Property Division (Equalization)
Property Division / Equalization
The parties are free to arrange for the property division in an agreeable fashion reduced to writing in the form of a separation agreement. Unfortunately, in many cases it’s not possible for the parties to settle on the division of properties on their own, and in that case equalization would be used to determine how properties are to be divided.
Please note that pursuant to the Family Law Act (FLA) and the Divorce Act (DA), a claim of equalization is only available to married couples. One has to elect for equalization of family property within six years of the date of separation or 2 years from the date of divorce.
A couple is considered to be separated as of the date on which there is no reasonable prospect they will resume cohabitation. The court considers a number of factors in determining this date, if the couple cannot agree on when the date of separation was:
Physical separation, even if they remain in the same home;
Withdrawal by one spouse from matrimonial obligations;
While the absence of a sexual relationship is a factor, it is not on its own determinative;
Changes in how the couple communicates with one another and with others;
Separate meal patterns;
Separation of child rearing responsibilities and time;
Separation of social activities and household responsibilities.
The Court has discretion to grant a leave extending the time limit for equalization if it is satisfied that: (1) There are appropriate grounds for relief; (2) The relief was previously unavailable because the delay was incurred in good faith and (3) No one will suffer substantial prejudice if an extension is granted.
When a marriage ends, the equal contribution of each person to the marriage is recognized. The law provides that the value of any kind of property that was acquired by a spouse during the marriage and still exists at separation must be divided equally between the spouses. Also, any increase in the value of property owned by a spouse at the date of marriage must be shared. The payment that may be owed to one of the spouses in order to effect this sharing is called an equalization payment, or an equalization of net family property.
There are some possible exceptions to these rules, which are called excluded property, and may include gifts or inheritances received during the marriage from someone other than a spouse, provided that the gifts or inheritances were not used towards a matrimonial home.
FLA sets out a regime for the division of property upon the breakdown of marriage. The formula is designed to calculate the growth of each spouse’s net worth from the date of the marriage to the date that the spouses separate (referred to as the “valuation date”) and equalize the difference between them.
To determine the difference, each spouse calculates his or her net worth on the date of marriage and on the valuation date. The increase is known as the net family property. Net family property is calculated by determining the spouse’s valuation date value (the value of all the spouse’s property on the valuation date minus all debts and liabilities on the valuation date) as well as the spouse’s date of marriage value (the value of all the spouse’s property at the date of marriage minus all debts and liabilities at the date of marriage).
Please note, however, that any property acquired after the separation date WOULD NOT be included in the calculation of the Net Family Property. So if you decide to purchase a property after separation, you can be rest assured that it would not be included in the equalization calculation.
Only married couples are entitled to Matrimonial Property rights, and such rights were conferred to them under Part II of the Family Law Act (FLA). A couple of notes regarding matrimonial home:
A married couple may have more than one Matrimonial Home: their main residence, cottages, etc., can all qualify simultaneously as long as they are for the use and enjoyment of the family at the time the marriage breakdown as a matrimonial home, and its use need not be full-time but must be consistent with the normal use of such property;
A provision in a marriage contract purporting to limit a spouse’s right to possession of the matrimonial home is unenforceable, as are any other restrictions of a spouse’s rights under Part II of the FLA;
A matrimonial home cannot be sold or encumbered without the written consent of the other spouse, regardless of how title may be held. Without written consent, the sale or mortgaging may be set aside by a court;
In addition, unlike other properties, the full value of the matrimonial home is to be equalized, regardless of who own the property or how much money have been invested into the property before marriage!
Equalization is extremely technical, so if a claim of equalization is involved in the divorce, you shouldn’t attempt to compute it on your own, and you are strongly advised to retain a lawyer for assistance. And if you and your spouse are in a common law relationship, equalization would not be applicable to you, a well-drafted separation agreement is your only protection.
HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.