“But our home used to be worth so much more, can I claim that?” We hear this type of question from clients a lot in a falling real estate market. Who is responsible for the value of the home dropping? Is there any way to be compensated for lost equity after separation?
The timing of your relationship breakdown likely wasn’t pre-planned by you in accordance with the state of the real estate market. It is very common to find that the family home is the parties’ largest asset and where no buy-out can be afforded by one party to the other, in most cases the family home must be sold.
Waiting on the Market?
Where your partner is agreeable and you can both afford to wait, it is possible to arrange for a date in the future to list the family home.
However, waiting on the price of real estate to rise in your area can be very unpredictable, risky and impractical.
- There is a risk that the market keeps falling and you lose further equity.
- There is also the unpredictable nature of the market and buyers’ behaviour, making you unable to guarantee a sale once your home is finally on the market.
- The impractical nature of waiting on the market also becomes evident as the pressure and desire to settle your family law matter grows.
Most separated parties are trying to agree on property division to move forward with their future, and any delay in listing the home for sale can create a lot of tension. If there are also children involved, sorting out living accommodations and finances quickly can become a higher priority to create stability for them as soon as possible.
Who Decides When to List the Home?
If the parties cannot agree on whether to sell the home, a court application may be brought under Supreme Court Family Rule 15-8 for a judge to direct that the home be sold and outline the conditions of the sale.
The sale must be advantageous to both parties, expedient, and necessary. The court will balance the prejudice faced by each party to pick the outcome that reduces the most harm.
Factors the judge will consider when deciding whether to grant the order include the following:
- The availability (also affordability) of alternative accommodation for each spouse and his or her dependents;
- The emotional condition of the spouses, especially the parenting spouse;
- Economic factors such as a declining market;
- Wasting of the asset; and,
- The capacity of the parties to maintain the asset.
(See Morrison v Greenwood, 2020 BCSC 1356.)
What if my Partner is not Cooperating with the Sale?
Once it is decided that the house should be sold, the court may further direct that only one party have control of the sale. This is called ‘sole conduct of sale.’ The party who has this right may choose the realtor, the listing price, and even sign and accept offers on behalf of their partner without their partner’s involvement!
The reason the other partner loses the right to be involved is often due to evidence showing that they have intentionally tried to obstruct the sale of the family home. This includes behaviours such as denying showings, refusing the reduce the listing price, and declining all offers. Where there is a reasonable risk of repetition of these behaviours, the court will grant the other party sole conduct to ensure that the sale of the home can indeed be carried out. (See DeThomas v DeThomas, 2023 BCSC 901.)
Value of the Home?
Unfortunately, you cannot arbitrarily use the past value of your family home for the purposes of separation and asset division. There is no external entity able to reimburse every separated family for changes in the real estate market, this would be an astronomical remedy to provide.
Per section 87 of BC’s Family Law Act, the value of all property is based on its fair market value at the time of making an agreement or at the time of the relevant court hearing determining division of property and debt (often trial).
If you and your partner disagree on the fair market value of the home, you may both hire property appraisers to assess its value, or hire one appraiser jointly. This provides the court with evidence as to the current value of a home, where a buy-out is being considered.
Otherwise, the fair market value of the home is simply the price that it sells for on the market.
What if my Partner Caused the Drop in Value?
Where the value of the home has dropped, not simply due the market, but due to your partner’s bad behaviours, it is possible to seek unequal division of the family property to provide you with a larger share of family property than them.
This compensation is available where it would be significantly unfair to give both parties an equal share of the equity under section 95 of the Family Law Act. Although there are many factors that can create this unfairness, one of them includes whether a spouse caused a significant change in the value of the property beyond market trends or disposed of the property to try to defeat the other spouse’s interest.
What Next?
Do you need advice on how to proceed with asset and debt division after separation? Are you struggling with an uncooperative ex-partner?
If you are worried about what will become of your family home after separation, please reach out to our family law team here at Baker Newby LLP. We can provide you with the clarity and confidence to move forward with success.
