Divorce in Ontario:  Buying Your Spouse Out of the House

Dividing assets during a divorce process in Ontario can be a complex process for most couples. This is especially true about their matrimonial home:  It’s not only steeped in memories, but usually represents a couple’s most valuable marital asset. This means the decision on what happens to it is not merely emotional, but also important from a legal and financial standpoint. 

One common solution to the problem involves one spouse agreeing to buy out the other spouse’s interest in the home.  If you are considering this option, here are some of the steps to take, and the things you need to know.

Step 1: Understand Your Home’s Value 

Determining your home’s current market value is the first step.  The most reliable way to assess that is to get a professional appraisal.  Here are the key points:

• Hire a certified real estate appraiser.  This ensures you and your spouse have a neutral and accurate figure, and minimizes any disputes.
• Avoid informal estimates.  This includes appraisals you might get from real estate agents, or from online tools. These may not be accurate enough for legal purposes. 

Step 2: Calculate the Buyout Price for Divorce Purposes

The next step, as part of the broader divorce process, is to determine exactly how much money you must pay your spouse to take over full ownership of the matrimonial home.  Here are the key points:

• Special status for equalization purposes.  Determining the buyout price is closely tied to the process of equalizing your Net Family Property under the Ontario Family Law Act.  That’s because the legislation declares that the matrimonial home has special status:  Regardless of who paid for it or who is on title, you and your spouse must share the full value of it equally when you separate and divorce (along with your other shared assets).
• Adjusting for other assets. If your home is your only significant shared asset, the buyout price is typically half the net value of the home. However, if you and your spouse have other significant assets or debts to consider (such as any outstanding mortgages or liens on the property), these must be accounted for. They will factor into the final price you must pay your spouse in any buyout. 

Step 3: Protect Your Rights with Legal Representation

With those basic points around equalization in mind, you should still consult an experienced Family Lawyer to assist with the buyout process. Here’s why:

• Fair equalization. Your lawyer can ensure the equalization process accounts for all marital assets and debts on both sides of the equation, including hidden or overlooked items like your respective pensions, investments, or personal loans. This ensures that any buyout figure you mutually arrive at will reflect a fair distribution of your marital assets overall. 
• Drafting agreements. Your lawyer will also prepare or review the legal agreement outlining the terms of the home’s buyout. This ensures your spouse will relinquish all legal claims to the property, once he or she receives your buyout payment. 
• Complying with legal obligations. A lawyer will also help you navigate court filings or approvals, especially if your buyout is part of a broader divorce settlement.

Related: Protecting Your Finances in a High-Asset Divorce: Strategies and Considerations

Step 4: What If There Is No Agreement?

In an ideal scenario, you and your spouse will simply come to an agreement on the buyout terms, facilitated by your lawyers. If you cannot reach a consensus, you may need to ask the court to resolve the matter for you. Here’s what you need to know:

• Exclusive possession: In some cases, you may be granted exclusive possession of your matrimonial home pending a negotiated agreement or court resolution of your disputed matters.  This is especially likely if there are younger children involved. Although this does not change your basic rights around equalization and obtaining legal title, it may influence the timing of any buyout or sale (as the case may be).
• Court-ordered sale: If your spouse refuses to sell you their share of the matrimonial home, or disputes the valuation figure arrived at, then the court may order that the home is to be sold to a third party on the open market. The proceeds of that sale will be added to the larger pool of your shared assets, and divided up as part of the equalization process.

Related: “Exclusive Possession” of Your Matrimonial Home: What Does it Mean?

The Takeaway

Buying your spouse out of the matrimonial home is a significant financial and legal decision – especially since it takes place against the broader background of your divorce.  It’s important to ensure the process is fair, and that your rights are protected. 

If you are considering making this type of buyout offer, feel free to contact our offices for advice that is tailored to your situation.