Mar 17, 2020

Splitting the family home when common law spouses separate

Kamermans v. Gabor, 2018 ONSC 5241 (CanLII)

Canadian statute law provides rules governing property relationships among married spouses, and how their property is shared if the marriage ends. By contrast, the law affecting common law spouses in most provinces[1] is much more fluid. Aptly, their fate is determined by the common law, which leaves much more discretion to the judge. This is particularly significant where common law spouses have bought a house together.

Many Canadians choose to live in common law spousal relationships rather than becoming legally married. The 2016 census found that, among those aged 25 to 64, 15% of Canadians were living common law, while another 8% were separated from a common-law union.

Home ownership is something to which many Canadians aspire, as a means of building wealth, and common law spouses often buy a house together. What happens to the proceeds of the house if they eventually split sometimes causes disputes. That becomes particularly complicated if their contributions have been unequal, either financially or through working to repair the property.

In the case of married couples, the outcome is simple. In most provinces, the value of the matrimonial home is divided exactly equally, regardless of who contributed how much.

In Ontario, the rule for splitting the family home is particularly strong. Even if one spouse owned a house free and clear prior to the marriage, the value of that house will be split equally between them if they divorce. In fact, avoiding that rule may be a factor that prompts some people who already own their homes when they enter a relationship to live common law rather than get married. The forced sharing of the matrimonial home can also be avoided through a marriage contract (or prenuptial agreement).

Contributions of time and money

Unlike in the case of married couples, the division of the family home in a disputed case will depend on the evidence of the contribution that each one made. That contribution can be either financial or through what is popularly known as sweat equity.

The first thing to keep in mind is that the legal title to the property is something that can be ignored by the judge. That may seem odd, but it is based on long-standing principles of equity in the English legal system that Canada has inherited. There are two interrelated legal concepts that can work in opposite directions, the resulting trust and the constructive trust.

The resulting trust concept means that a person who is registered as the legal owner may be considered to have no true ownership interest if somebody else actually contributed the money to buy the house, and that person did not intend to give it as a gift. The courts recognize that one spouse may put a property entirely in the name of the other spouse, because he is worried that he is worried about business debts.[2] In another case, the spouse who paid for the entire house argued that she registered the other spouse as a joint owner under pressure and contrary to her true wishes.[3]

The constructive trust works in the opposite direction. It can result in somebody who has no legal title in the property being declared the owner of part of its value. In connection with real estate, this may occur where that spouse who is not on title helped renovate or build the house.[4] However, it can also occur due to less direct contributions, such as where one spouse provides meals or groceries, relieving the legal owners of an expense and therefore indirectly helping him to pay the mortgage.

In some situations, this can take the form of one spouse developing a business, while one spouse stays at home to raise the children. In a landmark case, Vanasse v Seguin,[5] the Supreme Court referred to this as a “joint family venture.” In that case, the court divided the value of the business equally among the spouses during the period when the female partner was raising two children on behalf of the family while the husband was building a business that eventually sold for $11 million.

Kamermans v. Gabor: Joint tenancy, with unequal contributions to the down payment

The case of Kamermans v. Gabor is particularly interesting because it combines elements of both constructive and resulting trust. In this case, the male half of the couple, Mr. Gabor, paid most of the down payment on a house. In spite of that, title to the property was taken by both spouses together in joint tenancy. Joint tenancy normally implies a complete sharing. If one joint tenant dies, the whole property automatically goes to the surviving joint tenant.

Based on the joint tenancy, Ms. Kamermans argued that she was an equal owner and entitled to half the proceeds from the sale of the house after they separated. The judge rejected the argument that the joint tenancy necessarily entitled her to half the proceeds:

[46] The applicant argued that the fact that title was taken in joint names is, in and of itself, a juristic reason for the enrichment, because the public requires confidence in how title is held. It is argued that title should be clear and unequivocal except in the most exceptional of cases.

[47] I do not accept this argument. In every single constructive trust case the claimant seeks an interest in land, or monetary compensation in lieu of an interest, that is at odds with the manner in which legal title is already held. If the applicant’s argument were valid, no constructive trust claim would ever succeed.

The alternative to joint tenancy is taking title as tenants in common. In this form, each has a distinct and separate title, and can leave his or her portion by will rather than having the other co-owner inherit it. The judge noted that this would have been the more prudent course for Mr. Gabor to take if he had wanted to ensure that his contribution was taken into account:

[34] …. Had he wished to protect his down payment, there are ways he could have done so, such as having title taken as tenants in common in unequal shares, or having the parties sign an agreement to that effect.

Mr. Gabor argued that there was an oral agreement between him and Ms. Kamermans that the down payment he had provided would be credited back to him. She denied that there was such an agreement. Regardless of whether there was or not, in this type of situation an oral agreement would not be enforceable:

[35] …. Such an agreement would constitute a form of cohabitation agreement, since it determines how the major asset owned by the parties would be divided upon the cessation of cohabitation. Section 55(1) of the Family Law Act provides that a domestic contact, which is defined to include a cohabitation agreement, is unenforceable unless made in writing, signed by the parties and witnessed.

The house in this case was in very poor shape when purchased. Therefore, the increase in the value of the house resulted from a joint family venture:

[55] In this case, I am satisfied that the parties were engaged in a joint family venture, insofar as the acquisition and improvement of this house is concerned. They purchased this run-down property with the express intention of fixing it up and profiting from the increase in value that would thereby be generated. They both worked hard, as a team, to do all of the work necessary to complete the renovations. While they each maintained separate bank accounts, they each contributed to the various household expenses on an ongoing basis. There was a pooling of effort and team work toward the common goal of improving and profiting from this property.

Both spouses contributed labour and funds toward the purchase of materials for the renovation. Based on the evidence, the judge concluded that their contributions in this regard were about equal, and each was entitled to share equally in that increased value.

This still left the issue of accounting for the disproportionate contributions to the down payment. Here, the judge ruled that this portion of the funds should go back to each spouse according to their original contributions:

[59] …. What remains to be resolved is what to do with the wealth resulting from the initial contributions of the parties to the purchase of the residence, which is largely reflected in the remaining balance of the proceeds of sale. I have already found that, notionally, the respondent contributed $62,961.98 to the purchase while the applicant contributed $7,500. Consistent with the same principle that the parties should share in their wealth proportionate to their contributions, this means that the respondent should receive 89.4% and the applicant should receive 10.6%.

In the present case, the increase in the value of the property was attributed to the work provided equally by both parties, as a joint family venture.

In other situations, that conclusion might not be so straightforward, such as where the increase in the value of the property is due entirely to market conditions. Each case that goes to trial will be decided based on its specific facts. It would be better for common law spouses contemplating a home purchase together to enter into a cohabitation agreement in advance. That can avoid costly conflicts by clearly spelling out what each party will get if the relationship ends.

This case review is provided for general information, and is not intended to be legal advice for your particular case. The author is the principal of Spiro Law Professional Corporation,

[1] British Columbia is the main exception, where the Family Law Act provides for property equalization for common law spouses who have been together for two years in the same way as for married couples.

[2] Nussbaum v. Nussbaum, 2004 CanLII 23086 (ON SC), <>; Peter S. Spiro, "Judgment Creditors, Resulting Trusts, and the Matrimonial Home," Canadian Family Law Quarterly 35, 2016.

[3] Walters v. Nusseiri, 2019 ONSC 22 (CanLII), <>.

[4] McConnell v. Huxtable, 2014 ONCA 86 (CanLII), <>.

[5] Decided together with Kerr v. Baranow, 2011 SCC 10 (CanLII), [2011] 1 SCR 269, <>.