Matrimonial Home Buyout – The Right Strategy
The matrimonial home may be a property that is owned outright by either or both spouses, or it could be a rental apartment.
Ownership of the home is regarded as joint. It would not matter that they did not contribute equal shares to the purchase of the home.
All that matters is that the purchase was a joint effort.
If joint, both spouses are still entitled to share the value of the property.
Regardless of who actually or legally owns the home, both spouses have an equal right to live in it.
The concept of the matrimonial home does not apply to partners in a common-law relationship.
In every marriage, a matrimonial home is an important place for both spouses. Apart from being a place that both spouses will have very strong emotional ties to, the matrimonial home also often represents a significant financial investment in marriage. It is likely to include thousands of dollars in investment from either or both spouses, and in many cases, the matrimonial home is looked upon very fondly.
The matrimonial home is just as important in divorce as it is during the marriage. It will be at the heart of many issues to be resolved by the court, including living arrangements of the spouses and their children, and matters relating to equalization of property. Needless to say, these issues can turn fractious, leading to a long and bitter divorce battle.
As a result of the critical nature of the matrimonial home to spouses, it is important to understand how the law treats the matrimonial home and what this may mean for you and your family.
What is the matrimonial home?
The matrimonial home is the place where both spouses live after marriage and at the time of separation. It may be a property that is owned outright by either or both spouses, or it could be a rental apartment. This important thing is that both spouses and their children (if they have any) regularly live there.
Under section 18 of the Ontario Family Law Act, the matrimonial home regarded as including both the building and the property on it. Although this only applies where the spouses own the property. But it will not apply if the property is used for reasons or purposes that are non-residential.
Although it is natural to assume that the matrimonial is specifically a house where the family lives, the definition is actually a lot wider. Secondary residences are often considered as part of the matrimonial home, which means holiday chalets, rental homes owned by the couple, and even yachts could qualify. As a result, families may have more than one matrimonial home.
Obviously, the question of what amounts to the matrimonial home can get very wide indeed. This, in addition to the rights that often flow from the application of the definition, often means there is a lot at stake when it comes to defining the matrimonial home. This is why both the definition and application or often hotly contested. More on this below.
How is matrimonial home ownership treated?
Generally, there are many models of matrimonial homeownership. This generally differs in relation to whether the home is owned outright or rented by the couple. In cases where the matrimonial home is owned by the couple, ownership may be individual or joint.
One spouse may have either purchased the matrimonial home alone, even before the marriage, or they could have jointly purchased it. In this case, ownership of the home is regarded as joint. It would not matter that they did not contribute equal shares to the purchase of the home. All that matters is that the purchase was a joint effort.
There may also be instances where both spouses purchased the property but only one of their names is on the deed. In fact, there may be instances where neither of the spouses has their name on the deed, such as where the home was given to them by parents or friends.
Where the home is rented, either both spouses or only one of them may have their name on the lease. Therefore, as mentioned earlier, there are multiple ways in which matrimonial homeownership may exist.
However, the most important thing to remember is that the model of ownership hardly matters when it comes to family law. The fact that only one spouse’s name is on the deed or lease does not prevent the property from being regarded as a matrimonial home. And, as you will see below, the question of who owns the home does not really affect the rights of the spouses in relation to the home.
Rights of spouses to the matrimonial home
Spouses in a marriage have several well-defined rights to the matrimonial home. In fact, these rights are subject of a sizable chunk of the Ontario Family Rights Act. The law protects the rights of both spouses to the use and enjoyment of the matrimonial home in many ways.
First, both spouses have a non-derogable “right to possess” the matrimonial home. This means, regardless of who actually or legally owns the home, both spouses have an equal right to live in it. This also includes the right to “exclusive possession”, which operates to evict one spouse from the house during a specific period or during separation.
One spouse may have the exclusive right to remain in the matrimonial home by virtue of a court order, or under a domestic contract. This may come into play when the court orders one spouse out of the home due to domestic violence or when the court makes a temporary or permanent order permitting one spouse to remain in the home. This may also be the case if there is a separation agreement that specifies who will move out after separation.
Apart from these, the right to possess the matrimonial home cannot be affected by any domestic contract between the spouses. Any agreement they make regarding this right can only be entered at the time of separation, rather than when the marriage was first celebrated.
