When a couple separates, myriad financial issues inevitably arise. Chief among them is what to do with a jointly owned home. For the separated couple, continued joint ownership of the home is, almost always, unrealistic. Two options remain: one spouse can buy out the other's interest in the home or the home can be sold.
In Ontario, and in many jurisdictions across Canada, the law is clear that one spouse cannot force a buyout of the home between the separated spouses. A buyout is only available to separated spouses if they agree since it is presumed that a joint owner of a home has a right to insist upon the sale of the home on the open market. That right is limited only if one spouse can demonstrate that the sale of the home would somehow impair unresolved claims arising from separation such as division of family property.
The issue does not end there. If the home is to be sold on the open market, can one or both spouses make an offer to purchase the home? If so, are there rules to which the separated couple must adhere?
Those issues were recently before Justice Narissa Somji of the Ontario Superior Court of Justice. In the case, the couple separated in July, 2020, following which the wife continued to reside in the jointly owned home with the parties' two children. In August 2023, the court ordered the home to be listed for sale and sold.
One month later, the home was listed for $799,000 with offers to be presented on Oct. 17. Importantly, the offer process was closed such that potential purchasers would not know the terms of other offers being made. Only one offer was received: the husband's offer to purchase the home for $650,000. The wife rejected it since it was well below the wife's estimate of the home's value.
Almost immediately, the husband commenced court proceedings wherein he sought an order that his offer to purchase was a "valid fair market offer" and that it was binding. The wife disagreed. The husband went on to direct the real estate agent to suspend the listing until the issue was resolved in court. According to the husband, the wife "breached her duties of honesty and good faith" by rejecting the husband's offer to purchase the home.
For Justice Somji, there was no doubt that the husband was entitled to make an offer as part of the bidding process. If such an offer is to be made, the spouse making the offer "must compete with other interested purchasers and do so without any inside information as to the other offers made," the judge said.
"The case law makes clear that the owner must participate in the bidding process and comply with all the formalities of that process as would any other third party bidder and the home should be sold to whoever makes the highest offer within that fair process."
For the judge, the issue was whether the wife was obliged to accept the husband's offer.
The judge pointed out that the listing agreement did not include a clause which obligated the wife, or the husband for that matter, to accept an offer to purchase. The judge confirmed the wife is "entitled as a joint owner to hold out for the highest fair market value of the property available." The judge went on to find that the wife's rejection of the husband's offer "which was significantly lower than what he himself agreed to was a fair listing price" does not amount to "disingenuous conduct on her part to thwart (the husband's) participation as a purchaser."
The husband alleged the wife's conduct had delayed the sale of the home. The judge disagreed. In fact, the judge found the husband's conduct in commencing court proceedings and directing the real estate agent to suspend the sale caused the delay.
To avoid further disputes between the parties, the judge set a clear path forward which is grounded in the husband and wife being entitled to have the home sold at its fair market value. The judge directed the home to be listed for $750,000 and the listing price to be reduced by $20,000 every 30 days until it is sold. The husband and wife were permitted to make an offer at any time provided the offer is at the current listing price.
The judge ordered the husband to pay court costs to the wife in the amount of $5,000. In doing so, the judge found the husband's conduct to be unreasonable. According to the judge, the husband's hasty commencement of court proceedings and suspension of the listing "delayed the sale of the home, unduly complicated matters, and unnecessarily increased litigations costs for both parties."
This article was originally published in the Financial Post.
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