The Canadian Bar Association
Family, Mediation

Hot real estate market adding pressure to splitting spouses

The hot real estate market the Greater Toronto Area and other parts of the country is adding a new layer of stress for separating spouses, says Oakville family lawyer and mediator Cathryn Paul.

The frenetic pace — leading to a nearly 28 per cent jump in home values in February from the same month last year — can have significant effects on the decisions couples make as they part ways, and it’s often more complicated than making a big profit on the sale of the home, says Paul, who practises under Cathryn L. Paul, Lawyer, Mediator, Arbitrator and Oakville Mediation.

“Figuring out the value of the home is very challenging in this market because we’re seeing homes being sold for far more than the asking price. You don’t really know what the home is worth until it is sold,” Paul tells AdvocateDaily.com.

Even professional property appraisals can leave ex-spouses wondering if their house would fetch more on the open market, making it difficult to reach an agreement where one person buys out the other. If that is the case, the option of allowing one spouse and perhaps the children to remain in the same home is removed from the equation, she says.

“If they sell the home, they may receive a significant amount on the sale, but then both may have to turn around and buy two new homes — which is horribly expensive,” Paul says. That often means moving further away from Toronto, to less-expensive accommodations and leaving safety nets of friends and schools behind while facing longer commutes.

“There are many implications,” she says. “There may be limited finances, with one parent paying support to the other, and duplication of expenses in two households, so there's less money to go around to pay a greater housing expense.”

Another important aspect of the fast-moving real estate market is considering who is the named owner of the matrimonial home. 

“If the home is only in one party’s name, we would look at the value on the date of separation, and any increase or decrease in value from that date is kept by the person whose name the home was in,” she says.

For example, if a home is worth $1 million on the date of separation, and $1.2 million on the date of sale, and the home is in the wife’s name, she keeps the $200,000 increase, while sharing half of the $1 million value, or $500,000, with the husband. If the home was in both names, each spouse would receive $600,000, Paul explains.

If the home decreases in value, the person who owns it must absorb the loss between the date of separation and date of sale, she says. So if there was a sudden market correction, and the $1 million home in the wife’s name reduces to $800,000, the husband would still get one-half of the date of separation value, $500,000, and the wife would get what’s left, $300,000.

“Parties can always agree to share equally the value of the home on the date of sale, but if they can’t agree otherwise, this is what they’re dealing with,” she says.

A final point Paul says couples must consider is that in a hot market, it may be more challenging to keep the matrimonial home for a few years after a separation while a child finishes school, for example.

“It can become a bit more of a gamble because you don’t know if the value will go up or down,” she says. “There’s fear in the market now. It has risen so much, people wonder if it will continue to increase." 

As a result, decisions around how to handle the matrimonial home can become rushed and more stressful, she adds.

Paul says she tries to help ex-spouses work through these stresses by coming up with a list of scenarios and the impact of each.

“We work through different options and talk about alternatives,” she says. 

“When people see values of homes are going up more than 20 per cent in a year, that’s scary, and it makes a big difference when they’re already in fairly stressed circumstances because of the separation."

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