What to Write About the Matrimonial Home in a Separation Agreement

When one spouse plans to keep the house, it is tempting to treat the home as settled and move on to other issues. In reality the home is often the largest asset in the separation, and the wording of the clause decides who pays what, by when, and what happens if plans fall through.

This article walks through the three most common approaches: a buyout, a sale, and one spouse staying in the home for a period. It explains what each clause needs to say so that it is clear, workable and easier to carry out. It is general information, not advice on your own situation.

Why the home needs its own clauses

For married spouses in Ontario, property acquired during the marriage must generally be split equally when the marriage ends. The full value of the family home is shared, even if one spouse owned it before the marriage or received it as a gift or inheritance. That is different from most other gifts and inheritances, which can be excluded property.

The balancing payment is called an equalization payment. In general terms, each spouse adds up what they own at separation, less debts and excluded property, then subtracts what they owned at marriage less debts (not counting the family home). A negative result counts as zero. The spouse with the larger total pays half of the difference. Because the home counts so heavily, the buyout figure and the equalization figure are usually tied together.

If you were never married, the picture is different. Common-law partners are not legally required to split property acquired during the relationship. Each generally keeps what they bought, and a partner who contributed to the other's property may need a court order to recover that contribution. A cohabitation or separation agreement can set out property rights. If you are unmarried, the home clause should say plainly who owns what and how any contribution is dealt with.

Three common approaches compared

Which approach suits you depends on your finances, your children's needs and whether the keeping spouse can realistically afford the home on their own. A lawyer can help you test that before it is written into an agreement.

Buyout clauses: what to include

A buyout clause is only as good as its detail. Vague wording such as "fair market value" can lead to a second dispute. Think through each of the points below.

• How the value is set, for example an agreed figure or an appraisal, and the date the value is taken as of.
• How the buyout payment fits with the equalization calculation, so that the home is not counted twice or missed.
• The amount of the payment and the exact date it is due, and whether it is paid in one sum or in stages.
• Where the money is coming from, for example refinancing, savings or other assets, and what happens if financing is refused.
• Release of the leaving spouse from the mortgage and any line of credit secured against the home.
• Transfer of title, who arranges it and who pays the legal and registration costs.
• A closing date, and a date by which the leaving spouse moves out and hands over keys.
• What happens if the buyout is not completed on time, such as a fallback sale.

If the keeping spouse is also paying equalization on other assets, the agreement can set one combined figure. Make sure both the home value and the other property are described clearly enough that a reader who was not at your negotiation could follow the arithmetic.

Sale and exclusive possession clauses

Exclusive possession simply means that one spouse lives in the home and the other does not. In an agreement it is usually temporary. The clause should be specific about when it begins, when it ends and what ends it, for example a fixed date, the youngest child finishing a school year, or the occupying spouse remarrying or moving in with a new partner. Whether and how the law gives possession rights over a matrimonial home is something to confirm with a lawyer for your situation.

While one spouse stays and the home has not yet been sold or bought out, the clause should answer the everyday questions:

• Who pays the mortgage, property taxes, insurance and utilities during the stay.
• Who pays for major repairs and who decides whether to do them.
• Whether the other spouse can enter the home, and on what notice.
• Whether the occupying spouse can rent out rooms or let others move in.
• How any increase or decrease in value during the stay is handled.

For a straight sale, spell out who handles the listing, how the listing price and offers are approved, what happens if the spouses disagree, how real estate and legal costs are taken from the proceeds, and how the remaining money is divided. Include a deadline so that the sale does not drift.

Making the agreement hold up

Ontario.ca says separation agreements let spouses divide property as they choose, that each spouse should have their own lawyer review the agreement, and that it is hard to change later. Changing a domestic contract means negotiating a new contract and filing it with the court using form 26B. That is a good reason to get the home clauses right the first time.

Honest financial disclosure also matters. Ontario guidance on spousal support agreements says they should be made with full, honest financial disclosure, without pressure and with an understanding of the terms, or a court can set them aside. How a misstated home value or mortgage balance would affect your own agreement depends on your situation, so it is worth confirming with a lawyer.

On formalities, Ontario.ca notes that marriage contracts and cohabitation agreements must be signed by both partners in front of a witness, who also signs. Ask your lawyer which signing and witnessing steps apply to your separation agreement.

If the agreement also includes support, it is one of five kinds of domestic contract, and the Family Responsibility Office enforces it only if it is registered: file it with the Ontario Court of Justice or the Superior Court of Justice using form 26B, then send the Family Responsibility Office the contract, the court-signed form 26B and a completed registration package. How this applies to the home clauses depends on your situation, so it is worth confirming with a lawyer.

What to do next

• Decide whether you are buying out, selling, or staying for a set time, and whether it is realistic financially.
• Gather the mortgage statement, recent property tax bill, any appraisal and the title or deed.
• List what each spouse owned at the date of marriage and at separation, so equalization can be calculated if you are married.
• Prepare financial statements. Ontario's Form 13 is for support-only cases and Form 13.1 is for cases involving property or debts, and both are a useful checklist of the information to gather.
• Write down dates you can live with for payment, move-out and closing.
• Have your own lawyer review the draft before you sign.

If you are married and thinking about going to court over an equalization payment, note the deadline: six years from separation or two years from the final divorce, whichever comes first. Do not let negotiations run so long that you lose that option.

Frequently asked questions