Division of household items and contents

By Jack Pantalone

This newsletter is based on the assumption that there is no Cohabitation Agreement or Marriage Contract in place, setting out how household contents are to be divided upon a breakdown of the relationship.

For separating couples, in addition to all of the other issues that they often times are faced with and have to address, there is often an issue as to how their household items and contents will be addressed and treated between them.

The first point is to distinguish between household contents and personal belongings.

Clearly, each spouse is entitled to retain his and her own personal belongings upon a breakdown in their relationship. For instance, the wife is entitled to keep her own sporting equipment and jewellery, and the husband is entitled to retain his tools, etc.

This does not mean that these items are not accounted for, for equalization purposes. In other words, even though each spouse is entitled to retain his or her own personal belongings, these belongings may have a significant dollar value, which will have to be included in their net family property for equalization purposes. For example, if the wife’s jewellery has a fair market value of $20,000 as of the date of separation, she will certainly be entitled to retain this jewellery; however, she will have to include it as property owned by her on the date of separation for equalization purposes.

For non-married spouses (common law spouses) the equalization scheme under Ontario’s Family Law Act does not apply. Therefore and absent a trust claim in the interest of the property owned by the other, each common law spouse is entitled to retain his and her own property, free from any claim by the other spouse. For common law spouses, there is no “equalization process”, and each spouse is entitled to his and her own property, without any claim by the other spouse (again, absent a trust claim).

Household items and contents are generally considered to be jointly owned property, owned by both spouses regardless of whether one of the spouses actually purchased a particular item. A stereo system purchased on one’s credit card during the marriage, for example, is commonly considered to be jointly owned property.

There are different ways to deal with the issue of household contents and items, at marriage breakdown.

DIVIDE IN SPECIE (EQUALLY): Firstly and most commonly, household items and contents can simply be divided in specie. This means that the household items and contents are divided equally between the spouses, such that each spouse feels that he or she has received a fair share of the items, having regard to their overall dollar value. In such event, the household items and contents are left out of the equalization process, as each side would be deemed to have received approximately an equal value of the household contents.

If they want to divide the items in specie, there are a few different ways to go about doing so. First, the parties can themselves agree on how the items will be divided (who gets what). They both get the items that they really want to have, and simply agree to treat this division as a set-off. Second and if the parties cannot agree on who gets what items, a comprehensive list of items can be constructed by both parties and, upon a flip of a coin, the parties take turns choosing items until all of the items on the list have been exhausted. Third, a less common method is for one of the spouses to create two mutually exclusive lists (both lists combined containing all of the items), and for the lists to be presented to the other spouse, who then gets to choose one of the lists. This method ensures that the spouse creating the lists will do so in such a way that there is more or less an equal value to both lists, otherwise running the risk that the other spouse will take the more “valuable” list!

DIVIDE AND ADJUST: Rather than dividing the items in specie and treating them as a set-off for equalization purposes, a second way to deal with the items is for the spouses to divide the items unequally, and to have this unequal sharing of the items reflected in the equalization process. For instance, if the wife received approximately $5,000.00 of household contents, such would be noted in her net family property. If the husband received $3,000.00 of the contents, this would be noted in his net family property. For equalization purposes, the wife will be deemed to have received $2,000.00 more in household contents than the husband.

In such instance, it may be necessary to retain the services of an appraiser/auctioneer, to provide an estimated fair market value of the household contents and items. Generally and in such event, spouses are shocked at how low a value is attributed to their household contents. The reason for this is that the household contents are appraised at their “garage sale” value, not their replacement value, purchase price, or insured value.

SELL EVERYTHING: If the parties are unable to agree on a division of these joint items, the parties can simply proceed to court for determination. However and  if the parties end up proceeding to court, undoubtedly the judge will simply order that all of the contents be sold, with the net proceeds of sale divided equally between the parties. This is really the last resort for the spouses as, once again, both spouses will end up receiving a fraction of the replacement cost of these items, once they are sold and the proceeds divided equally between them.

