With the hot real estate market in several Canadian cities meaning that homes can increase in value by as much as 10% or more per year, the question of whether separating spouse’s share in that increase in value can be an important one. The amount at stake may be very large, even several hundred thousand dollars if it takes a year or two, or even more, to resolve the issues between the separated spouses.
To start, the answer may be different depending on whether the separated spouses are married or common-law. Since there is no property division under Ontario’s Family Law Act for common-law couples, there is no automatic right to share in the value of a home at all if both spouses names are not on title. For married couples, Ontario’s Family Law Act only equalizes the net of the increase in the party’s net worth’s between date of marriage and date of separation (with some exceptions). So married couples do not have an automatic right to share in the increase in value of a home after separation where the both spouses are not on title.
Where both spouses are on title, the starting point is that the increase in value will be shared and that, as part of the final resolution, the home will either be sold on the open market or one spouse will buy out the other for half of the fair market value of the house (assuming there only two names on title).
However, where one spouse leaves, and stops paying all the bills in relation to the house (the spouse stops paying for the mortgage, taxes, utilities and maintenance expenses) leaving the other spouse to pay for all of that, then it may be unfair for the spouse who left and stopped contributing to share that increase in value. The leaving spouse essentially stopped treating the house as his or hers when he or she left and forced the other spouse bear the burden of keeping the house. If that leaving spouse got to share in the increase in value, he or she would have a windfall and would essentially get something for nothing.
Ontario’s Superior Court applies principles of equity, one of which is the concept of “unjust enrichment.” The spouse who shared in the increase in value of the house after separation without contributing to the cost of keeping the house after separation would be “unjustly enriched.” In that situation, the court may not allow that spouse to share in the increase in value after separation even if his or her name is still on title.
However, there is another equitable principle called “occupation rent.” The spouse who stayed in the house and had full use of it even though he or she only owned half of it should probably have paid rent for the half that he or she did not own. So if half of the fair market value rent for the house was more than the total of the taxes, mortgage interest, and maintenance costs then that might offset the unjust enrichment claim and the leaving spouse would be entitled to share in the increase in value of the house after separation. Occupation rent is a more difficult claim to make where there are children in their relationship as well because they occupied part of the house and needed some place to live.
Where the spouse that stayed in the home was also the only spouse on title, then there would be no reason for the other spouse to get to share in the increase in value of the house unless the other spouse contributed to the costs of caring the house after separation.
Where the spouse had stayed in the house after separation was not on title, it will be difficult for the staying spouse to share in the increase in value of the house because he or she got to live in that house rent free. The value of the free rent likely would offset the amount that he or she paid in relation to the mortgage interest, property taxes and maintenance expenses. There could be situations where that was not the case in which there could be a claim to share in the increase in value because of unjust enrichment but circumstances that would leave so that would be rare and very unique.
There can also be occasions when the spouse who is not on title who can make a claim to say that he or she should have been on title and ask a judge to essentially put that spouse on title. A spouse can make such a claim where the spouses always treated the house as a joint asset and the claiming spouse contributed a significant amount financially, or through his or her own work, to the house during the relationship. In that situation, a judge might make an order that is essentially puts him or her on title. After judge makes that order, the above general rules would apply as if the house was jointly owned. This type of claim is exceptionally difficult for a married spouse to make because the spouse who put in that money or did all that work ought to have been compensated for it through the property equalization process under the Family Law Act. In addition, for both married and common-law spouses, a court may prefer to compensate for that type of contribution by way of a order for spousal support rather than putting the spouse on to title for a home.
The principles of unjust enrichment and occupation rent are principles in equity and there are a lot of rules in equity that may affect whether the principles apply to a case or how they apply to a case. In addition, even with regard to title, there may be a number of small facts that can affect how matters unfold. To figure out whether or not the increase in value of a house should be shared after separation in your particular circumstances, you should really speak to a good family lawyer.
The rules for property division after separation are very different in different jurisdictions. There are differences between each Canadian Province. Things can be very different in Quebec and the United States. The law set out in this page relates to Ontario only.
If you have any questions or concerns about your property in separation, or if you have any other Ontario Family Law questions that you need answers, contact Certified Specialist in Family Law, John Schuman, by calling 416-446-5847 or emailing him.