Prenups and the Matrimonial Home in Ontario: What a Contract Can't Do

If you own a home before you marry, a prenup can look like the obvious way to protect it. The surprise for many people is that Ontario law treats two questions about the home very differently: what the home is worth when the marriage ends, and who has the right to live in it while the marriage lasts.

This article explains that split in plain terms. It covers what a marriage contract can do about the value of a home, what it cannot do about possession, and what helps a contract hold up later. It is general information, not advice on your situation.

Two questions: the home's value and the right to live there

Ontario's Family Law Act does not use the word prenup. The term it uses is marriage contract, and prenup is an informal name. A marriage contract is one kind of domestic contract.

A marriage contract lets two people who are married or intend to marry agree on their rights and obligations during the marriage, on separation, on annulment or dissolution, or on death. It may deal with ownership or division of property, support, and other matters in the settlement of the couple's affairs.

For a home, that means keeping apart two ideas. One is money: how the home's value counts when property is equalized. The other is possession: who has the right to occupy the home. The contract has real room on the first and a firm limit on the second.

What a contract can do about the home's value

Without a contract, a spouse's net family property is the value of what they own on the valuation date, less debts and less the value of property they owned on the date of marriage, other than a matrimonial home. The spouse with the lesser net family property is generally entitled to one-half of the difference.

That is why the home matters so much. If you owned the home before marriage, or received it as a gift or inheritance, the default rules give no date-of-marriage deduction or gift and inheritance exclusion for a matrimonial home, and Ontario's guidance says its full value must be shared unless the spouses agree otherwise.

A contract is one way to agree otherwise. Property that the spouses agree, by a domestic contract, is not to be included is excluded from net family property. Whether and how a particular clause achieves what you want depends on its wording, so this is worth having a lawyer draft and review.

Keep in mind that anyone claiming a deduction or exclusion has the onus of proving it. Records showing what the home was worth at marriage and what you owned then can matter.

What a contract cannot do about possession

Both spouses have an equal right to possession of a matrimonial home, whoever owns it. A property is a matrimonial home if you and your spouse ordinarily occupy it, or occupied it at separation, as your family residence.

A term of a marriage contract that tries to limit a spouse's rights under Part II of the Act, the matrimonial home part, is unenforceable. So a clause saying your spouse will have no right to live in the home during the marriage cannot be relied on.

Other Part II protections work the same way. A spouse may not sell or mortgage an interest in a matrimonial home unless a listed condition is met, such as the other spouse's consent or a court order. A court may also order that one spouse be given exclusive possession of the matrimonial home.

There is an exception worth knowing. If only one spouse has an interest in the home, the other spouse's right of possession is personal as against the owner, and it ends when they stop being spouses, unless a separation agreement or court order says otherwise.

Helping your contract hold up

A domestic contract 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, who also signs. People who are already married can make a marriage contract too, so a contract is not limited to the time before the wedding.

A lawyer is not one of the formal requirements. Even so, Ontario's government advises that each partner speak to a different lawyer and that the partners exchange financial information before signing.

A court may set aside a contract, or a term in it, if a party failed to disclose significant assets or significant debts or other liabilities, if a party did not understand the nature or consequences of the contract, or otherwise in accordance with the law of contract. A clause cannot take that power away from the court. Pressure to sign is generally argued under the contract-law ground, and judges decide those cases one at a time.

If you and your partner have a cohabitation agreement and then marry each other, the agreement is deemed to be a marriage contract.

What to do next

• Write down when you bought the home, what it was worth at the date of marriage, and what is owed on it.
• Gather proof of your other assets and debts, since you will want to share them honestly with your partner.
• Decide what you actually want: protecting the home's value, a plan if you separate, or both.
• Each of you should speak to a different lawyer before signing.
• Make sure the contract is in writing, signed by both of you and witnessed.
• Keep a signed copy somewhere safe and review it after major changes, such as a move or a new home.

A lawyer can confirm how a clause about the home would likely work, and can draft it so it stays on the right side of the possession limit.

Frequently asked questions