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Division of the Matrimonial Home: What Divorce Means for Homeowners in Ontario

November 24, 2020

When couples are in love, their lives can become intertwined by small, incremental steps - like when two people gradually realize they're living together - and with grand gestures serving as milestones - like housewarming parties and weddings. But no matter how they're joined, when relationships end in separation and divorce, pulling these lives apart again can be fraught with charged emotions and uncertainty.

The family home is usually one of the biggest areas for concern during a separation – who’s allowed to stay in it, who gets it after the divorce, and how its value will be divided. Since homes are imbued with so much personal meaning and are typically among the biggest investments Canadians will make in their lifetime, they can be a huge point of contention.

While the rawness of emotion can make these situations seem impossible to navigate, the Ontario Family Law Act provides guidelines for how property divisions work during separation and divorce, both for legally recognized and common-law marriages. This article focuses on the Act’s rules regarding the division of the family home (legally known as the “matrimonial home”), as opposed to other types of property, to help shed some light on a dark time for many homeowners facing the end of their partnership. 

Man's hands cupping a woman's hands with a paper cut-out family laying inside

The matrimonial home

Under the Family Law Act, the matrimonial home is given special status over other types of property, and different rules apply to its possession and division. The term refers to any residence that is owned or rented and “ordinarily occupied” by the couple and their family at the time of separation. It can include any type of housing, such as condos, mobile homes, cottages, and so on.  

Although a couple can have multiple matrimonial homes, not every property owned by one or both spouses is given this status – a vacation home, for example, may not be used often enough to meet the criterion of being ordinarily occupied by the family, and so would have a different set of rules applied to its division.

Who’s entitled to the matrimonial home?

In Ontario, the rules regarding the family home are different for legal marriages and common-law marriages, with more rights assigned to couples whose unions are legally recognized.

It’s important to note that under the Canadian constitution, a legal marriage is seen as an equal partnership, regardless of the financial contributions each person makes or what assets they brought to the relationship. That’s why, according to the Family Law Act, both spouses are entitled to equal possession of the matrimonial home, no matter whose name is on the title, who owned the home prior to the marriage, or who pays the mortgage.

Because both spouses are equally entitled to the home, they share the right to continue living in it during a separation, unless a formal separation agreement has been drawn up giving one spouse sole occupancy or the court grants a temporary order of “exclusive possession” pending a family trial. It follows that one spouse can’t legally change the locks after the other moves out, nor can they sell, rent, sublet, mortgage or remortgage the home without the written consent of their partner. 

Contrary to common misconceptions, the Family Law Act protects a couple’s rights regardless of current living arrangements. So, a spouse won’t forfeit their rights to the matrimonial home if they move out during a separation, even if the home is only in their partner’s name or it belonged to their partner before the marriage. For this reason, there’s no need to stay in stressful or volatile living arrangements prior to the divorce.

What about in common-law partnerships?

For common-law relationships – that is, couples who are not legally married and who have either lived together for at least three years or who have a child and have lived together for at least one year – the couple’s statutory rights to the family home are not protected in the same way.

By and large, what a person brought with them to a common-law relationship goes with them when the union ends, while assets purchased together are divided equally. Therefore, if the family home is in one spouse’s name only, their partner may not have the legal right to stay there during the separation, and they usually aren’t entitled to a share of it.  The house can also be sold, rented, remortgaged, and so on by the spouse whose name appears on the title without consent from their partner.

There are ways for common-law couples to share rights to the home, however. If the couple has drawn up a cohabitation agreement prior to the separation or a formal separation agreement, they may have made provisions for how the division of the home should be handled. And even without a cohabitation or separation agreement, one spouse may be entitled to a share of the home if they can prove that their actions allowed their partner to acquire property or wealth during the relationship.

White paper house with a woman's hands hovering protectively above

What happens to the matrimonial home?

Whether the matrimonial home is kept or sold as a result of the divorce, its full value (that is, its fair market value on the day of separation, less any debts) must be shared between spouses who were legally married.

Though there are a few options for what to do with the matrimonial home during a divorce, the preferred option should be detailed in a formal separation agreement, which will give a real estate lawyer instructions for how to disperse any funds.

Option 1: Sell the home to a third party
In this situation, the spouses agree to move out of the home and split the proceeds from the sale, often also sharing the costs associated with selling. The signatures of both spouses will be needed to sell the home, regardless of whose name is on title.   

Option 2: One spouse buys the other out
This arrangement allows one spouse to buy the other’s share of the equity in the home, which most often means that the spouse who keeps the home will have to assume the existing mortgage and increase it to include the amount paid to their partner.

For example, if a couple’s home is worth $800,000 on the day of separation and they have a mortgage for $500,000, then the value that must be shared equally is $300,000. The spouse who wishes to keep the house will have to add the $150,000 buyout payment to their mortgage.

Option 3: Both parties maintain ownership
There can be a few ways of handling ongoing joint ownership, some of which include turning the home into a rental property and splitting the proceeds, or dividing the home into separate units and continuing to live there. In any case, the separation agreement should clearly outline the terms of the arrangement and detail how payments and/or income are to be handled.

In situations where agreements can’t be reached regarding the division of the home, or where one spouse attempts to impede the division process for the other (causing damage to the home to prevent its sale, for example), or where the safety of family members is called into question, matters will need to be settled by a judge in a family trial.

What happens to the mortgage?

During a separation, whosever name appears on the property title and mortgage will continue to be responsible for carrying costs such as property taxes and mortgage payments, regardless of whether they live in the home. If the home and mortgage are in both spouses’ names, each spouse will be on the hook for payments if the other stops contributing. Therefore, it’s advisable to have a separation agreement outlining the financial responsibilities of each party prior to the divorce.

When one spouse wishes to take on the mortgage for the matrimonial home after the divorce, they will have to qualify for the loan based on their individual income and debts, and any new equalization payments to their spouse will be considered part of their total debt load. On the other hand, the spouse who moves out of the home will usually have to be legally removed from the existing loan before they can qualify for a new mortgage. In either case, a separation agreement will be required by the bank to qualify for a new loan.

Once a decision has been reached about whether to sell the property or allow one partner to keep it, the mortgage will have to be renegotiated. Of course, there are usually stiff financial penalties for breaking a mortgage contract before the term is up: lenders may charge prepayment fees, as well as administration, appraisal, reinvestment and other fees, all of which could end up costing thousands of dollars. For this reason, many couples choose to sell the property to a third party: the sale of the home allows the costs to be deducted from the proceeds of the sale rather than being rolled into one spouse’s existing debt load.

Get legal advice

There are countless grey areas in the division of the matrimonial home since every couple has circumstances unique to their relationship. While this information can work as a general guide for “ideal” divorces where abuse is not a factor, ownership of the home is clear, and both spouses are willing to work toward a solution, the advice of a divorce attorney and/or a legal professional who specializes in real estate divorce sales should always be sought before taking any significant steps.

Though the division of the family home can be an overwhelming and emotional process, it can unfold more smoothly when the laws regarding the family home are understood and accepted. And, while picking apart intertwined lives can be a painstaking challenge, there is hope for new growth when it’s done.

If you need to buy or sell a home because of your divorce, Purplebricks is here for you. Our REALTORS® handle each transaction with professionalism and care, understanding your unique circumstances and providing an experience that’s efficient and stress free. Plus, you stand to save thousands of dollars when you choose us: we offer top-level support to sellers for a low fixed fee, and we give buyers $2,000 cash back* when they purchase their home with one of our agents. Call us at 1-855-999-9740 to learn more.