Dividing Property In A Divorce

Divorce is never a situation anyone expects to be in. Regardless of the reason, it can be a scary time of upheaval and change with many unknowns. Not only does it represent a time of emotional and financial turmoil, which is hard enough, but then you also have to tackle tough questions about who owns what, and who owes what.

In Canada, family law is dictated by provincial law. Despite small differences, most jurisdictions make it fairly easy for a divorcing couple to predict – in advance – how assets and property will be divided, and the support entitlements each is entitled to.

Nevertheless, even in the best of circumstances, when both partners amicably agree to the dissolution of the marriage, divorce is still a difficult process. Even simple decisions, such as what to do with the family home, are wrought with emotional and financial minefields.

The “Matrimonial” Home

The matrimonial home is the legal term used to describe the family home in which the spouses were living just prior to the date of separation. If you and your spouse regularly use more than one home together, then each home can be considered to be a matrimonial home. An additional matrimonial home, therefore, can include a cottage or chalet, or simply another home in another location.

What happens to a family home when spouses separate?

Under Canadian law, each spouse is entitled to half of the equity that’s accumulated during the marriage in the property that was used as the family home. This means that even if only one spouse is on the title or only one spouse holds the mortgage, both parties have a claim to the home’s equity. If the divorce lands in court, the sale of the house and the division of the proceeds may be ordered in the consent decree. Otherwise, the fate of the home is typically negotiated between the couple (and their attorneys).

These are the three most common ways to settle the family home in a divorce:

1. Sell the house immediately and split the proceeds

Selling the home prior to the divorce definitely saves time, money, and hassle. The couple pays only the routine real estate fees associated with any sale. If they wait until during or after the divorce to list the house, each spouse is likely to submit the paperwork for review to that person’s attorney and pay hourly fees.

If you decide to pursue the sell-first strategy, be sure both parties are committed to the sale and stay legally married until the paperwork clears. That’s because if the home is jointly owned, both parties will have to sign all documents. You can simplify this process by working with an experienced real estate agent. An all-inclusive real estate agency such as Team Kleiner offers the benefit of having two experienced real estate advisors in one package.

2. Buy out the other party

In this option, one spouse gains sole ownership of the property by buying out the other spouse’s interest in the home. Typically, the spouse who wants to stay in the house must buy out the other spouse’s share of the equity by applying for a new loan in his or her name.

The spouse accepting the buyout will lose out on any appreciation in value the home may achieve in the future. The buying spouse takes on all the liability and financial burden of the new mortgage, along with all other risks and responsibilities that come with homeownership. A buyout can also be arranged to occur over time. Any kind of a gradual buyout arrangement is typically outlined in the divorce settlement agreement.

3. Co-own the house

The option to co-own a home in a divorce is more common when there are children involved. It allows a custodial parent to continue to live on the property and have exclusive use of the house. This strategy typically involves delaying the sale of the marital home until a set later date, such as when the child turns 18, or graduates from high school, at which time the home can be sold.

4. Less common options

There are other less common options to keep the house, such as renting out the property as co-landlords; or a strategy called bird nesting, wherein divorced parents take turns living in the home when they have custody. Both of these involve a high level of agreement and interaction with your ex-spouse.

Professional Help Is Available

Making decisions over the marital home adds complexity to an already stressful process. You should ask for help whenever necessary, and not feel that you have to do everything on your own.

Choose real estate agents that truly care and can help you navigate the complexities of selling a home in a divorce and lighten your load such as Team Kleiner’s Mary and Konstantin. They are such real estate agents that are known to go one step further by offering not only moving services free of charge when you buy or sell with them, but also personalised services above and beyond what is offered by other realtors. These gestures surely are all the more welcomed during a particularly difficult time in your life.