Property Division
Who gets what?
Quick Facts
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The Family Law Act and Divorce Act set out the rights of married couples
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Common law partners are not subject to the property division under the Family Law Act, although they may claim constructive trust to various property and assets
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On separation, married partners are subject to equalization. Generally this is a 50/50 division of assets and debts
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On partner may seek a higher division of assets if they are able to meet certain legal requirements.
Property rights on Separation
When a married couple separates, they have a right to make a claim for equalization payment. This is an automatic right to share the value and/or increased value of your property on separation.
Equalization looks at the increase of the value between you and your spouse during the course of your marriage. This means the calculation looks at the changes to your financial status (including assets and debts) from the date of your marriage to your date of separation only. This value is known as Net Family Property (NFP).
The date of separation is classified as the “valuation date.” Dependent on the circumstances, your valuation date may be the date you physically separate or the day you state your intentions to separate.
To determine who will pay who, you will need to calculate what is called the "equalization payment." To obtain this value, the lower NFP is subtracted from the higher NFP. The remainder is divided by two (2) and that amount is paid from the party with the higher NFP to the party with the lower NFP.
Although the calculation sounds simply in theory, there are a number of factors that must be taken into account. For instance, some assets such as inheritances received during the marriage are excluded from division. However, if monies from an inheritance are contributed to a matrimonial home, then they are divisible at time of separation.
It is important to understand your rights under the Family Law Act and Divorce Act before making any agreements as to division of property.
Division of the Family Home / Matrimonial Home
The matrimonial home falls in a special category when it comes to equalization. It may be one or more residence that the parties use on a regular basis during the marriage. "Regular basis" may be everyday or once a year. Regardless of who legally owns the property (either you, your spouse, or both), both parties have the same right to the value of the home and to occupy it after separation. It also means that neither spouse can register a mortgage or sell the matrimonial home without the consent of the other. If possible, you should consider maintaining the property under both parties' names as it will make the division of the asset easier on separation.
The treatment of the matrimonial home(s) on the NFP will be determined by the legal owner of the home - the person on title. If only one spouse has the title to the property, then the full value of the property will be included in their NFP calculations, but the value will be divided as part of the NFP calculation. If it is a joint title between you and your spouse, then the value is included on both parties' NFP calculations.
If married and you separate, you can control the division of the matrimonial home through a written agreement, court order, or through divorce.
Common-Law Rights
Only legally married couples have equalization rights as discussed above. Common law couples do not have this entitlement. Unfortunately, there is no “matrimonial home” rights available for common law couples in Ontario.
This means that if you separate, the person who legally owns the family residence may be able to sell, mortgage, or ask the other party to leave the house without the latter’s consent.
However, you may have rights to claim a payment for any contributions you may have made towards the property. Due to the circumstantial rights in common law relationships, you would want to consult with a lawyer to discuss whether you have any trust claims available for your situation.
Given the fact that common law couples do not have automatic property division rights, a good precaution is to have a domestic contract written up between you and your common law spouse to create or waive rights.
Opting Out of Property Division
Are the above rules set in stone?
No! Though there is legislation and rules controlling the rights of a couple, the courts still look at each individual circumstance. “Equal” does not necessarily mean “fair,” thus, the court may decide in an unequal division of your family property if they deem it fit for justice.
Dependent on the subject matter, you may be able to control your rights on separation through a domestic contract. A well written domestic contract will anticipate your property rights in anticipation of different scenarios. Both married couples and common law couples can control their rights in property division through a properly executed marriage agreement or separation agreement.
If you’re unsure on how to proceed or how to get started on property division, you may wish to consult with a family lawyer on your rights and options.