As Canadian housing costs continue to spiral out of control, spouses are often using creative means to qualify for mortgages and obtain financing. In many cases, this may include financial help from a family member or loved one, essentially adding a third or fourth party to a transaction that has typically involved only spouses. These additional parties can complicate matters in a divorce in terms of equalization of property and claims pertaining to the matrimonial home.

A recent Ontario Court of Appeal decision provides some insight into how courts are approaching such novel situations.

What Happened?

The spouses were married in 2000, had two children, and separated in 2011.

In 1999, prior to the marriage, the wife’s mother had given her $70,000 towards the purchase of a home in Maple, Ontario. As a result, the mother’s name was listed on the title as 50% owner along with the wife as the other 50% owner. Following the marriage in 2000, the husband moved into this Maple home. It was later sold in 2002 and the proceeds went towards the purchase of another home in Brampton, where the wife’s mother was once again listed as 50% owner.

On appeal, the husband argued that the wife was the sole owner of the property by virtue of a constructive trust. He claimed that the wife should be listed at the sole owner of the matrimonial home for the purposes of equalization payment calculations, with the $70,000 loan from the mother deducted from the value of the home prior to any equalization determinations being made.

In response, the wife argued that the court did not have the jurisdiction to make any decisions vis-à-vis the mother’s interest in the home because the husband had made a claim against the wife, and not the mother, and as a result, the mother was not part of the proceedings.

Ultimately, the Court of Appeal agreed with the original judge and concluded that the mother’s 50% ownership was relevant and should not be excluded, and that for purposes of calculating net family property for equalization, only the wife’s 50% share would be considered.

What Does This Mean?

This decision confirms that any claims entitlement to property must be made before equalization determinations commence. In this case, if the husband had wanted the mother’s financial contribution to the matrimonial home to be removed from the calculation of net family property, it was incumbent upon him to make a separate claim before he made a claim for his share of the matrimonial home. Since he did not do so, the mother’s contribution became a relevant factor in the ultimate equalization decision, and affected the amount the husband ultimately received.

This case will be important moving forward, as more complicated financial arrangements become more common, and family members outside of just the spouses become involved in real estate purchases.

If you have questions about divorce, separation, division of property, or equalization please contact Jason P. Howie, online or at 519.973.1500.