It is not unusual for one spouse to move out during a separation, leaving the other spouse in the home. The one staying in the home might even live there for several years until the property issues are settled.
But how are the proceeds divided if the house went up in value over the years or if the occupying spouse paid down the mortgage? Is it fair the non-resident partner has to pay rent, while the spouse in the house enjoys free accommodation and ties up the other’s equity?
These are just some of the common issues that courts must deal with when sorting out a separated couple’s property issues. A couple can ask a court to order the sale of a jointly held property, but that still leaves the question of how to divide the proceeds if only one spouse has been living on the property.
Ontario’s Family Law Act allows the court to order exclusive possession (the right of one spouse to live in a matrimonial home and require the other spouse to live elsewhere). It can also order which payments both the resident and non-resident spouse must make. Often, however, separated partners are not in court and simply deal with these expenses on an ad hoc basis. A dispute may then arise when the house is sold.
In the 2017 case of O’Brien v. O’Brien, Justice Meredith Donaghue had to decide whether the husband, who stayed in the jointly held matrimonial home, owed occupation rent to the wife who had moved out.
Donaghue reviewed the case law and confirmed occupation rent is a discretionary remedy, and that the non-occupying spouse (in this case, the wife) had the onus of proving whether the resident husband should pay occupation rent.
The non-resident partner is also required to provide evidence of the property’s rental value during the period for which he or she is seeking such rent.
When considering whether occupation rent should be ordered, Donaghue relied on a 2001 case from the Ontario Court of Appeal, which set out a number of factors to consider, including when the claim was first made, how long the occupying spouse had been in the home, the fact that the non-resident spouse was unable to use the equity in the home while it was occupied, and the reasonable credits for payments made that each spouse was entitled to receive.
In addition, the Court of Appeal stated that occupation rent had to be considered in the context of the other competing claims in the litigation.
In weighing these factors, prompt notice of the intention to seek occupation rent is important. If the occupation lasted for a lengthy period, this, too, increases the likelihood occupation rent will be granted, provided the claim was raised early.
A non-resident spouse is not allowed to sit back and bank a claim, only to bring up it up at the last moment to try to get a greater share of the house proceeds.
In deciding what credits each spouse should get for payments made, it is assumed that each spouse, as a joint owner of the property, has an obligation to pay one-half of the home’s mortgage, taxes and property insurance, as well as any major repairs. These are expenses traditionally borne by the landlord in arms’ length third-party rental arrangements.
Conversely, the resident spouse, like any tenant, is usually responsible for paying utilities, internet, cable, phone and day-to-day expenses for the home. The property’s expenses are usually allocated and then debited and credited on this basis when assessing each party’s payments.
There are other non-monetary issues to consider as well. Although conduct is usually thought to be irrelevant in deciding a family law case, the behaviour of both spouses is a factor here, including whether a spouse was obliged to leave the home because of domestic violence, if children lived with the occupying spouse in the home and, if so, whether the non-resident spouse paid child support.
The court also considers whether the non-resident spouse asked the other spouse to sell the home or brought a motion in court for the sale, and if not, why not.
In O’Brien, the wife sought occupation rent from the husband. She moved out after the separation, because she did not like the home. The parties’ daughter lived about half time with each parent. The resident husband had a much lower income than the wife, yet did not claim child support from the wife until more than six years had passed after separation.
The husband paid the home’s mortgage, taxes and insurance for the home, and also put his own labour and money into renovations. It was not until it was clear the house would be sold and it had appreciated in value that the husband claimed for the improvements he had made to the home. In response, shortly before trial, the wife responded with her claim for occupation rent.
Donaghue took all these factors into account, and decided the husband did not owe occupation rent to the wife, even though he had lived in the home for nearly seven years before trial.
The lesson from O’Brien is clear: conduct matters.
Laurie H. Pawlitza is a senior partner in the family law group at Torkin Manes LLP in Toronto.