontario be for a different amount?
In some cases, a court in Ontario can order for one spouse to pay the other spouse more or less than the previously calculated equalization payment. This might happen if a judge believes that the amount for the equalization payment is extremely unfair or if the couple in question has signed a marriage contract or another agreement that outlines the division of property and other assets at the end of a marriage.
When you have a signed marriage contract or other agreement, the court will force you to follow whatever is outlined in the marriage contract unless the court deems the marriage contract to be extremely unfair. The court will not force you to follow a marriage contract or other agreement that you were forced to sign. You NEED to tell the court if you signed a contract, if you were coerced, bullied pressured or lied to.
A judge will consider the following factors when deciding whether or not an equalization payment is fair:
- Whether or not one spouse did not tell their spouse about all of their debts at the time of marriage
- Whether or not one spouse accumulated debt by behaving recklessly or acting unfairly on purposes
- Whether or not one spouse specifically intentionally reduced their property or spent their money before the couple separated
- Whether or not the Net Family Property (NFP) for one spouse includes large gifts from the other spouse
- If the couple lived together for less than five years and if the equalization payment amount would mean that one spouse is getting more than their fair share of the property
Property rights for common-law couples in Ontario
When you are in a common-law relationship you do not automatically have a legal right to your spouse’s property. While you can ask a court to order your common-law partner to give you some of their property if you can demonstrate that what you did during the relationship made it possible for your spouse to acquire that property or wealth or your actions significantly contributed to your partner’s wealth. If you want to make this claim, you need to make this claim within two years of separating from your common-law partner.
When a couple in a common-law relationship separates, each spouse will keep the property and assets that they brought with them into the relationship as well as anything that they might have bought when they were in the relationship. The only property that is divided equally when you are in a common-law relationship is any assets where both spouses are listed as owners.
However, if a common-law couple has a cohabitation agreement, their property and assets will be divided in accordance with whatever is outlined in the agreement. Common-law couples can also write a separation agreement detailing how to divide the property.
What happens when you and your common-law partner cannot agree on how to divide property?
If a common-law couple cannot agree on how they should divide property and mediation has not worked for them, they might consider going to court and asking a judge to decide on dividing the property. You can ask a judge and the court to help you and your common-law partner divide property if:
- You and your common-law spouse cannot agree on how to divide something that you and your common-law spouse acquired together
- You and your spouse had agreed on planning to share the property that was only in one spouse’s name
- The property is in your spouse’s name, but your actions made it possible for them to acquire this property and you have suffered financially because of this
- The property in question is in your spouse’s name, but your actions helped add to the value of this property or asset and you have suffered because of this.
Ideally, you should be able to get some of the value of your common-law spouse’s property, property that is in your spouse’s name if you are able to demonstrate how work you did or your actions helped enrich your spouse, i.e. you contributed to your spouse’s business or supported them financially while they were in school or advancing their career.
The court recognizes that the unpaid labour women and femmes do in the home, such as caring for the home, family members, relatives, and caring for children is something that makes it possible for couples to become wealthier. The court recognizes this labour but fighting to ensure that you receive some of your spouse’s property but fighting to make this happen can be time-consuming and expensive. If you believe that you might be entitled to some of the value of your common-law spouse’s property, you should speak with a lawyer.
Responsibilities for debts and loans for married couples getting divorced and common-law partners breaking up
Whether you are or were married or in a common-law relationship, you will be responsible for the debt that you have accumulated in your own name or the debt that you might have accumulated jointly with another person in both of your names.
If you are married, the debt you owe will be subtracted from the total amount from your property value when you are calculating how to equally divide property with your spouse when you become legally separated. The National Association of Women in the Law (NAWL) recognizes that when one partner takes on large debts in their partner’s name or in a joint account with or without the other partner’s consent that these are common forms of financial abuse.
What are your options for dealing with the matrimonial home when you are getting divorced in Ontario?
For many couples, the family or matrimonial home might be one of the most valuable assets that they own together. Therefore, making the decision to sell your home can be emotionally and financially challenging. You have five options when disposing of the matrimonial home in Ontario (it is important to note that this only applies to couples who are or were legally married).
First, if you have not already decided what you will be doing with the matrimonial home, you need to consider your options when it comes to the family home. These options assume that if you are getting legally separated or divorced that you and your spouse will be no longer living together.
1. You keep the matrimonial home and buy your spouse out
In this scenario, where you are keeping the matrimonial home and buying out your spouse’s share of the matrimonial home, this could end up costing you a lot. In this scenario, you are buying out your spouse’s half of the equity in your home. If you end up doing this, you are potentially taking on an existing mortgage for your home and you will probably need to increase your mortgage to include the amount of money you would be owing to your spouse if you buy out their portion of the home.
