We have separated. How do we sell the house?

Both of you must consent

Section 21 of the Family Law Act says no spouse shall dispose of or encumber an interest in a matrimonial home unless the other spouse joins in or consents, has released their rights in a separation agreement, or a court order authorizes the transaction. It applies even if only one spouse is on title, and a sale that ignores it can be set aside unless the buyer paid value in good faith without notice.

Part II of the Act protects married spouses. Common-law partners are governed by ordinary property law; if only one is on title, the other's rights depend on trust claims rather than on section 21.

Who stays until it sells

Section 19 gives both spouses an equal right to possession, so neither can change the locks on the other. A court can give one spouse exclusive possession under section 24, weighing the children's best interests, each spouse's finances, any family violence and the availability of other housing.

Most separated couples settle who stays, who pays the mortgage, taxes and insurance until closing and whether any credit is owed for that, and put it in a written interim agreement. The lender still holds both of you to the mortgage regardless of who lives there.

When one spouse will not sign

A listing agreement needs every owner, and an agreement of purchase and sale needs both spouses' consent. If one refuses, section 23 allows the court to dispense with a spouse's consent or authorize the sale, and co-owners may also apply under the Partition Act for an order for sale.

Courts weigh the children's living arrangements and the timing of the wider case, and are more willing to order a sale where the refusal is tactical or the carrying costs are unsustainable. Costs can be awarded against a spouse who obstructs without reason.

Where the proceeds go

Unless a separation agreement or court order directs otherwise, the lawyer closing the sale pays out the mortgage, any secured line of credit and the selling costs, then holds the net proceeds in trust until both spouses sign a joint direction. That protects both sides while equalization is worked out.

Under section 4 the matrimonial home is included in net family property at its value on the valuation date, without the deduction allowed for other property owned at the date of marriage. That is why the home so often drives the equalization payment. Interim releases, for example for a deposit on a new home, are common and are documented in writing.

Keeping the home instead

One spouse can buy the other's interest. The lender must release the departing spouse or the mortgage must be refinanced in one name; nobody should stay liable on a loan for a home they no longer own. A transfer between spouses under a separation agreement or court order may be exempt from land transfer tax; check the current rules. Both spouses should have independent legal advice before signing the agreement that sets the buy-out figure.

Tax after a separation

A sale of the home you lived in is usually sheltered by the principal residence exemption, and each spouse still reports the sale. Spouses who are separated and living apart can designate different homes for the years after separation. The federal flipping rule, which taxes the profit on a home held less than a year as income, has an exception for marriage or common-law breakdown where the spouses have lived apart for at least 90 days. A transfer of the home to a spouse in settlement of family law rights can roll over without immediate tax.