In the end and as difficult as it may be, the spouses are best off dividing the items between them, and either treating the items as having been divided in specie,  or agreeing on the necessary adjustment to be made to their respective net family properties in order to reflect the fact that the items were divided unequally. Sentimental value of items aside, this is clearly an issue where the cost of arguing over “who gets what” will very quickly outweigh any financial benefit that is derived from being able to retain the items in dispute.

Jack Pantalone is a family law lawyer based in Ottawa Ontario.  He has been practicing law for over 22 years and has focused on  family law since 1998, which includes divorce, custody and access, child and spousal support, property disputes, domestic contracts (such as separation agreements), and variation applications.

The Engagement Ring

By Jack Pantalone

In Western culture, most often a marriage proposal is accompanied with an offer of an engagement ring. Engagement rings are symbols of the love, devotion, commitment and fidelity a couple shares.

Conventionally, the woman’s ring is presented as a “betrothal” gift by a man to his prospective spouse while he proposes marriage or directly after she accepts his marriage proposal. It represents a formal agreement to future marriage. Rings can be bought by the man, the woman, the couple together, or by each partner for the other.

Betrothal rings were used during Roman times, but weren’t generally revived in the Western world until the 13th century. The first well-documented use of a diamond ring to signify engagement was by the Archduke Maximilian ofAustriain imperial court of Vienna in 1477, upon his betrothal to Mary of Burgundy.

However, engagement rings didn’t become standard in the West until the end of the 19th century, and diamond rings didn’t become common until the 1930s. Now, 80% of North American women are offered a diamond ring to signify engagement.

In addition to being symbolic, engagement rings are expensive! A “rule of thumb”, apparently, is that a bridegroom should spend approximately 10% of his total annual salary on his fiancée’s engagement ring.

Not surprisingly, therefore, if an engagement is broken off and the couple do not end up marrying, often times a dispute arises as to who gets to keep this valuable ring.

A gift is a voluntary transfer of property from one individual to another, made gratuitously to the recipient. Three elements must be present; delivery, donative intent, and acceptance. It is generally free of any conditions, strings or “consideration”.

Clearly, an engagement ring is given in contemplation of marriage. In this respect, proceeding with the actual marriage can be viewed as a condition on which the ring is given. However, if a gift cannot be conditional, how can the bridegroom require its return, if the engagement is broken off?

This issue is not dealt with under any legislation, such as the Family Law Act, or the Divorce Act. Rather, it is a common law issue, one that has been dealt with by the courts on many occasions.

Cases have held that, in spite of the fact that a gift cannot be conditional, a donor can nevertheless legitimately require its return if the condition is not fulfilled, in that the engagement is broken off prior to the wedding; however, the issue is dependent upon who breaks off the engagement.

If the donor (the bridegroom) decides that he does not want to proceed with the wedding and cancels the engagement, the bride is entitled to keep the ring. If, on the other hand, the bride is the one who initiates it and breaks off the engagement, the ring must go back to her former fiancé.

Of note is that the reason for the wedding cancelation appears to have no relevance; if the bridegroom discovers that his wife-to-be has been unfaithful and angrily breaks off the engagement, he is not entitled to the return of the ring.

Another issue that arises with respect to engagement rings, is whether the ring is included as property to be equalized between the spouses if, after they marry, they end up separating.

An engagement ring is property and, as such, is to be included as property owned by the wife on the date of separation, for equalization purposes. However, if the engagement ring was given to her by her bridegroom prior to marriage, it is also pre-marital property, which is deductible from her net family property. Therefore and unless the engagement ring has increased in value from the date of marriage to the date of separation, there is no benefit to the husband by having the wife include the ring as property owned by her on the date of separation. Although she will include the value of the ring as property owned by her on the date of separation, she will then turn around and deduct its value as property owned by her on the date of marriage.

Jack Pantalone is a family law lawyer based in Ottawa Ontario.  He has been practicing law for over 22 years and has focused on  family law since 1998, which includes divorce, custody and access, child and spousal support, property disputes, domestic contracts (such as separation agreements), and variation applications.

