Sunday, November 18, 2007

Ontario Appeal Court Revisits "Matrimonial Home Exception" in Calculating Equalization of Net Family Property

What do the equalization provisions of Ontario's Family Law Act provide regarding a home that was owned by one spouse on the date of marriage, occupied by the parties as a matrimonial home thereafter, but sold prior to separation?

The Court of Appeal for Ontario briefly revisited this question in Gervasio v. Gervasio, a decision released last Thursday.

The Court reiterated that a deduction for the home's value on the date of marriage is, in fact, allowable, in calculating the net family property of its owner.

The Court affirmed its 1999 decision in Nahatchewitz v. Nahatchewitz, where it had noted that the matrimonial home "exception" under Section 18 of the FLA is applicable only to a property that continues to be occupied as a family residence on the date of separation.

If the property has been disposed of prior to separation, it does not qualify for this exclusion. The owner is thus entitled to deduct its value on the date of marriage - even if the proceeds of a sale of the property trace directly to a purchase of a successor home that is, in fact, occupied as a family residence on the separation date.

The Court's endorsement in Gervasio states:

...[The] respondent asserts that the trial judge erred by failing to afford him a deduction in the sum of $29,000 for his pre-marriage equity in the parties’ first home...

We are satisfied that the trial judge erred....

In respect of the respondent’s claim for a deduction on account of his equity position in the parties’ first home, we rely, in particular, on the decision of this court in Nahatchewitz v. Nahatchewitz, [1999] O.J. No. 3154.

In the 1999 Nahatchewitz ruling, Mr. Justice Gouge had stated, for the Court:

In this case, at the time of separation the Maurice Street property was not ordinarily occupied by the parties as their family residence. The fact that it had at one time prior to separation been so occupied is not enough to bring it within the legislative definition of matrimonial home.

I can find no policy basis to support the opposite conclusion for the Maurice Street property.

... the Family Law Act permits the husband to deduct the value of the Maurice Street property in calculating his net family property.

- Garry J. Wise, Toronto

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