Investment Property and Family Law Act Consent

Question:


As a Listing agent, I was referred a client named Brad (not his real name) who is married to his wife Angelina (also not her real name)… just thought this would be easier with names.

Brad gave me the scenario below and asked me a few questions.

Brad owns a property in Ontario that is currently under his name. Angelina’s name is not on title. It is not a matrimonial home and was never legally designated as such.

Brad acquired this property before he married Angelina. However, when they did marry, they lived in this home for a short while as a married couple. They have since moved into another home.

Brad currently rents it out and neither Brad nor Angelina currently live there. Brad and Angelina live together in another property in which they share ownership of (i.e. their matrimonial home).

They are not contemplating separation or divorce. Brad just wants to sell for personal reasons.

Brad’s question: if he sold this property today, what signing authorities are required (spousal consent?) and who would legally receive the net proceeds of this transaction?

Is there anything else that is important to consider in this scenario?

Answer:

On the basis of the facts that you provided Angelina does not sign the Spousal Consent. The reasons would be twofold:

1) this property is not a matrimonial home and

2) she isn’t in possession, or have rights to possession.

Remember that the Spousal Consent only deals with possession. It has nothing to do with equity. So, if this were a quick multiple choice question on an exam, “not signing” would get you two marks.

However, this is actually a little more complicated than that. This is real life, and Brad didn’t stick to the script. He was supposed to just ask you “real estate questions”, but he didn’t. He asked you a question which was mixed real estate and law. So, your reply should be: “that’s beyond my experience, I can refer you to a lawyer…”.

But, this is real life, so, we are going to have to analyze this somewhat. What is your relationship with Angelina? Is she your client too? Is she a Customer? Is she just a Consumer? Your relationship to her will affect your answer. I am assuming here, that Brad is indeed your client.

You say that the property was not designated as a matrimonial home. Designation is very rare, much less than 1 in 1,000 matrimonial homes are actually designated. If it were, that that would mean that there had been a dispute.

Angelina did live there as a legal spouse, properly married at one time. You say the time was short. All you actually need is a day. At that point, the property became a matrimonial home.

Then, they moved out. Both Brad and Angelina gave up possession to a Tenant. The ordinary conclusion would be that the property is no longer a matrimonial home at that point. But, you don’t know that for sure, because you never asked the right questions:

  1. Did you have a marriage contract when you got married,
  2. Did you separate at any time when you lived in that house,
  3. Did you execute a Separation Agreement at any time,
  4. Did you enter in a Resumption of Co-Habitation Agreement?

If there’s an agreement, you would need to see it and see if this issue is covered. If there was a separation when it was a matrimonial home, that would solidify its status as a matrimonial home. And, there can be more than one, including the present home which is occupied by both.

Brad’s question needs to be broken down into two parts:

1) if he sold this property today, what signing authorities are required (spousal consent?), and

2) who would legally receive the net proceeds of this transaction?

On the basis of the information that we have, only Brad needs to sign.

We really have no idea about the answer to #2. It’s often answered by real estate agents, but it shouldn’t be.

This is the equalization of net family properties. You would have to know all their assets and all their liabilities at the time of the marriage and at the time of the valuation date. You would have to know about excluded properties, cash flow, contributions, net income for each and children. I assume that you know none of this, so, that just means that you can’t answer the question. If you did have all the correct information, then you could undertake some calculations and compute an answer that would comply with the Family Law Act.

That answer, may not be enough. There may be other reasons why a Court may allocate funds otherwise including the doctrines of “unjust enrichment” and “constructive trust”. So, this question, although simple enough, is really not one for real estate agents.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource

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