Property Division in Ontario
In Ontario, the Family Law Act (FLA) guides this process, aiming to equalize each spouse’s net worth from the date of marriage to the date of separation, known as the "valuation date" or "V-Day".
This formula, designed to calculate the growth of each spouse’s net worth, remains a cornerstone of the FLA's framework. Each spouse calculates their net worth on the marriage date and the valuation date, and the net family property is derived from this comparison.
The calculation of net family property is determined by the spouse’s valuation date value (the value of all the spouse’s property on the valuation date minus all debts and liabilities on the valuation date) and the spouse’s date of marriage value (the value of all the spouse’s property at the date of marriage minus all debts and liabilities at the date of marriage). The date of marriage value is then subtracted from the valuation date value to arrive at a spouse’s net family property.
A unique aspect of the FLA is its treatment of the matrimonial home at the date of marriage. If a spouse enters the marriage with a home that is also the matrimonial home at the valuation date, neither the home nor any debts or liabilities related to its acquisition or significant improvement owing at the date of marriage are included in the calculation of the date of marriage value. Thus, the value of a matrimonial home is equalized without any credit to the spouse bringing the home into the marriage.
Once each spouse's net family property value has been determined, the spouse with the greater net family property pays the spouse with the lesser net family property an equalization payment. This payment is one-half the difference between their respective net family properties. If a spouse’s net family property is less than zero, it is deemed to be zero for the purposes of calculating the equalization payment.
If both parties have zero as their net family property, then neither will owe the other an equalization, as there is nothing to equalize. This usually occurs when the properties’ values have declined during the marriage.
All property, irrespective of its nature, is included in the net family property calculation. Assets include a house, car, joint bank accounts, business assets, interests in trusts, pensions, RRSPs, and more. Even contingent interests must be valued, although that can be challenging at times.
Determining what is included in net family property involves three steps:
The property must meet the FLA's definition of property.
A value must be assigned to the property on the valuation date and/or the date of marriage.
The ownership of the property must be ascertained. Only the property that the spouse owns is included in that spouse’s net family property.
The FLA's approach to net family property and equalization provides a clear framework for property division upon a marriage breakdown. Understanding these provisions can certainly aid in making an often challenging process more navigable.
Unjust Enrichment, Trusts, and Equalization Payment Terms
In a situation where a property is held jointly, half of its value is included in the net family property of each spouse. If the property is in one spouse’s name only, it is only included in that spouse’s net family property. However, the courts have recognized situations where rapidly escalating real estate values may deprive the non-owning spouse of any share of these increases in value. Despite the FLA being presented as a complete property code for married spouses, the courts have permitted spouses to argue constructive and resulting trust principles.
In Kerr v. Baranow, the Supreme Court of Canada introduced the concept of “joint family venture” as a way of justifying a remedy for unjust enrichment. A joint family venture arises where contributions of both parties have resulted in an accumulation of wealth. If unjust enrichment is established, the first remedy to consider is always a monetary award, which will usually be sufficient to remedy the unjust enrichment.
Unconscionability and Limitations on Proceedings
The FLA also provides for very limited circumstances under which the equalization payment can be other than as described above. When such an order is made, it is called an “unequal” equalization. This requires the normal calculation result to be “unconscionable,” – it must shock the conscience of the court in relation to certain specific conditions set out in the FLA.
The finding of unconscionability and, thus, an order for unequal division of the parties’ net family property are extremely rare. However, when justified, the court can order more or less than the difference between net family properties to be paid by one party to the other.
In terms of time limitations, a claim for equalization cannot be brought after the earliest of six years after separation, two years after a divorce or judgment of nullity is granted, or six months after the first spouse’s death, absent an order for an extension of time.
Matrimonial Home and Property Preservation
Matrimonial homes have their own special part of the FLA, which sets out several rights unique to matrimonial homes within the province. A matrimonial home cannot be sold or encumbered without the written consent of the other spouse, regardless of how title may be held.
The court can also order the preservation of any property owned by either spouse during the course of litigation. An option to preserve real property is for a spouse to bring a motion for a certificate of pending litigation on an application within a matrimonial proceeding.
In conclusion, the FLA's approach to property division is comprehensive, covering various aspects of property and asset division in the event of a marriage breakdown. Understanding these provisions is crucial for navigating this complex process successfully.
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