April 14, 2021
How to Lose your Excluded Property Part 1: Transfer Excluded Property into Joint Names
Vancouver & North Vancouver family lawyer discusses how to lose your excluded property
In a previous blog post, I discussed the ways that a spouse may lose their excluded property resulting in them having to share that property with their ex-spouse if they separate. A common way for a spouse to lose their excluded property is to transfer the excluded property into joint names.
For example, you may lose your excluded property by transferring it into real estate jointly held with your spouse (that is, property owned in “joint tenancy”); a bank account jointly owned with your spouse; a vehicle joint registered in your name with your spouse, or other property which is jointly owned.
As I have previously discussed, there are eight categories of excluded property listed in the Family Law Act. Some common types of excluded property are:
- Property owned by a spouse prior to the spousal relationship. For example, your equity in the family home that you owned prior to becoming spouses.
- Gifts to one spouse from a third party. For example, a gift from your parent to you for the down payment of real estate.
- Inheritances received by one spouse. For example, your grandmother passes and leaves you a cash inheritance.
- Personal injury settlements and insurance settlements (not attributed to the loss of income).
In the recent BC Supreme Court case of Basi v Basi, 2021 BCSC 421, the court confirmed that if a spouse transfers excluded property into joint names, but does not take steps at the time of the transfer to ensure that their excluded property will be returned to them at separation, and the court cannot otherwise find evidence of an intention to keep the excluded property separate, the excluded property will be lost and shared with the other spouse. For example, if there is evidence that the spouses at the time of transfer were “coming together” with the intention of commonly owning property, and they do not discuss what will happen if they break up, the excluded property will likely be lost.
If, however, a court can find evidence that a spouse did not intend to make a gift, then the transferring spouse may be able to keep his excluded property. Such evidence may include, for example, an oral agreement between the spouses that the excluded property would be returned upon separation, or some other circumstantial evidence of intention to keep the property separate.
In Basi v. Basi the parties began cohabiting in May 2005, were married in May 2007 and separated in July 2016. When the parties met in 2004 Ms. Basi was living in a rental suite and Mr. Basi was living in a house he co-owned with his mother (the “First House”).
On September 1, 2006, the parties began living together in a home they purchased together in June 2006 (the “Second Hose”).
The parties separated on July 13, 2016, and at that time owned a property (the “Third House”). Mr. Basi, amongst other claims, claimed $207,930 of his excluded property was used to purchase the Second House. Specifically, a $10,000 deposit that was paid towards the purchase of the Second House (which Mr. Basi said was derived from a line of credit secured against the First House) and $197,930.27 from the sale proceeds of the First House that was used as the down payment for the Second House.
It should be noted that in 2006 Ms. Basi received approximately $101,000 as her share of the family assets from her previous marriage.
Mr. Basi says the parties agreed he would provide the funds to purchase the Second House, and that Ms. Basi would provide her $101,000 as a contribution towards future household expenses, and not towards the acquisition of the Second House. Ms. Basi stated that she provided her $101,000 to Mr. Basi as her contribution to the purchase of the Second House, being half of the approximately $200,000 the parties put towards its purchase.
The court’s finding
After considering all of the evidence, the court found that Mr. Basi lost his exclusion for the following reasons:
During his testimony, Mr. Basi described the purchase of the Second House as the parties’ “coming together” to buy something after both the First House and Ms. Basi’s former family residence had been sold. Such a description was inconsistent with the suggestion that Ms. Basi made no contribution towards the purchase of the Second House.
(1) The parties took title to the Second House as joint tenants, evidencing their intention to jointly purchase the property.
(2) The parties had no discussions about how their respective financial contributions would be treated or about what would happen to their family property upon the breakdown of the relationship until the year leading up to their separation.
(3) Over the course of their relationship, the parties worked jointly to improve first the First House, then the Second House, and finally the Third House. Each contributed what they were able towards the household expenses. They equally took on the debt associated with both the Second House and the Third House.
(4) At the time the Second House was purchased, there was no acknowledgment by Ms. Basi that Mr. Basi’s contribution was to remain his exclusive property.
So, what’s the takeaway?
If you have excluded property that you do not want to share with your spouse if you separate, the safest thing to do is to keep it in your sole name. However, if you do decide to place excluded property into joint names with your spouse, make sure you document an express intention to keep the excluded property separate in the event you separate. My recommendation is that you enter into a marriage or cohabitation agreement (also known as a “prenuptial agreement”) which clearly states you and your spouse’s intentions with respect to excluded property. You can learn more about marriage or cohabitation agreements (also known as a “prenuptial agreement”) here and you can contact me here to book your free consultation.
NOT LEGAL ADVICE. Information made available on this website is for information purposes only and is not legal advice. Do not rely on this information, nor take or fail to take any action, based upon this information. Do not disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Contact me here to discuss any specific legal issues.
February 10, 2021
Unequal Division of Family Property Part 1: Short Relationships and Unequal Financial Contribution
If one spouse owns the family home, contributes more money and the relationship is short, will family property be divided equally?
A common situation is this: a couple moves in together and only one of them owns and financially maintains the family home. They are together for a few years (as least two) and then they separate.
As I have discussed in my previous blog post found here, family property is generally shared by spouses equally if they separate. Family property is all property earned or acquired by one of the spouses during the “spousal relationship.” I discuss the features of spousal relationships here.
