By Nathalie Boutet

Many couples who are thinking of separating are unclear about how family law determines division of the family property – including cottages and rental property.

Once someone decides to move out of the matrimonial home and live in a different residence, the biggest question they might have is whether the separation impacts property division. The answer depends on whether the separation is temporary or permanent.



A trial separation does not impact property division. This is because rights and obligations relating to division of property get triggered not during a relationship, but after there has been a permanent separation.

The permanent separation triggers certain property rights. For married couples who end up permanently separating, the Family Law Act (FLA) governs their financial affairs. Under the FLA, if there is a permanent separation, the home and all of their other assets accumulated during the marriage will be divided equally between the spouses. Additionally, the person who moved out is generally still entitled to half of any increase in the value of the property while he/she lived elsewhere. People are able to retain the value of the assets they brought into the marriage but any increase in value of that property during the marriage will be shared.

The case is different for common-law partners. In Ontario, if there is a permanent separation, there is no automatic equal division of asset. Usually each partner keeps the assets in their names and they share the joint assets in the proportion reflected in the title. If the house was owned as joint tenants, then they are each entitled to half. But if one partner only was on title, the other spouse does not have an automatic right to a portion of that house.

To have any right to the house owned by a former partner, the non-titled spouse would have to prove that they made significant contributions towards the purchase price, the mortgage or made significant improvements that resulted in an increase in the value of the house.

There are no legal implications to asset division when somebody moves out from the matrimonial home for a trial separation, but it definitely has a major financial impact on their budget. Unless they are lucky enough to find free accommodation, such as a parent’s residence, running two households can be expensive. Couples should agree on the method of payment of not only the matrimonial home, but also the cost of renting a second residence. It is common for the housing expenses for both spouses to be jointly funded by the couple, but in some cases the rented house is only paid by the one moving out.

It is usually advisable to continue funding the family expenses in the same manner as before the trial separation. This keeps the family finances stable and avoids additional stress on the family, especially if they have children. If this arrangement is not feasible or recommended, the parties should plan, so each knows how the bills will be paid.

Couples should also have a plan if the mortgage is up for renewal during the trial separation period. It may be simpler to renew with the same financing institution than to embark on a renegotiation with a new institution during this difficult period.

While a trial separation may have limited impact on high-net-worth families, less affluent families need to plan on how to fund regular budget items. They should also discuss how to service larger expenses such as anticipated home or car repairs.

Real estate agents dealing with couples who are about to separate, or have recently separated, should recommend they speak with a family law lawyer to fully understand their legal rights and ensure that their property interests are protected.

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1 COMMENT

  1. Although these articles I wrote are old, I had passed them by a local lawyer at the time to authenticate. So they might trigger some questions to consider asking your own lawyer or the article writer here at REM.
    • Getting Divorced? – a list of a 50 questions you need to consider
    (and – Should you Sell the house? or Buy out your Spouse?)

    http://carolyne.com/divorce.html

    ===
    • Gift Money, Homes and Divorce
    (Was It a Gift or a Loan?)

    http://carolyne.com/gift.html

    I had thank you’s and inquires from as far away as Ireland. The net causes materials to go all over the world. I haven’t written articles or updated my site in a long time since I put my life and licence on hold. Agents across North America made links to my articles for their own readers.

    Carolyne L 🍁

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