Property Division after a Short Relationship
Properties are usually a couple’s most valuable asset. So dividing this valuable asset can become a central factor in separation.
As a starting point, property is divided as follows:
1. All property owned by either party at the time of separation is family property,
2. Family property is valued as at the date of division which is either the date of the agreement or of trial and
3. All family property is shared equally.
However, there are exceptions and some properties can be excluded in terms of sec 85 of the FLA.
What happens when one of the parties enters the relationship with more assets then the other and the relationship only lasts a few years?
The Court of Appeal recently discussed this issue in Banh v Chrysler 2022 BCCA 74.
In this case the parties were married for 2 years and the trial took place a few years later. At the commencement of the relationship, the husband owned 3 properties and the wife owned 1. They did not transfer ownership of the properties after marriage. The parties lived in one of the husband’s properties and they rented out the other three. The husband’s three properties were his excluded assets and the wife’s 1 property was her excluded asset. In terms of the FLA the parties would only share the growth in value of the 4 properties. The exclusion was not in dispute however the date of valuation was at issue.
The trial took place 3 years after separation, The properties had increased in value not only during the marriage but also in the 3 years since separation. The husband successfully persuaded the trial judge that it would be significantly unfair for the wife to equally share in the growth of all his properties given the short time of the relationship and the length of the separation. He further argued that he was the one who made the effort to collect rent etc for the rental properties.
He relied in sec 95(2) of the FLA which allows the court discretion to use a valuation date other than the trial date in circumstance that the court found were insignificantly unfair to divide the properties using the trial date. One of the factors that can be considered is the length of the relationship and it is this factor that the husband proffered. The trial judge found that it was significantly unfair to divide the properties using the trial date under these circumstances and used the date of separation in which to value the properties.
The wife appealed. The court of Appeal found that the term “significant unfairness” created a high threshold. The court of appeal referenced Jaszczewska v. Kostanski 2016 BCCA 286 at para. 41. Reapportionment will require something objectively unjust, unreasonable, or unfair in some important or substantial sense…There must be a real sense of injustice that would permeate the result if the court did not deviate from the presumptive equal division.
The increase in the value of all the properties was due to market forces. In addition, the husband had retained all of the rent from the rental properties. The wife was living in her property after separation.
The Court of Appeal found that there were cases where a short relationship could be a factor which resulted insignificantly unfairness. However, they found that that was not the case here. The court found that two years was not so compellingly short that the duration of the relationship alone justifies an unequal division of family property.
The court found at para 63: The key distinguishing feature in the present case is that Mr. Banh's excluded properties were rental properties and he was compensated for his time and expenses associated with managing and maintaining the properties following the parties' separation. There was no reason to further compensate him for his contributions through an unequal division of family property.
As a result, the court ordered that the growth of all the properties from the date of cohabitation to the date of trial were to be divided equally.
The husband made an application for leave to appeal to the Supreme Court of Canada. The SCC dismissed the application.
In short, to successfully vary the valuation date to something other than the date of agreement of trial, there must exist factors that would make it significantly unfair and the bar to make a finding of significant unfairness is very high.
To find out how you can protect your property when you enter a relationship see my upcoming blog.