Can a Marriage Contract Protect a Home You Owned Before Marriage in Ontario?

If you own a home and are about to marry, or are already married, you may worry that your spouse could claim half of it if the relationship ends. Many people assume that a home bought before the wedding stays theirs. In Ontario, the answer is more complicated, because the matrimonial home is treated differently from other property.

A marriage contract, often called a prenup, can change the default result. It cannot do everything, though. This article explains the usual rule, what a contract can and cannot do about the home, and what helps the contract hold up.

The default rule for a home you owned before marriage

Net family property is the value of everything a spouse owns on the valuation date, except excluded property, after subtracting debts and other liabilities and the value of property the spouse owned on the date of marriage, other than a matrimonial home. When the couple divorce or separate with no reasonable prospect of resuming cohabitation, the spouse with the lesser net family property is entitled to one-half of the difference.

A property is a matrimonial home if you and your spouse ordinarily occupy it, or occupied it at separation, as your family residence. This is where the worry comes from. Statutory exclusions such as gifts or inheritances from a third person after the date of marriage do not cover a matrimonial home. Without a contract, the date-of-marriage deduction and the gift or inheritance exclusion do not apply to it, and Ontario's guidance says its full value must be shared unless the spouses agree otherwise.

What a marriage contract can do about the home

The Family Law Act excludes from net family property any property the spouses have agreed, by a domestic contract, is not to be included. A marriage contract may deal with ownership in or division of property. So a contract can say that your home is property that is not to be included in net family property.

Timing is flexible. People who are married to each other, or who intend to marry, may make a marriage contract, so it is not limited to the time before the wedding. If you signed a cohabitation agreement and later marry each other, that agreement is deemed to be a marriage contract.

• It can set how the home's value is treated in equalization.
• It can address support and other matters in the settlement of your affairs.
• It can set rights on separation, on divorce, or on death.

If a spouse dies, the surviving spouse must choose between taking under the will and receiving the equalization entitlement, and a marriage contract may set rights on death. A lawyer can explain how your contract and your will should fit together.

What a marriage contract cannot do

Excluding the home's value from equalization is different from controlling who can live in it. Any term of a marriage contract that tries to limit a spouse's rights under Part II (Matrimonial Home) is unenforceable. Part II includes the equal right to possession of the home, and the table below also sets out a separate rule about selling or mortgaging it.

Separately, the Family Law Act allows a court to order that one spouse be given exclusive possession of the matrimonial home. How a contract term about who lives in the home would work alongside that power depends on your situation, so it is worth confirming with a lawyer.

There is a limit on the other side as well. If only one spouse has an interest in the home, the other spouse's right of possession is personal as against the owner and ends when they stop being spouses, unless a separation agreement or court order says otherwise. So the contract can protect the home's value in a property calculation, but a term that tries to limit your spouse's matrimonial home rights, including the equal right to possession, is unenforceable.

Keeping the protection effective

A domestic contract, and any agreement to amend or rescind one, is unenforceable unless it is in writing, signed by the parties and witnessed. Ontario's guidance says both spouses sign in front of a witness, and the witness also signs.

A court can set aside a domestic contract or a provision in it on application. The grounds are that a party failed to disclose significant assets, or significant debts or other liabilities, existing when the contract was made; that a party did not understand its nature or consequences; or otherwise in accordance with the law of contract. The last ground is the route for arguments such as duress or pressure to sign. A clause in the contract cannot take away this power.

Proof also matters. The person claiming a deduction or exclusion from net family property has the onus of proving it. Keeping records of the home's value and of your finances can help.

Legal advice is not one of the formal requirements for validity. Still, Ontario's government advises that each partner speak to a different lawyer and that the partners exchange financial information before signing.

What to do next

• Gather your property records, including the title or deed, mortgage statements and a recent estimate of the home's value.
• List all your assets and debts honestly, and ask your partner to do the same.
• Decide whether you want the home's value excluded entirely, partly, or treated another way.
• Each of you should speak to a different lawyer before signing.
• Allow plenty of time, so no one feels pressured.
• Sign in writing in front of a witness, who also signs, and keep copies safe.

How a particular contract is drafted, and how it fits with a will or an existing cohabitation agreement, depends on your facts. A family lawyer can confirm what suits your situation.

Frequently asked questions