Home costs continue to rise. Equity can be built pretty quickly within a home (especially when acquired several years ago) just on market changes alone. A lot of clients will come to us with the question of what happens to their home property after divorce when it was owned by just them coming into the relationship.

In Ontario, the Family Law Act, R.S.O. 1990, c. F.3, (the “FLA”) is the legislation that governs the property rights of separating spouses including the “equalization of net family property”.

Generally speaking, the purpose of equalization is to calculate the value of assets accumulated during the course of the marriage and to have it divided equally between the spouses, subject to exclusions such as gifts and inheritances. However, it does not actually change the ownership interest of the property itself.

There are special rules that apply to the matrimonial home which is property where at the time of separation was “ordinarily occupied by the person and his or her spouse as their family residence”. Even if only one party owned the matrimonial home prior to marriage, the full net value of the home is equalized.

This leads to the question: is it worth it to get a marriage contract (also known as a pre-nuptial agreement) to protect your property that you purchased prior to marriage and are now using as the matrimonial home?

In Martin v. Watts, 2018 ONSC 2622, clauses in the parties’ marriage contract regarding the division of their matrimonial home upon relationship dissolution were upheld.

The wife in this case used her assets to purchase a property that would become their matrimonial home. The parties entered into a marriage contract in 1990 that stipulated if the parties separated, the wife would receive a return of her cash contribution plus 25% free of any claim by the husband, with the balance divided equally. This provision would apply when there was a sale or buy out of the matrimonial home.

The husband brought a motion to have the matrimonial home sold and for him to be given carriage of the sale. He relied on s. 52(2) of the FLA, which provides that “a provision in a marriage contract purporting to limit a spouse’s rights under Part II (Matrimonial home) is unenforceable.”

However, the motion judge upheld the marriage contract and reminded the husband that the FLA does not actually create ownership rights so he does not have the authority to force the sale of the home. As long as the “intent of the contract is sufficiently clear, a domestic contract may provide an exemption from the equalization provisions of the legislation”.

In other words, a carefully worded marriage contract could protect your property from equalization even when it is the matrimonial home. For more information on the specific wording required, speak to Katelyn or Sarah by scheduling a consult online.