Property Division for Ontario Family Law

If a client is considering marriage or, conversely, if they are considering a separation, it is important that they are fully advised of how property is treated for married spouses versus unmarried (common law) spouses. Generally, married spouses have special rights enshrined in statute, such as the Family Law Act, RSO 1990, c. F.3 (“FLA”), whereas common law spouses must rely on equitable doctrine in asserting a claim to their interest in property following a separation. A key distinction between the two is that married spouses have a presumption of entitlement – an important detail to explain to clients.

Married Spouses

The above stated presumption of entitlement is known as equalization. This is the default regime for married spouses, unless both parties have opted out through a valid domestic contract. The purpose of equalization is to recognize the economic partnership of a marriage and each spouse’s fair entitlement upon its dissolution. Each spouse is entitled to a payment representing half the value of property acquired during the marriage, known as an equalization payment.

The equalization payment is calculated using a Net Family Property statement (NFP), which follows the subsequent steps:

1. Quantify each spouse’s respective assets and debts on the date of separation (this day is known as the ‘Valuation Date’ on an NFP).
2. Deduct the value of assets and liabilities owned for each respective spouse on the date of marriage, except for the Matrimonial Home (you may also deduct gifts or inheritance received during the marriage if not used towards the Matrimonial Home, as per FLA s. 4(1); Tremblay v Tremblay 2016 ONSC 588).

This value is known as a spouses’ net family property. These values are then compared and the difference between the two spouses is remedied by the equalization payment. The spouse with the lower NFP is entitled to one-half the difference between their NFP and that of the other spouse (FLA s.5(1)). For example, if the Wife had an NFP of $200,000 and the Husband’s NFP was $100,000, the Wife would owe an equalization payment of $50,000 to the Husband.

In some circumstances, the court will depart from the standard and award unequal division of property where it would be unconscionable to apply the equalization (FLA s.5(6)). The threshold for unconscionability is “exceptionally high” and must “shock the conscience of the court” (Serra v Serra 2009 ONCA 105; Dosu v Dosu 2022 ONSC 5053). Examples include marriages of a short duration (Booth v Bilek 2021 ONCA 128) and reckless dissipation of assets (Merchant v Amir 2024 ONSC 2522).

Common Law Spouses

On the other hand, unmarried spouses do not enjoy the presumption of entitlement and are only presumed to be entitled to what is in their name. Oftentimes, this results in significant disparity of a fair division of assets and unmarried spouses must rely on equitable claims, such as unjust enrichment, to seek a share in property when the relationship ends.

The test for unjust enrichment requires three conditions to be met: an enrichment or a benefit to the respondent, a corresponding deprivation to the applicant, and the absence of a juristic reason for the enrichment (Kerr v Baranow 2011 SCC 10). Common examples of unjust enrichment include household chores such as cooking, cleaning and laundry, contributing towards groceries and utilities, insurance and mortgage, as well as performing labour for renovations.

The remedies can be either a monetary award or a proprietary award, granting a share in the property in the form of a constructive trust (Kerr v Baranow; Martin v Sansome 2014 ONCA 14).

Another important aspect of unjust enrichment is the scenario of joint family ventures (JFV). In a claim for unjust enrichment on the basis of a JFV, one party would have retained an unfair share of the assets which are the product of the spouses’ joint effort (Kerr v Baranow, at para 55 and 60). A monetary award for a JFV is calculated by ascertaining the proportionate value of total wealth accumulated based on the claimants’ contributions. For example, where a claimant contributes $100,000, representing 20% to the purchase price of a house of $500,000, and the market value increases substantially and the house sells for $1,000,000, the claimant would be entitled to the same percentage, not amount, from the proceeds of sale (i.e. 10% of the net proceeds at $200,000) (Kerr v Baranow, at para 100).

In summary, married spouses enjoy the predictability of a statutory regime guaranteeing an equal share to matrimonial assets whereas unmarried spouses face a more onerous obligation of proving their entitlement under equitable doctrines through evidence of contribution.