If for the sake of argument your home is worth $600,000 and you have a mortgage on your home for $200,000, you would have $400,000 in equity in your home. Your spouse would receive half of the total equity in your home ($200,000). If you are keeping the matrimonial home, you will be assuming the existing mortgage of $200,000 and your new mortgage would increase to be $400,000, to include the existing mortgage and pay for your spouse’s share of the equity in your home. In this situation, you would be solely responsible for paying a new mortgage of $400,000 plus applicable taxes.
Whenever one spouse is buying out the other spouse’s portion of the matrimonial home, the valuation of the matrimonial home will be based on a formal appraisal completed by a professional appraisal. [Differences Between a Home Appraisal and a Current Market Assessment in Ontario]
When you are getting a new mortgage to buy your spouse’s portion of the home, each lender tends to have their own preferred home appraisers that they tend to work with. You might benefit from arranging to have 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.
It is important that you understand that before you make any major significant decisions about the future of the matrimonial home–whether you are buying your spouse out, whether your spouse is buying you out, whether you and your spouse are selling the matrimonial home to a third-party buyer, etc. you will need to have a finalized separation agreement.
Whenever you are dealing with anything related to changing homeownership of the matrimonial home, you need to have a formal Separation Agreement describing the financial terms of your divorce and the division of property and assets.
Separation Agreements are extremely important for real estate transactions when you are getting legally separated and/or divorced since you will need a formal separation agreement to instruct the real estate attorney who is handling the sale of your home, on how you want to distribute the proceeds from the sale of your home.
Otherwise, if you do not have a formal separation agreement in place when the time comes to sell your home, the 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 finalized which provides instructions for your real estate 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 previously. However, instead of you buying out your spouse, they will be buying you out, paying for half of the equity in your home.
3. You and your spouse decide to sell or rent the home to a third-party 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, you want to sell your home for as much as possible. If you and your spouse are renting your home to earn rental income, the same rule will apply, you will 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. If your separation agreement has not been finalized before you sell your home, the real estate lawyer you are 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. In this scenario, 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 and divide the proceeds from there.
5. If you and your spouse cannot come to an agreement about who should be allowed to live in the matrimonial home after your separation, you can ask a court to decide who should be allowed to stay in the matrimonial home.
When asking a judge to decide who should be allowed to live in the matrimonial home, the judge will be taking the following things into consideration:
- How much money each spouse has
- Whether or not the couple has any written agreements that specify what will happen to the matrimonial home
- What will be best for the couple’s children if the couple have children together
- Whether or not there are other places where the spouses could live
- If there is a history of domestic violence
It is important to note that property will no longer be considered the matrimonial home when a couple is legally separated or divorced. If you own a home, you should be settling questions about how to divide up assets and properties before your divorce is officially finalized.
What happens to your mortgage if you want to sell the matrimonial home?
An important consideration when disposing of the matrimonial home is what happens to your mortgage if you sell your home or leave your mortgage early because you are getting divorced. This is an important consideration because probably the majority of homeowners will have needed a mortgage or financing from a bank or other financial institution in order to be able to purchase their homes.
If you are getting a new mortgage to buy a new home after getting divorced, it is important to note that ALL Canadian banks will require you to show them your legal Separation Agreement before they will approve you for a new mortgage without your spouse.
You need to keep in mind that you will need 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 forms of support payments as part of your total debt to income load when they are reviewing your new mortgage application.
Furthermore, if both spouses are still on an existing mortgage, in the eyes of the bank or lender, both spouses will be held responsible for paying the mortgage and property taxes until one of the spouses is removed from the mortgage.
For more information on selling your home after your divorce, check out our article “How to sell your home after a divorce”. If you are looking to learn more about managing the real estate after divorce, check out “How to manage real estate after a divorce”
Hopefully, after reading this article you will have gained greater insight into how property is divided after divorce in Ontario, what your rights are concerning the matrimonial home, how to calculate each spouse’s net family property (NFP), and how equalization payments work.
Ideally, you will have a better idea of what your options are when dealing with the matrimonial home after getting divorced and what happens to your mortgage when you get divorced. Gaining a clearer understanding of how assets are divided during divorce should help you to potentially plan ahead and know what to expect with dividing assets when you get divorced in Ontario.
Dividing up assets and properties with your soon to be ex-spouse when your marriage ends might be potentially emotional, stressful, and contentious. Having a great team of professionals who work with people who are getting divorced, potentially could help to make this process less stressful.
A divorce team might consist of a divorce lawyer, potentially mediator who works with couples are getting divorced, a real estate lawyer who handles divorce sales, a real estate agent or broker who handles divorce sales, a financial advisor, and maybe a counsellor or therapist who can help you deal with the emotional side of divorce. You will probably want to have all of the support and guidance you can get since getting divorced is notoriously stressful and draining.
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