Who gets the house?

How property is divided after a divorce

No one enters a marriage expecting it to fall apart. And yet, a staggering 50% of all unions do just that, resulting in heated arguments and costly divorce proceedings. Not even a wedding involving a tiger as a wedding gift is immune to North America’s marriage meltdown (who knew?); indeed, the recent split of songstress Katy Perry and comedian Russell Brand is just the latest in a long line of Hollywood separations. Recent reports insist that the two young stars are on reasonably good terms with one another, but that could change once divorce talks touch on their $6.5 million Hollywood Hills mansion.

The family home is almost always a sore spot for a divorcing couple. Not only is it the largest shared asset, it’s also filled with memories (good and bad). While some spouses are able to come to a mutual decision, others will fight to the bitter end in order to maintain possession of this emotional investment.

If you’re bound and determined to keep your home after splitting from your partner, it’s important that you understand the intricacies of divorce and your net family property value.

A note on the Divorce Act

Canada’s Divorce Act is the federal Act governing divorce in this country. Struck in 1968, it is important to note that this Act does not deal with the sharing of property or debts. Each province and territory in Canada has a set of rules for dividing property and debts that you and your spouse have accumulated over the course of your marriage. Furthermore, “property” includes such things as:

• The home you and your spouse shared, its contents and any other real estate;

• Pensions from employment, Canada, or Quebec Pension Plan credits;

• RRSPs, investments, bank accounts and cash;

• If you own a business, the value of the business may count towards your property.

Debts refer to any amount of money owing on joint credit cards, your mortgage, or any other loans you may have.

How property is divided upon separation

In Canada, property is divided equally between spouses upon separation. It’s important to note that the assets themselves are not equally divided (in other words, you won’t be splitting your house down the middle), but rather the value of these assets.

While the laws differ throughout the country, the general starting point for dividing property is for each spouse to calculate his or her “net family property.” This involves some basic math, so grab a calculator.

First, add up the value of all of your assets on the date of your formal separation. From there, subtract all of your liabilities at the same date. Next, deduct the value of all the assets you had on the date you were married. You will also need to subtract the value of items that fall outside the realm of family property. This will include things like life insurance proceeds, third party gifts, inheritances, and any personal injury settlements. Finally, add in the cost of any liabilities on the date of your marriage. Your resulting figure is known as your net family property.

The spouse with the higher net family property is required by law to pay his or her spouse an equalization payment. This equalization payment is equated to half of the difference between the two individuals’ net family properties.

So, what about the house?

Canada law treats the matrimonial home - the home that the couple resided in at the time of separation - in a unique manner. In the case of a married couple, both spouses have an equal right to the possession of the matrimonial home during divorce proceedings, regardless of who’s name is on the home’s title. As such, the matrimonial home may be a home which one of the parties owned prior to the marriage, or one that is jointly owned between the two.

This doesn’t mean that the name on the title is irrelevant, however. Where the matrimonial home is in the name of only one of the parties, only that party is entitled to the possession of the home following the completion of the separation. The other party may submit a court order to challenge this. With that being said, when the property of the marriage (see the definition of “property” above) is being calculated and divided, the ruling may find that the non-owner is still entitled to receive one half of the value that the matrimonial home had on the date that the parties separated.

Get the help you need

When fighting to maintain possession of your home following a nasty breakup, make sure to consult with a legal professional. He or she will be able to help you navigate the many ups and downs of a divorce proceeding. Furthermore, it’s important that you contact your mortgage broker for additional financial advice. Carrying a mortgage on your own can be difficult, but the right advice can go a long way to easing the transition.