Get It In Writing – Transferring Spousal Home During Separation
When a couple separates or divorces, the question often arises of who gets to keep the matrimonial home. In some cases, one spouse will purchase the other spouse’s interests in the property. In these cases, it is crucial to have a written separation agreement signed before the transfer takes place.
Putting aside the numerous family law considerations for having a separation agreement for real estate transfers, having a written separation agreement could allow the parties to avoid payment of Land Transfer Taxes upon the transfer from one spouse to the other.
One spouse can transfer an interest to the other spouse with married spouses, often for no consideration other than “natural love and affection.” This is not often true with transfers between separating spouses, and not because there may be a lack of love and affection.
As part of a matrimonial home transfer, there is often a payment to purchase the transferring spouse’s interests in the home and perhaps an assumption of that spouse’s share of the mortgage debt. These amounts are generally taxable in terms of Land Transfer Taxes.
With a written separation agreement, the transferee spouse can claim an exemption from payment of Land Transfer Taxes. This can result in savings of thousands of dollars and make the time and costs involved in having a formal separation agreement drafted a worthwhile investment.
Dealing With Your Matrimonial Home During A Divorce
Essential Points To Consider:
- Who gets to keep the home?
- What is the market value of the home? This will help determine how much of payment the spouse who gets to keep the house will have to pay to the transferring spouse. An excellent real estate agent can help during this process.
- Are land transfer taxes payable on a transfer of a matrimonial home, between spouses or former spouses? The answer to this question is, “maybe.” If a payment is being made for the transfer of the home, then taxes could be payable unless there is an exemption. One such exemption is if the transfer is in compliance with a written separation agreement, pursuant to which the parties have agreed to live separate and apart.
- How are any mortgages or secured lines of credit being dealt with? For the transferring spouse, it is essential for him or her to address how they are being relieved of liability under any existing mortgage or secured line of credit after the transfer takes place. Typically, this involves either a mortgage refinance transaction or obtaining a written release from the lender.
With some careful planning and by asking the right questions, transferring a matrimonial home can go smoothly and be one less source of stress in what can otherwise be a very stressful time.
Selling Your Home After A Divorce
Selling your home after a divorce can have its inherent challenges. This is not the case with all divorces, but at the very least, there may have been memories and plans with an emotional investment in and around your home. Letting go of the house can be quite liberating as you begin a new chapter of life.
Some divorces are amicable, some sudden and unexpected and others where the former couple are no longer on speaking terms. This can be a challenging experience for this divorced couple.
Buy The Other Out?
Perhaps buying the former spouse is a relevant solution if the purchasing party would like to retain the home and has the necessary funds to take on the additional responsibility on their own. Perhaps a legal transfer of the matrimonial home is best.
Spousal Consent
If one spouse is not on the title of the former matrimonial home, it is essential that the spousal consent form is signed on the agreement of purchase and sale. This signature documents the necessary consent of the other party with a legal right to the property.
Professional Real Estate Guidance
It’s essential that a professional realtor is chosen based on real estate market understanding listing strategy and of the utmost importance is the ability to represent both the former husband and wife equally. To see the big picture and goals of the two, then to navigate the process delicately. It is essential that both people feel heard (this is always true, but all the more so in a potentially challenging situation).
The primary job of the realtor during the sale of a divorced couple’s home or condo is that the sale goes smoothly, the most money is given for the sale and that both people feel heard and understood at every step of the way while being handled professionally.
➤ Want to learn more about selling your home? Have a look at these posts:
Now What?
What do I do now? Rent? Buy? Buy if you can. Suppose you know that you are ready to settle into a new life and if you have the financial means. At the very least, rent and work towards buying whatever you can purchase in the future.
It’s best to stay in the market, don’t lose ground. Selling and buying in the same market is an excellent move. Even if the market is flat, at least you aren’t paying your landlord’s mortgage payments! You are paying down your mortgage and creating more equity in the property.
The Quality of Title and Adverse Possession
There are two land title registration systems in Ontario: one under the Registry Act and the other under the Land Titles Act. We commonly associate the former with paper deeds and other title documents and the latter with electronically recorded title documents. Around the year 2000, the Province of Ontario began the administrative process of converting paper land registration records for properties registered under the Registry Act to electronically recorded Land Titles parcels. The title to these converted parcels is referred to as Land Titles Conversion Qualified.
Not all parcels of land have been converted. When deficiencies or questions regarding the title to land under the Registry Act are identified, the property is not automatically converted to the Land Titles system, and such parcel of land is left under the governance of the Registry Act. These properties are referred to as non-converts.
There are certain benefits to converting the property from the Registry System to the Land Titles system, limiting the risk of an adverse possession claim. Adverse possession can give rise to property rights acquired by someone other than the registered landowner by virtue of their use or occupation of lands. When title to a property is converted to Land Titles Conversion Qualified, the possibility of an adverse possession claim is removed, save and except for any such claims that would have matured by the time of conversion. In Ontario, the time required for use or occupation giving rise to an adverse possession claim is a minimum of 10 years. So, unless this minimum period of use or occupation had been reached by the time the property is converted to Land Titles Conversion Qualified, a claim based on adverse possession would not be successful.
Non-convert properties can still be converted into the Land Titles system. The process involves determining and correcting the title deficiencies that prevented the administrative conversion. Then, a lawyer’s affidavit is required, setting out details of the title and the steps taken to correct the title deficiencies and requesting the Land Registrar convert the property to the Land Titles system.
Suppose you believe that your property is affected by an adverse possession claim or is still in the Registry system. In that case, you should speak with your real estate lawyer regarding options to protect and enhance your ownership interests.
