It is generally understood that, in the event of divorce, all assets owned by a couple will be divided equally amongst them, barring an agreement (such as a prenuptial agreement) to divide property in a particular manner. This includes the home where the family lived during the marriage, known in legal terminology as the “family residence.” Generally speaking, each spouse is entitled, upon divorce, to recover 50 per cent of the value of the family residence. However, circumstances may arise in which it would be manifestly unjust to divide the property in such a manner; when and how such circumstances may arise is discussed in this blog.

A Brief Marriage Gives Rise to a Lengthy Dispute About the Value of the Family Home

Singh v Chandi involved a husband and wife who sought a divorce after only four years of marriage. In that case, the wife purchased a home in June 2009, years before meeting her husband. In 2012, the wife and husband entered an arranged marriage in India, after which the wife returned to her home in Canada and remained in India for approximately one year. When the husband eventually came to Canada, he moved into the wife’s property, which became the family residence. The couple had one child together, born in June 2014.

One day in August 2016, the husband left for work. When he failed to return home after his shift ended, the wife contacted police and filed a missing person’s report. The police could locate the husband in Winnipeg, and the husband advised police then that he was taking a “two-week break.” The husband remained in Winnipeg for the next two years, during which he never contacted the wife nor his child, and he made no contributions to their welfare, financial or otherwise. The husband eventually filed for divorce, which gave rise to a distribution of the family assets.

What is Family Property and Who is Entitled to it in a Divorce?

As noted by the court in its decision in this case, part 5 of BC’s Family Law Act (“FLA”), which governs property division, dictates that “[w]ith certain exceptions, all real or personal property owned by either spouse on the date of separation is ‘family property’” and, “[p]ursuant to s. 81 of the FLA, on separation, each spouse has a right to an undivided half interest in all family property, without regard to their respective use or contribution.”

There are exceptions to what constitutes “family property,” such as inheritances received by one party or property acquired before the relationship between the divorcing spouses began. However, just because such property is excluded from division in terms of ownership does not mean that any increase in the valuation of such property is treated similarly, as “pursuant to s. 84(2)(g) of the FLA, the amount by which the value of the exclude property has increased since the relationship began or the excluded property was acquired is considered family property. On the other hand, where the value of the excluded property has decreased during the relationship, there is no basis on which to divide the asset.”

Can a Family Residence be Categorized as Excluded Property?

The short answer is yes. A family residence can be considered excluded property if it meets the criteria dictated by section 85 of the FLA, namely, that it be acquired by one party alone before the marriage.

In the case at hand, the wife purchased the home in which she, her husband, and their child resided before marrying her husband. As such, she satisfied the relevant criteria to have the family residence considered hers alone and not subject to division due to divorce.

However, the family home’s value had increased significantly between the wife’s purchase of the property and the couple’s decision to divorce. As such, the husband was entitled to a division of the home’s increase in value.

Who Paid What in Respect of the Family Home?

The wife purchased the family home in June of 2009 and made all necessary payments (mortgage, principal, interest, property taxes) by herself for the next four years, which included the first year of her marriage. The husband began contributing to the home in 2013, when he arrived in Canada, and continued through August 2016, when he disappeared to Winnipeg. The husband made no contributions to the home after that date, necessitating the wife to make all such payments herself. Expenses incurred by the wife after the couple’s separation included payment of a nearly $5,000 strata assessment related to fixing the pipes in the residence.

By the date of separation, the family home’s value had increased to $200,000, and the balance on the mortgage was $141,067.10, so there was equity in the house of nearly $60,000. By the trial date, the home’s value had further increased to $400,000, leaving equity of approximately $270,000.

How is the Increase in Value of Excluded Assets Divided?

The court noted that “[t]here is no dispute that the Family Home, and the $5,000 equity that [the wife] had in the Family Home as of the date of marriage, are excluded property. Nor is there any dispute that the increase in the value of the Family Home after the date of marriage is family property subject to division.” However, the parties disagreed on how the value increase should be divided.

