Questions such as “are you a spouse?” or “is the house your matrimonial home?” arise regularly in real estate transactions; yet can still be an ongoing source of confusion. The purpose of this blog is to try to explain the significance of spousal status in a real estate transaction as well as to attempt to shed light on some common misconceptions that can be the source of confusion.
The starting point for any consideration of spousal status is the Family Law Act, R.S.O., 1990, Chapter F-3 (the “Act”). “Spouse” is defined at the outset of the Act as such:
In this Act…“spouse” means either of two persons who,
(a) are married to each other, or
(b) have together entered into a marriage that is voidable or void, in good faith on the part of a person relying on this clause to assert any right.
This definition is applicable when dealing with Family Property (Part I of the Act) or Matrimonial Home (Part II of the Act). In other words, for a person to have family property to be divided upon a separation or a matrimonial home, they have to be legally married. Common law couples, no matter how long they have been together, are not considered to be “spouses” for the purposes of property division and do not have a matrimonial home.
The precise definition of “spouse” is important in the context of a real estate transaction especially due to section 21 of the Act which reads:
Alienation of matrimonial home
21. 1 No spouse shall dispose of or encumber an interest in a matrimonial home unless,
(a) the other spouse joins in the instrument or consents to the transaction;
(b) the other spouse has released all rights under this Part by a separation agreement;
(c) a court order has authorized the transaction or has released the property from the application of this Part; or
(d) the property is not designated by both spouses as a matrimonial home and a designation of another property as a matrimonial home, made by both spouses, is registered and not cancelled.
What this section basically means is that if you are married, you will need your spouse’s consent to sell your matrimonial home or to take out a mortgage loan against the property, even if the title to the property is in your name alone. Any transaction that is somehow completed without proper spousal consent can be set aside (reversed). This is the main reason why real estate lawyers, purchasers and lenders need to know the correct spousal status of the parties.
It can be argued that part of the confusion surrounding the definition of “spouse” is caused by the second definition of spouse contained later in the Act. Under Part III of the Act (Spousal Support), the definition of “spouse” is expanded to include common law relationships of at least three years or of some permanence if the couple has a child together. However, this definition only applies to this part of the Act only, dealing specifically with spousal support, and not with property or matrimonial home issues. Adding to this confusion, some specific situations such in land transfer tax calculations for first time home buyers, the Ontario Ministry of Finance uses the expanded definition of “spouse” which includes common law couples.
As a result of this confusion, banks, clients or even lawyers often believe that a common law partner is a “spouse” for real estate purposes and may ask the partner to consent to the transaction, even if only to err on the side of caution. However, it is clear from the Act that common law partners are not considered to be “spouses” in the consideration of property and the matrimonial home. As such, where a property is in one person’s name, only the consent of a legally married spouse is required in order to satisfy the requirements of the Family Law Act, dealing with the sale and mortgage of the property.