Surrey Family Property Division and Exclusion Property within a Marriage and Common Law Marriage
Our Surrey family property division lawyers are constantly tracking the court decisions relating to family property and excluded property division in BC. On separation, Surrey family property division is often a hotly disputed issue and our skilled Surrey property division lawyers negotiate, mediate and litigate on behalf of our clients to ensure the best possible outcome.
Herein lies a cautionary tale as to the continuing effect of the presumption of advancement upon “Excluded Property” under the Family Law Act. Upon separation, the claimant argues that the entire home should be “excluded” family property and should not be divided between the two parties because the claimant owned the home prior to marriage. The respondent argues that the placement of her name on title effectively transferred to her at least half of the property thus making it “included” family property. Therefore, the house should be divided between the two parties. Who is correct?
Individuals who come into a marital relationship with substantial funds, or who receive inheritances during their relationship, have no guarantee that these assets will retain their character as Excluded Property following a breakdown of marriage. Our Surrey Family Property Division lawyers have been warning clients for some time to be cautious with respect to changing ownership of excluded property.
Before we examine the judgment, let’s take moment to clarify the Family Property framework. The Surrey family property division regime in British Columbia is governed by the Family Law Act. The framework is the same for common-law couples (i.e., have lived together in a marriage-like relationship at least 2 years) and married couples.
In general, the most compelling reasons for moving to an excluded property regime are to make the law simpler, clearer, easier to apply, and easier to understand for the people who are subject to it. The model seems to better fit with people’s expectations about what is fair. They “keep what is theirs,” (such as pre-relationship property and gifts and inheritances given to them as individuals) but share the property and debt that accrued during their relationship. Where one spouse enters the relationship with more assets than the other, providing that spouses share the increase in the value of the excluded property promotes a fair outcome.
Presumption of Advancement
In layman’s terms, the “presumption of advancement” is a legal principle that essentially states that a transfer of property from one spouse to another is a gift to the receiving spouse to be legally owned by the receiving spouse.
Section 85(1) of the Family Law Act (“FLA”) defines “Excluded Property”, which is exempt from division between spouses after the marriage breaks down: property acquired prior to the beginning of the relationship; inheritances; settlements or awards of damages; insurance policy proceeds; trust property; and property derived from Excluded Property. However, Section 84(2) (g) provides that any increase in value of Excluded Property during the relationship is family property. The increase in value of the “excluded property” is divisible unless the beneficiary can prove that it would be clearly unfair to divide the value gain equally.
J.B. v. S.C.
In this very recent case from November 20, 2015, the parties were common-law spouses who were in an eight-year relationship. The claimant owned property before they began cohabiting. That property was sold and the proceeds of sale were used to purchase two more family homes which were registered in the claimant’s name. When the third home sold, the equity was used to buy an interest in property which had been registered in the respondent’s name. The court was asked by the claimant to consider a portion of the equity in that third home as excluded property. The respondent stated that by virtue of the presumption of advancement, it was not excluded and ought to be divided equally.
Court’s Findings
The courts have been divided on the issue of excluded property. Our Surrey family property division lawyers note the majority of cases by a margin of 5:2 are upholding the exclusion continuing despite changes in ownership. In this particular case, it was held that the home was excluded family property and was not subject to division between the parties. The court differentiated the case and emphasized that the findings in this case was limited to the specific facts that the court was faced with.
The court declined to divide the excluded property. It was found that the respondent made some modest direct contributions toward the preservation of the excluded property but as a result she was receiving 50% of the increase in value of property purchased with the excluded property. During the medium length relationship, she was pursuing her career and has successfully graduated and significantly increased her income and was therefore, in a better position as a result of the marriage, leaving the relationship with approximately $90,000 of equity, minimal debt and a career.
The Excluded Property debate is far from over and while it is certainly too early to tell whether this case may be appealed; for the time being, spouses who have property that qualifies as Excluded Property should proceed cautiously when deciding whether to transfer any portion to their partner. In closing, the division of Family Property is complicated and it is strongly advised that you receive independent legal advice before signing any agreements or agreeing to any consent orders. For assistance with this and other family law issues, please contact me or anyone of our other Surrey family property division lawyers at 604-576-5397.