When B.C.’s Family Law Act was enacted in 2011, it was supposed to bring some certainty into how family property is divided. That is, family property is presumed to be equally divided 50/50, regardless of the contribution of each spouse. Further, under the Family Law Act, family property can only be unequally divided if it is “significantly unfair” to divide it equally – and the courts have said this is a high bar.
To meet the “significant unfairness” test, the court must be satisfied that there exists “something objectively unjust, unreasonable or unfair in some important or substantial sense” which requires the family property to be divided unequally.
After the enactment of the Family Law Act, family law lawyers thought that courts would unequally divide family property only in rare circumstances, but we have seen more unequal division cases than expected – in fact, unequal division cases are on the rise in British Columbia.
Is a short relationship where only one of the spouses owned and financially maintained the family home one of these “significantly unfair situations” that warrants unequal division?
It seems so.
A court may unequally divide family property if it would be significantly unfair to divide it equally based on the short duration of the relationship and “any other factor” that may lead to significant unfairness. The contribution of each spouse has been considered by the courts within the “any other factor” consideration for an unequal division.
Below I will discuss short relationships and unequal contribution as a basis for unequal division.
Short relationship
We have seen unequal division by the courts in cases where the spouses have relatively short relationships. Specifically, a relationship of approximately 4 years or less has been a factor that has been given considerable weight in supporting unequal division cases. In Vancouver, we saw quite a few unequal division cases in short relationships due to the dramatic rise in the Vancouver real estate market. This led to a significant increase in the value of the matrimonial homes in a short period of time, with little or no contribution of the non-owning spouses. The courts saw the 50/50 split of the increase in the value of the family home as a windfall to the non-owning spouse, and thus significantly unfair.
Lack of contribution
In several BC cases, the court has also reapportioned the increase in the value of a property to the spouse that owned the property before the relationship began and was responsible for virtually all of the payments towards the down payment, mortgage, taxes, and the ongoing household expenses of the property before and during the relationship. Unequal division based on lack of contribution is most often tied to the short length of a relationship, as relative contribution becomes less significant in longer relationships where the spouses’ lives are more intertwined.
Recent BC court case on unequal division
Recently another B.C. court unequally divided the family home based on the short length of the relationship and the non-owning spouse’s lack of contribution.
In the recent Vancouver BC Supreme court case of Chapman v. Cuthbert 2021 BCSC 1, the parties were in a common-law relationship for approximately 2.5 years, which ended with separation in November 2017. The main issue in dispute was the division of the matrimonial home. Mr. Cuthbert owned the family home before the relationship, and the couple lived in the home during their relationship. The increase in equity in the family home during the spousal relationship was $196,505.02, and this was attributable to market forces rather than any specific contribution by either of the parties towards the family home.
Mr. Cuthbert asked for an unequal division of the family home on the basis that equal division would be significantly unfair due to the short length of the relationship; because he owned the matrimonial home before the relationship; and was the sole person on the mortgage to the home, made all the mortgage payments, took care of all of the property-related expenses, and a substantial portion of the parties’ joint living expenses.
Ms. Chapman sought an equal division of the family home under the Family Law Act.
The court found that the family home should be divided unequally. The court awarded Mr. Cuthbert 80% of the increase in the value of the family home and Ms. Chapman 20% of the increase in the value of the family home.
The court stated that the greatest factor which resulted in the unequal division was the short duration of the relationship between the parties (2.5 years). The court also found that the unequal contribution of the parties meant it was unfair to divide the family property portion of the family home equally. Namely, the asset was purchased with Mr. Cuthbert’s money, he paid for all the house-related expenses, and he was the only person who put his money and credit at risk by being solely on the title for the mortgage.
What’s the takeaway?
If the family home has increased in value during the relationship but one spouse owned the family home before the relationship, has contributed to most of the expenses and the relationship was relatively short, there is a reasonable likelihood that the equal division of family property division provisions will not be followed, and family property will be unequally divided. The likelihood of this occurring can only be assessed on a case-by-case basis and thus it is very important to consult a Vancouver family property law lawyer to discuss the likelihood of an unequal division occurring in your case.You can contact me here to book a free consultation to discuss your unique situation.
NOT LEGAL ADVICE. Information made available on this website is for information purposes only and is not legal advice. Do not rely on this information, nor take or fail to take any action, based upon this information. Do not disregard professional legal advice or delay in seeking legal advice because of something you have read on this website.
January 26, 2021
Can you lose your excluded property if you separate from or divorce your spouse?
As I mentioned in my last post, there are eight categories of excluded property in the Family Law Act. Some common types of excluded property are:
- Property owned by a spouse prior to the spousal relationship. For example, your equity in the family home that you owned prior to becoming spouses.
- Gifts to one spouse from a third party. For example, a gift from your parent to you for the down payment of real estate.
- Inheritances received by one spouse. For example, your grandmother passes and leaves you a cash inheritance.
- Personal injury settlements and insurance settlements (not attributed to the loss of income).
A common question for Vancouver family law lawyers is: If you have excluded property, and if you and your spouse separate or divorce, you get to keep your exclusion, right?
January 7, 2021
Family Law Property Rights: an often Misunderstood and Contentious Subject
In Vancouver, family property division, family debt division and excluded property division are governed by the laws in the Family Law Act. These laws apply to those couples who meet the definition of “spouses” in the Family Law Act. Spouses are those couples who have been “living in a marriage-like relationship” for a period of two years or more.