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If separating spouses own a home together, it is not unusual that one spouse wants the home to be sold, while the other may want to keep the home. In some cases, the parties might be able to negotiate the transfer of one spouse’s interest in the home. Sometimes, a spouse may seek a right of first refusal, giving them the first chance to purchase the other party’s share of the home. However, it is clear that if there is no consent between the parties, the courts cannot grant a right of first refusal since this can distort the market for the sale of property. A spouse must compete with other interested buyers if they wish to retain the home.
Joint Tenants Are Entitled to the Fair Market Value for Their Property
In Ontario, case law favours a joint owner’s right to maximize their recovery through property sale. In Silva v. Silva, the court indicated that one joint owner should not be able to tie up the other’s capital in a property. Courts have described their role as “jealously guard[ing] the rights of joint owners to the best price for jointly owned property”.
Moreover, in Batler v. Batler, Justice Granger explained that a joint tenant is entitled to the highest price for their interest in a property. And when it came to unlocking the value of a property, Justice Granger acknowledged that the appraised value of a property might not reflect the fair market value and that the “true test of the fair market value is to sell the property in an open market”. In his view, unless the parties agree to transfer property and agree on a price, the property should be sold to ensure a fair market value.
Parties Cannot Be Forced to Grant a Right of First Refusal
In Martin v. Martin, the court had to determine whether the Family Law Act enabled a judge to order the sale of a jointly owned matrimonial home and grant one spouse a right of first refusal or a right to match any offer acceptable to the other spouse. In Martin, both parties wished to sell the matrimonial home. However, the husband was looking for a right of first refusal. The motions judge found that the wife would not be prejudiced and ordered the house to be sold, with the husband having a right to purchase it on the same terms as contained in any offer acceptable to his spouse. The lower court held that when a judge ordered a sale of property, the court had the authority to grant one spouse a right of first refusal. The wife appealed.
The Court of Appeal explained that section 10 of the Family Law Act provided a process where questions of ownership or possession could be determined. However, in this case, the parties did not raise a question of ownership or possession. So, there was no basis under that section to order the parties’ home sold. While there was jurisdiction under the Partition Act to order their home sold, the order for sale could not be made under section 10; consequently, “its provisions granting authority to make ‘ancillary’ orders and directions cannot provide the required statutory authority for granting one spouse a right of first refusal”. For the court, nothing in the Family Law Act indicated that “absent consent, one spouse should have a special right to purchase the matrimonial home”.
Right of First Refusal Would Discourage Other Buyers
In Dibattista v. Menecola, the court held that in proceedings under the Partition Act, neither party should have a right of first refusal and that parties are free to bid at any sale and can “act to protect their investment”. In Martin, the justices ultimately held that a right of first refusal is a substantive right with economic value. It can also “work to discourage other interested buyers” since the effect is to “remove that spouse from the competitive market for the matrimonial home”. For the court, such a right “distorts the market because it benefits one party, eliminating the need for that party to compete with any other interested purchaser”. Moreover, a spouse with a right of first refusal may have a disincentive to maintain the property, thereby increasing its value and saleability.
Interested Buyers Must Compete in a Fair Process
Following the decision in Martin, judges routinely held that courts could not compel one joint tenant to sell to the other or give either a right of first refusal. In Martin, the court accepted the Family Law Act provides a matrimonial home with a special status, but once the house is ordered to be sold, both spouses are entitled to the fair market value for their interest.
However, owners who wish to retain property can still bid for it in the marketplace. As the court made clear in Barry v. Barry, the party needs to “compete with any other interested purchaser” in such circumstances. In Barry, the appellant wanted to sell the home while the respondent wanted to purchase the appellant’s interest. The value of the home was not established at trial, but the trial judge gave the respondent the right to purchase the interest within 30 days after obtaining an assessment of the fair market value. On appeal, the court agreed with the appellant that the trial judge was in error, and that the respondent needed to compete with other buyers.
Important for Parties to Compete Within Free Market for Property
Courts have also commented on the importance of competing within a free market when bidding for a property. In Kokaliaris v. Palantzas, Justice Charney explained that while parties can try to purchase the interest of the other party, the right to do so “presupposes a free market where all interested buyers have had an equal opportunity to access, view and inspect the house”. He also warned that a party who has exclusive possession of a property cannot skew the market by refusing to grant possible buyers access to the property.
Additionally, in Howard v. Howard, Justice Piccoli emphasized that the prospective buyer needs to compete without any inside information, such as knowledge of the other offers that have been made. They need to participate in the same manner as any other third-party bidder. Accordingly, the party cannot “wait to see other offers and then offer to beat them marginally”. As the judge noted, that would distort the market, and the home should be sold to whoever makes the highest offer within a fair process.
Contact Johnson Miller Family Lawyers for Trusted Advice on Property Division in Windsor-Essex
Selling the matrimonial home can be complex and emotional when a relationship ends. At Johnson Miller Family Lawyers, our skilled family and divorce lawyers provide personalized advice to clients dealing with the possession and sale of the matrimonial home as part of the post-separation property division process.
Johnson Miller Family Lawyers provides clients with over 25 years of experience dealing with all aspects of family law matters and complex property and asset division, high-asset divorce, and hidden assets. To schedule a confidential consultation, call 519-973-1500 or reach out online.
