Real Estate and the Matrimonial Home
Last week, the Toronto Real Estate Board (“TREB”) released a report that Toronto home prices in the month of June jumped nearly 17% compared with the same month last year. Toronto and Vancouver real estate prices are frequently a news topic, but regardless of where you live, the home often represents the largest and most important asset of a person’s estate.
We have previously written on the rights of common law spouses under the Succession Law Reform Act. However, surviving married spouses have those rights and more. Surviving married spouses also have recourse to the Family Law Act (“FLA”). Under section 6(1) of the FLA, a surviving married spouse can file an election for equalization of net family property. In essence, a surviving married spouse is entitled to half of all the property of the marriage – regardless of who held legal title and regardless of the terms of the deceased spouse’s will.
Ontario has implemented a pecuniary (or payment) regime rather than a proprietary regime. This means that an election in Ontario does not give a married spouse a right to a particular piece of property; instead it gives the surviving spouse a right to receive (or make) a payment. One implication of this is highlighted below, but for now, it should be noted that the law affords special protection to a surviving married spouse’s interest in the matrimonial home. Section 18(1) of the FLA defines the matrimonial home as the property “ordinarily occupied by the person and his or her spouse as their family residence.”
The special protections given to the matrimonial home are numerous. For example, under section 19 of the FLA, a spouse is entitled not only to a payment but to possession of that property.Under section 26 of the FLA, if a deceased spouse owns the matrimonial home as a joint tenant with someone other than the married spouse, the joint tenancy is immediately severed and the surviving spouse is allowed to retain possession of the home, rent free, for sixty days after the other spouse’s death. In addition, even though Ontario has adopted a payment regime, a surviving spouse’s entitlement to ½ of the net value of the matrimonial home is afforded special protection, particularly against creditors.
Thibodeau v Thibodeau, 2011 ONCA 110, is a family law case involving two living spouses, but it is instructive with regard to the rights of a surviving spouse and their interest in the matrimonial home. In this case, an ex-wife obtained a court order for an equalization payment from her ex-husband. The ex-husband then declared bankruptcy. The ex-wife sought an order granting her equalization payment priority over her ex-husband’s unsecured creditors. The Court refused to grant the payee-wife priority over other unsecured creditors of the payor-husband. However, the ex-wife had already received her share of the proceeds from the sale of the matrimonial home. While the Court order did not mean that the ex-wife would not later recover the rest of the payment owed to her – as she had other avenues by which to secure her payment – the case is significant because the ex-wife’s ½ interest in the matrimonial home and rights therein were not prejudiced by her ex-husband’s bankruptcy.
While there is some uncertainty with regard to the prioritization of claims in an insolvent or bankrupt estate, it is likely that a surviving married spouse’s interest in a matrimonial home would gain similar protections in an estate’s context – which, according to the TREB, is good news for married couples who own a home in Toronto.
Thank you for reading.