Separated Couple Can’t Agree On How To Satisfy Equalization Payments
There are many considerations a couple must take into account when going through a separation or divorce. One of these is what happens to the matrimonial home. There are typically two options available to a couple. The first is for the home to be sold and the proceeds split. However, if one member of the relationship wishes to keep the home, they may be able to purchase the interest of the other party. This type of payment is known as an equalization payment, and is meant to provide the person who no longer retains ownership of the home with compensation for the value it holds. A recent case before the Court of Appeal for Ontario looked at a situation where a couple could not agree on how to satisfy their obligations for equalization.
The couple were married in 1999, and separated 15 years later. By mid-April 2015, the husband had moved out of the home and the wife was paying for all of the expenses associated with it. It was at this time at the husband commenced an application seeking various relief, including equalization of net family property and the immediate sale of the home. Meanwhile, the wife asked for equalization of net family property and exclusive possession of the home and its contents until she could obtain the financing needed to pay the husband for his share.
They parties signed interim order on June 9, 2016. It contained the following conditions:
5. The matrimonial home shall be transferred to the mother on the following conditions:
(a) the father shall obtain an appraisal with Independent Appraisers at his cost. The father shall be allowed to attend with the appraiser, but he shall not bring any one with him. The mother may have any third-party present. The father will not communicate with the mother during the appraisal. The appraisal will be either on the weekend or in the evening after 5:30 p.m.
(b) The mother shall forthwith apply to the bank for approval to remove the father from the mortgage;
(c) Subject to the ability of the bank to comply and the consent of counsel, should the mother not be approved within 30 days of the minutes, the home shall be listed for sale by Mario Lemieux on the following conditions:
(i) the listing price will be as recommended by Mario Lemieux; and
(ii) the parties shall accept any offer that is at least 95% of the listing price.
(d) Provided the mother is approved, the house shall be transferred into the mother’s name alone within 60 days of the appraisal. The cost of the transfer shall be shared by the parties.
6. The equalization of the net family properties shall be addressed at a later date.
By the time the divorce trial rolled around, the main outstanding issue was that of the house as well as the husband’s pension plan. The husband’s share of the value of the home was $128,260, but he owed the wife $144,934.47 as an equalization payment for his pension. The wife proposed that the husband keep $128,260 in his pension as a credit and pay her the remainder be paid by a transfer (or “rollover”) from the husband’s pension plan. Meanwhile, the father asked for payment in full for his share of the home, and that if it could not be made, that the home be sold.
The trial judge found that the interim agreement did not stipulate how the husband was to be paid. After referring to the Family Law Act, which has a primary goal as a division of assets that is fair to both spouses. The trial judge did not think it fair to leave the husband with only his pension. But at the same time, the trial judge concluded he could not order the sale of the home to enforce the equalization payment. In the end, the trial judge ordered the husband to make an equalization payment of $166,674.64 to the wife, and the wife to make a payment of $128,560 to the husband.
The wife appealed, arguing the Family Law Act “is not open to the court to order the payment for the transfer of an asset that does not directly satisfy equalization. That is, her position is that the only question for the court is how the equalization payment is to be satisfied by the payor.”
The court dismissed the appeal, finding,
“the words ‘the equalization of the net family properties shall be addressed at a later date’, without more, did not mean that the (husband) would be entitled to payment for his share of the matrimonial home only by way of set-off against the equalization payment, once the amount was determined. As the trial judge noted, if the parties intended that result, the minutes should have said so. He concluded that the parties agreed to defer that issue to trial…. In the absence of an agreement between the parties to that effect, the trial judge was not obliged to order the payment to be made by way of set-off against the equalization payment owed to the appellant by the respondent. It was open to him to make the order that he did.”
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