1. Does the Person Whose Name Is on the House Get to Keep It?

2. Is the House Automatically Divided 50/50?

3. What If One Spouse Owned the House Before the Relationship?

4. Can One Spouse Buy the Other Out?

5. What Happens If Neither Spouse Can Afford to Buy the Other Out?

6. Can One Spouse Stay in the House During the Divorce?

7. What If the Children Are Living in the House?

8. What If Both Spouses Want the House?

9. Do Mortgage Payments After Separation Matter?

10. How Bridgestone Law Can Help

Introduction

For many separating couples, the family home is their largest asset and one of the most difficult parts of the separation to resolve. It may also carry enormous emotional significance. It is where the children have grown up, where a couple built their life together and, in many cases, where a significant portion of the family's wealth is tied up.

One of the first questions we often hear is: Who gets to keep the house?

In Alberta, there is no automatic rule that one spouse gets the family home simply because their name is on title, they paid more of the mortgage, they earn more money or the children are primarily living with them. Instead, the home generally has to be considered as part of the spouses' overall family property.

Depending on the circumstances, the house may be sold, one spouse may buy out the other's interest, or one spouse may remain in the home temporarily while the parties work toward a final property settlement.

The rules governing property division in Alberta are primarily contained in the Family Property Act. The Act allows the Court to distribute property owned by either or both spouses and contains different rules depending on when and how property was acquired.

Understanding the difference between ownership, possession and division of equity is particularly important. The person who lives in the house after separation is not necessarily the person who will ultimately own it.

Does the Person Whose Name Is on the House Get to Keep It?

Not necessarily.

A common misconception is that if only one spouse's name appears on the title to the home, that spouse automatically gets the property when the marriage ends.

Family property division does not work that way.

The Family Property Act permits the Court to distribute property owned by both spouses and property owned individually by either spouse. This means that title is important, but it does not necessarily determine how the value of the property will ultimately be treated between the spouses.

For example, suppose a married couple purchased a Calgary home during their relationship for $500,000. The home was registered only in the husband's name because he handled the financing.

Years later, the couple separates. The home is now worth $800,000 and there is $300,000 remaining on the mortgage.

The fact that the husband's name is the only name on title does not automatically mean that he simply walks away with the house and all of its equity.

The home must be considered as part of the overall family property analysis.

Is the House Automatically Divided 50/50?

Property acquired during the marriage or qualifying relationship will generally be divided equally unless the Court determines that an equal division would not be just and equitable after considering the factors set out in the Family Property Act.

However, saying that property is divided equally does not necessarily mean that the physical house must be divided or sold.

Instead, the value of the house may form part of a much larger property division.

For example, imagine that a couple has:

• a family home with substantial equity;

• RRSPs and other investments;

• vehicles;

• savings accounts;

• pensions; and

• debts.

One spouse may want to keep the home while the other spouse would prefer to receive a larger share of investments or other property.

If the numbers work and the spouses can agree, they may be able to structure their property settlement so that one spouse receives the house while the other receives other assets or a payment representing their share.

This is why determining "who gets the house" should rarely be looked at in isolation.

What If One Spouse Owned the House Before the Relationship?

This can make the situation significantly more complicated.

Under Alberta's Family Property Act, certain property may have an exempt value, including property owned before the marriage or before the spouses' relationship of interdependence began, depending on their circumstances.

Generally, the relevant market value of qualifying property at the beginning of the relationship may be exempt from distribution. However, an increase in the value of exempt property is treated differently and may be distributed by the Court in a manner that is just and equitable after considering the statutory factors.

Consider an example.

Example: A Home Owned Before the Marriage

Sarah owned a home in Calgary before her relationship with Michael began. At the relevant starting date, the property had a market value of $400,000.

Sarah and Michael later lived in the property together as their family home. During their relationship, mortgage payments were made, renovations were completed and the property's value increased substantially.

At separation, the property is worth $850,000.

It would be too simplistic to say either:

"Sarah owned it first, so Michael gets nothing."

or

"They were married, so Michael automatically gets half of the entire house."

Instead, the original exempt value, the increase in value, any mortgage and the parties' circumstances must be properly analyzed under the Family Property Act.

Evidence of the home's value at the relevant date can become extremely important. Historical appraisals, property assessments, mortgage statements, purchase documents and other financial records may be needed to establish an exemption.

Can One Spouse Buy the Other Out?

Yes. A buyout is one of the most common ways separating spouses deal with a family home.

Rather than selling the property to a third party, one spouse keeps the home and compensates the other spouse for their interest as part of the overall property settlement.

However, calculating a buyout is not always as simple as dividing the home's equity by two.

The parties may first need to determine:

• the home's current fair market value;

• the mortgage balance;

• whether either spouse has an exempt interest;

• whether there is a home equity line of credit or other secured debt;

• how the rest of the family property will be divided; and

• whether adjustments should be made for other assets or liabilities.