Another right that spouses enjoy in relation to the matrimonial home is the right against sale, mortgage or borrowing against the home, without their consent. Essentially, either spouse can prevent the other from taking any of these actions in relation to the matrimonial home, even if they took no part in the purchase or have their name on the deed.
If either spouse desires to sell the matrimonial home, then they should obtain either the written or express consent of the other spouse. Otherwise, the aggrieved spouse can ask the court to prevent the sale.
Both spouses also have an equal right to share in the value of the matrimonial home. This is important because, when it concerns other marital real assets, the general rule is that the spouses only share in the increase in value of the asset. This is especially the case when the asset was brought into the marriage by either spouse. But in the case of the matrimonial home, there is a right to share in the full value of the property, for equalization purposes.
Lastly, both spouses have a right to jointly enjoy the value of the property when the ownership is joint. This means they each have the right to share the property equally. This is a bit different from sharing in the value of the property for equalization purposes. More on this below.
The rights of the spouses to the matrimonial home will not continue forever though. The rights will come to an end when the matrimonial home is sold or the lease ends. The right to possess the matrimonial home will also end after divorce, especially if one spouse’s name is not on the title to the home. That spouse can only continue to exercise rights over the home if there is a separation agreement or court order to that effect.
What if you are in a common law relationship?
The concept of the matrimonial home does not apply to partners in a common-law relationship. Only married spouses have special rights to use and enjoy the matrimonial home. As a result, partners in a common-law relationship cannot enjoy any of these rights or expectations.
How home ownership will be treated in a common-law relationship depends on whether the property is owned jointly, or by only one partner. If the property is owned jointly, then both have equal rights to stay in the home, and each one can prevent the other from selling or mortgaging the home.
These rights can change if a court orders one partner to leave the home, or if both partners agree to sell the home. One partner may also offer to buy out the other’s share in the home. If partners cannot agree on whether to sell the home or how to treat it, they can ask the court to sell the home.
If only one partner owns the home, the other partner may be forced to leave at any time. They can get locked out or the home may be sold or mortgaged without their knowledge or input. There is no right to possess the home. However, there are several exceptions that may apply here, such as if there is an agreement that states the partner can stay in the home or if a court makes an order to that effect. The partner may also fight for an ownership stake in the house on claims of unjust enrichment or unfairness.
How to buy out your common law spouse
As a common law couple, when you jointly own or have jointly been paying for the property, you are required is to buy out your spouse. If the property was in your name and you have singularly been paying for it, there may be no need to buy out your spouse.
To buy out your common spouse, you need to first establish the value of their contribution. Once you have the establish value of the house, you would then need to consider how much they have put into the house and what percentage it amounts to now.
In estimating the percentage your spouse contributed, you will also need to consider the equity. If your house’s estimated value is $1,000,000 but loans of $400,000, the net equity is $600,000. You can determine their percentage of the net equity.
No matter how much you want to stay in the property and buy out your spouse, you need to consider if you are financially able and willing. If your spouse refuses to be bought, it can turn messy.
How is the matrimonial home divided after divorce?
During divorce, the respective contribution of each spouse to the marriage is usually recognized. It is assumed that both spouses have contributed to improve the marriage and are entitled to a fair share of the wealth that was accumulated during the marriage. As a result, any property acquired by the spouses during the marriage may be shared, including the matrimonial home. This is often regarded as equalization of family net property.
However, unlike other marital property, what is liable to be shared between the spouses is not just the value that accumulated during the marriage. Instead, both spouses are equally entitled to a share in the total value of the property. There are two scenarios on how the property division may be treated – sole ownership of the home by one spouse and joint ownership by both
If sole, both spouses will be entitled to share in the value of the property, except if there was a marriage contract. But this is only for the purposes of equalization, which means the spouse may end up sharing only a small percentage of the home value. The goal for equalization is not to split the value of the home equally down the middle. Rather, it’s to ensure that both spouses get equal shares of the net family property acquired during the marriage. The matrimonial home is not treated as separate property on its own, but as part of the net family property.
If joint, both spouses are still entitled to share in value of the property. However, this time, they are equally entitled to half of the property. This will be the case because they both have legal ownership of the property and are entitled to enjoy their stake in the property. In this situation, there are a number of ways the family home may be treated, including the possible options of selling the home and splitting the proceeds or one spouse buying out the other.
How to value the matrimonial home?
Where the decision to sell the home has been made, it will be necessary to obtain a valuation. It is important that the exact value of the matrimonial home is calculated. Vague ideas or assumptions hinder one or both parties from making informed decisions and this can adversely affect the financial outcome of the divorce for both parties.
