Office: 165 Pretoria Avenue, Ottawa ON. K1S 1X1
In some circumstances a cottage can be considered a matrimonial home in the event of divorce.
A matrimonial home is recognized as a very special asset by the law in Ontario. That means that if the home is sold, it will usually be divided equally between the married couple, regardless who paid for it. Even if only the husband or the wife is on title to the property, it will take both of them to agree in writing to sell it.
In 1993, David Smith bought a cottage in Oro township, near Barrie as an investment. It was a 10,000 square foot cottage on 5 and a half acres of lakefront property. He bought it through his company of which he was the only shareholder. A year later, in 1994, he married Miriam Smith. They had been living together for seven years and had a child together in 1989.
The couple separated in 1995 and started fighting over property rights and support. They did not sign a marriage contract when they married and the cottage which was worth $840,000 at the time of their marriage was worth $1 million at the time of separation.
If the cottage was an investment property, then Miriam could have claimed up to 50 per cent of the gain in value of the cottage during their marriage, or 50 per cent of $160,000, which was $80,000. However, if the cottage was a matrimonial home, then Miriam could claim up to 50 per cent of the entire $1 million value or $500,000.
It was clear from court documents that the couple used the cottage year round.
In a decision dated September 5, 2006, the Ontario Court of Appeal confirmed that even though the property was owned by a company, since David controlled the company, he in fact owned the cottage. As a result, Miriam was able to collect $500,000, since the property was used as a matrimonial home at the time they separated.
If David had wanted to protect himself, he should have asked Miriam to sign a marriage contract before they married. In it, she could have agreed not to make a claim on the cottage, or limit any claim to the increased value after the marriage.
A couple can have more than one home considered as a matrimonial home, as long as they use it with their family during the year. So if you have a home in the city, a summer home and a chalet for skiing, all three can be considered matrimonial homes and the same rules apply to each property.
However, let’s say you bought a home and then got married. On the date you got married, the house was worth $300,000. You lived in it for five years as your matrimonial home, but then you bought a second house that you moved into together. The first house is now used as a rental. It is still in your name.
While you will own the second home together as a matrimonial home, the first house will no longer be considered a matrimonial home. Therefore, if you later split, you will still be able to get credit for the full $300,000 that your house was worth on the date of the marriage, and you will only have to split the gain with your spouse.
When it comes to selling a house after the parties have separated, similar rules apply. Even if the house is registered in only the wife’s name, the husband will have to give permission to the sale, even if he moved out a long time ago, if at the time of separation it was their matrimonial home and they are still not divorced or have not signed a separation agreement.
These rules do not apply if you are not married. If you are living in a common-law relationship and only one person is on title, then that is the only person who needs to sign to sell the home. You must get your name on title to protect your interest in any property if you are not married.
If you are not sure who has to sign for the sale of your home, always get legal advice first so that all proper parties sign your agreement. It will save a lot of stress later.
– Mark Weisleder is a Toronto real estate lawyer. Contact him at email@example.com