Although sections 81 and 87 of the FLA operate on the “presumption that family property, including the growth in the value of the excluded property, will be divided equally at the date of trial, without regard to each spouse’s respective use or contribution,” this presumption may be rebutted “if an equal division would be ‘significantly unfair’ as set out in s. 95 of the FLA”. Section 95 states that it would be significantly unfair to divide increases in excluded property valuations equally where “it would be significantly unfair” to do so. In assessing whether such significant unfairness exists, the court considers the duration of the parties’ relationship, whether one spouse, after the date of separation, intentionally “caused a significant decrease or increase in the value of the family property or family debt beyond market trends,” and any other factor that could manifest in unfairness.

Importantly, the person who seeks unequal division need not demonstrate that all criteria are satisfied, as significant unfairness may be evidenced through proof of only one criterion. As noted by the court, “once an anchor in one of the s. 95(2) factors have been established, ‘it is then necessary to consider the entire factual circumstances of the parties, all the relevant facts, all the relevant circumstances, and of course, the effect of equal division, in order to fully inform oneself and to justify whether or not unfairness has been established”.

Application of the Legal Principles to the Facts of This Case

Although the wife, in this case, did not dispute her soon-to-be-ex-husband’s right to an interest in the increase of the value of the family home, she argued that it would be significantly unfair to divide the amount equally, given the significant contributions that she, alone, had made to the property. Moreover, she contended that “for the purposes of dividing the property, the Family Home should be valued as of the date of separation, not the date of trial.” Unsurprisingly, the husband sought equal division of the increase in value, as valued on the trial date.

In evaluating the s. 95(2) criteria, the court first considered the duration of the parties’ relationship and noted, “where the duration of the marriage is not the only s. 95(2) factor present, marriages of approximately four years have been sufficient to warrant re-apportionment or a valuation date other than as of the trial date”. The court found that these parties had been married only 4.5 years, in conjunction with the fact that six years had elapsed between separation and trial, militated in favour of an unequal division of the house’s increased value.

Moreover, in respect of section 95(2)(f) of the FLA, increases or decreases in the value of a family property beyond market trends, the court noted that the wife made significant post-separation payments in respect of the family home, including mortgage payments, property insurance and property taxes, which payments “served to preserve the property.” The court found that “this factor militates in favour of a finding of significant unfairness.”

In considering any other factors that may lead to significant unfairness (s. 95(2)(i)), the court noted that “the consideration is not of any factor that may lead to significant unfairness, but rather is limited to factors that relate to the ‘economic characteristics of the spousal relationship.’” In this case, the court considered “the passage of time between the date of separation and trial as one ‘other factor’ that favours a finding that equal division would be significantly unfair.” Additionally, the court reviewed the monies paid by each husband and wife concerning the family home. It noted that the wife had contributed “six times the amount toward the equity, maintenance, upkeep, and preservation of the Family Home.” If the equal division of the increase in the home’s value as of the trial date were to be awarded, the wife “would realize only 1/3 of the profit that [the husband] would realize”. This would place the husband “in a substantially better position than” the wife “relative to their input.” As “the relative financial positions of the parties are a factor that informs the significant fairness analysis,” the court was satisfied that such disparity would be significantly unfair to the wife.

As a result, the court was satisfied that to award an equal division of the value of the increase of the family home as of the date of trial would be “significantly unfair.” Instead, it ordered that the parties divide the increase in the valuation as of the date of separation.

Experienced Vancouver Family Lawyers Advising on Property Division Matters

If you are in the midst of a divorce or separation and are unsure of what your rights are with respect to property division, child or spousal support, or any other family law matter, then you are in need of competent legal counsel to help you clarify and assert your rights.

Fortunately, the lawyers at Meridian Law Group are well-equipped to assist and guide you through the difficult divorce process. Meridian Law Group is proud to provide expert legal advice to British Columbians from all over the province from our downtown Vancouver offices. Contact us online or via telephone at (604) 687-2277 to schedule a confidential consultation.