Needless to say, the matrimonial home is a valuable financial asset. It should be handled with precision and the greatest care. There are more than a few ways to get an estimated value of your matrimonial home and property.
The fastest way might be to access an online service for a free and instant valuation. But these services publicly announce that they may not be accurate thus, unreliable. Having a qualified person(s) analyze and examine the house helps in providing accurate and precise figures.
Please note, your house is only worth whatever a willing and able buyer would pay for it today. In valuing the property, there are a few crucial instruments of measurement. They include time, neighborhood, size, and home improvements or the lack thereof.
One of the most accurate ways to determine the value of the property is to find out what other similar properties have been sold for recently. This is where time comes in as the key factors here are similar and recently. In volatile markets, prices can change almost every day, and so if a sale was made a year or 2 years ago, it may be irrelevant. Only the most current sales can give solid ideas of what your house would sell for.
A home owner certainly cannot value their homes themselves but they can go for one or both of these reliable options. A formal appraisal by a licensed appraiser or the comparative market analysis (CMA) prepared by a real estate agent. Whichever way is chosen, beware of unscrupulous agents that present inflated value just to get your listing. If possible, get more than one opinion.
Sample Matrimonial Home Buyout Analysis Report
Matrimonial Home Buyout Calculator
How to untangle the mortgage
As part of the separation agreement, both parties may have agreed that one spouse should take the house. The other spouse then signs over the title but forgets about the mortgage. This is a mistake divorcing couples often make.
When you buy a house, you gain ownership through a grant deed. This document certifies you as the new owner. As at the time of this purchase, you chose whose name would be on the title document and what form of ownership to adopt.
Now, when one party decides to surrender ownership rights to the other, it is done through a quitclaim deed. Or inter-spousal transfer deed if the transfer is between spouses as in the case of a divorce settlement.
The loan that was taken to buy the property is commonly referred to as the mortgage and is a completely separate document from the title. The signing over of the title does not affect the mortgage. If you signed on the loan, you are still responsible for that obligation until it is paid off, regardless of whose name is now on the title.
Even if the change of ownership was ordered by the court, the responsibility of the mortgage remains with the signer. The options to remove your name from this loan are either to pay it off, refinancing or selling. Refinancing involves taking a new loan to replace the old one. Although, the old loan is paid off, the new one may have different terms and different signers.
Refinancing is also an effective way to buy out the other party. But it will be difficult to qualify for refinancing if the other spouse is unable to repay the new loan. Loan modification may also be considered but in most cases a loan modification will not remove the signer’s name from the loan. Selling may be the only practical option.
Selling the matrimonial home
Selling the matrimonial home is probably one of the most heart-wrenching decisions to consider in the difficult divorce process. The house probably holds a lot of memories that you are not ready to let go of. But the decision to sell or not has to be based more on facts than emotions.
This decision may be hard but it is not complicated. You can decide to either keep the house or sell the house. A critical look at what both options will entail is important. Will your income be enough to sustain the house? If you decide to keep the house, will you be counting on spousal support or child support? You may have a court order that dictates payment of a particular amount of money but what happens if your spouse is unreliable or if they get laid off?
Of course, all circumstances are not the same. You may be able to maintain the house on your own but is it worth that financial and emotional burden? If the circumstances surrounding the divorce were too messy, selling the house might be a welcome relief. It all comes down to asking yourself what you want. If there are kids in the equation, you will also want to consider what is best for them.
Knee-jerk reactions do not always yield the best result. This might leave you stuck with a house you don’t really want. Take time out to critically think things through
Conclusion
Clearly, issues relating to the matrimonial home are more than mere matters of a simple abode for a married couple. These issues can fundamentally affect the rights of the spouses and the disposition of the children. Therefore, they deserve critical consideration.
The services of a professional mediator may be beneficial in reaching an agreement over exactly what constitutes the matrimonial home and the disposition of the home. This way, you and your spouse can enjoy the most freedom over your options and the eventual choices you make.
Are you having trouble reaching an agreement on your finances? Do you want to avoid going before the judge and asking for help? Consider working with a family mediator who can help you end your marriage in a way that is peaceful, cost-effective, and child-focused.
Would you like to learn more? Get in touch for a Get Acquainted Call to learn more about finding a separation agreement with a soft landing.
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