The spouse keeping the property must also deal with the mortgage.

A separation agreement saying that one spouse will take over the mortgage does not necessarily mean the lender will release the other spouse from their obligations. The spouse keeping the home may need to qualify for refinancing in their own name.

This can become a major practical obstacle.

A spouse may desperately want to remain in the home but simply may not have sufficient income to qualify for the mortgage on their own.

A family lawyer can help determine whether a proposed buyout is financially and legally workable before the parties commit to it.

What Happens If Neither Spouse Can Afford to Buy the Other Out?

The home may need to be sold.

This is often difficult for separating families, particularly when children have lived in the property for many years. However, keeping the house is not always financially realistic.

After separation, a household that was previously supported by two incomes may suddenly need to support two separate residences.

There may also be a substantial mortgage, property taxes, insurance, utilities, repairs and maintenance.

If neither spouse can afford to carry the property or refinance it, selling the home may ultimately be the most practical solution.

The net proceeds can then be addressed as part of the overall family property division.

A sale can also create disputes of its own, including:

• when the property should be listed;

• which realtor should be used;

• the listing price;

• whether repairs should be completed;

• who will pay those expenses;

• whether an offer should be accepted; and

• how the proceeds will be held or distributed.

These issues should ideally be addressed in a detailed written agreement or court order rather than left uncertain.

Can One Spouse Stay in the House During the Divorce?

Yes.

It is important to distinguish between temporarily living in the home and ultimately receiving the home through property division.

A spouse may remain in the family home while the divorce and property issues are being resolved. In some situations, the spouses may even continue living under the same roof while separated. Alberta expressly recognizes that spouses can be separated while continuing to reside in the same home.

Where the spouses cannot agree about who should remain in the property, one of them may seek an Exclusive Possession Order.

Under the Family Property Act, the Court can grant one spouse exclusive possession of the family home, direct the other spouse to leave and restrict that spouse from attending at or near the home.

An exclusive possession order is generally a temporary solution. Alberta describes it as a way to address who will remain in the home while the parties' longer-term issues are resolved.

Most importantly, exclusive possession does not necessarily determine who ultimately owns the house.

A spouse could receive exclusive possession of the home during the separation but the house could later be sold as part of the final property settlement.

What If the Children Are Living in the House?

The needs of children can be particularly important when deciding who should temporarily remain in the family home.

For example, maintaining the children's existing home may allow them to remain close to their school, friends, activities and community while their parents work through the separation.

Alberta identifies the needs or best interests of children as relevant to decisions concerning exclusive possession of the family home.

However, having the children primarily reside with one parent does not automatically mean that parent becomes the owner of the house.

Parenting arrangements and property ownership are separate legal issues.

The children's circumstances may influence whether one parent remains in the home temporarily, but the financial and property issues still have to be resolved.

What If Both Spouses Want the House?

This is where property disputes can become particularly difficult.

Sometimes both spouses want to remain in the home.

One spouse may say:

"I paid the mortgage, so I should keep it."

The other may say:

"The children live with me, so I should keep it."

Neither position automatically decides the issue.

The parties need to determine the home's value, their respective property claims and whether either spouse can realistically afford to keep it.

If both spouses are financially capable of purchasing the other's interest, negotiations may be required to determine whether one spouse will receive the property.

If they cannot reach an agreement, court involvement may ultimately be necessary.

Do Mortgage Payments After Separation Matter?

They can.

After separation, one spouse may continue paying the mortgage, property taxes, insurance or major expenses associated with the home.

Those payments should be carefully documented.

However, a spouse should not automatically assume that every dollar paid after separation will simply be reimbursed in the final property settlement. The analysis may depend on the circumstances, including who remained in the home, the nature of the expenses, the parties' financial arrangements and other claims between them.

This is one reason separating spouses should obtain legal advice early rather than allowing expenses to accumulate for months or years without a clear arrangement.

How Bridgestone Law Can Help

The family home is often much more than a line on a financial statement. It can represent financial security, stability for children and years of work and memories.

That emotional importance can make it particularly difficult to make sound financial decisions during a separation.

At Bridgestone Law, our Calgary family lawyers can help you understand how Alberta's property division laws apply to your home and the rest of your family property.

We can assist with determining whether an exemption may apply, reviewing title and mortgage information, obtaining appropriate valuation evidence, calculating equity, negotiating a buyout, addressing the sale of the property and seeking or responding to an application for exclusive possession when necessary.

Before agreeing to sell the home, transfer title or accept a buyout, it is important to understand how the house fits into the entire family property settlement.

A decision that appears straightforward today can have significant financial consequences for years to come.

If you are separating or divorcing and are unsure who should keep the family home, contact Bridgestone Law to speak with a Calgary family lawyer about your options.