Common-law couples – Has the law regarding property changed?

 By Jack Pantalone

Division of property among common-law spouses has traditionally been a very murky area of family law.

The starting point, with an unmarried but cohabiting couple is that, upon a breakdown of their relationship, each common-law spouse is entitled to retain ownership and possession of the property in his or her name and possession.

Even the definition of “common-law” when it comes to division of property, is unclear.

 As an aside, division of property for married spouses, or “equalization of property”, is relatively straightforward, in that spouses equalize their respective “net worth” as at the date of separation, after deducting their “net worth” as at the date of marriage, and after excluding the present date value of any property which either of them may have acquired during the marriage from an external source (for example, a gift or inheritance).

As for spousal support for non-married spouses, the Family Law Act (the governing legislation for common law spouses in Ontario, given that the Divorce Act does not apply to non-married couples), includes in the definition of a “spouse”, individuals who have cohabited for a period of not less than three years or, if they are the parents (biological or adoptive) of a child or children, individuals who have cohabited in a relationship of “some permanence”. To be sure, there has still been litigation over such issues as the period of cohabitation (start and end dates, when someone has still maintained his or her previous residence), whether they are even cohabiting (for example, whether someone just “stays over from time to time”), and over the issue of what amounts to “some permanence”.

Therefore and although family law is somewhat more straightforward when it comes to the determination of “spouse” in common-law situations for support purposes, there is still plenty of room for disagreement in this area!

With respect to the division of property, family law has undergone some fairly significant changes over the past several years, culminating in the Supreme Court of Canada cases in 2011 of Kerr v. Baranow and Vanasse v. Seguin.

Very briefly, the history of division of property laws can be traced, as follows:

Petkus v. Becker

A 1980 Supreme Court of Canada case in which the court found that, in regards to property, if a common-law spouse was “unjustly enriched”, with the other spouse being “deprived” and without there being a “juristic” reason for the enrichment, then the non-titled spouse may be entitled to either an interest in the property or monetary compensation for financial or non-financial (labour) contributions towards the property.

There had to be a connection between the property at issue, and the contribution, and the contribution had to be towards the acquisition of the property.

A typical example would be a financial contribution (towards the down payment, for example) by one spouse towards a home purchased solely in the other spouse’s name.

Otherwise and if unjust enrichment was not found, each spouse was entitled to retain ownership and possession of the property in their respective names and possession.   

Sorochan v. Sorochan

In the 1986 case of Sorochan, the Supreme Court of Canada expanded the necessary contribution towards property, to include contributions not only towards the acquisition of property, but also towards the “preservation, maintenance or improvement” of property.

Therefore, non-financial contributions such as helping to renovate a house, paint a garage, etc, might be deemed to “unjustly enrich” the spouse who is the sole owner of the house.

Peter v. Beblow

In 1993, the Supreme Court once again expanded the principles of unjust enrichment. However, the court clarified the circumstances under which monetary compensation, as opposed to an interest in property, would be awarded to the non-titled spouse.

Vanasse v. Seguin

As Kerr v. Baranow was sent back to the British Colombia trial court for a new trial, I will focus on the Vanasse v. Seguin case.

In this 2011 case, the Supreme Court of Canada once again expanded the principles of unjust enrichment, by finding that in cases of a “joint family venture”, the court can award:

1. A share of accumulated assets;
2. An ownership interest in specific property (rather than a share of all accumulated assets) in cases where the non-titled spouse can prove a direct or indirect contribution towards the acquisition, maintenance or improvement of such property; or
3. A monetary compensation on a “fee-for-service” basis.

A “joint family venture” must be proven, taking into account four factors: mutual effort, economic integration, actual intent, and priority of the family. Clearly, the longer the period of cohabitation, the more likely a court will find it to be a “joint family venture”, unless both parties worked, had no children and kept their finances totally separate.

If it is a clear case of joint family venture, the court is more likely to award a sharing of the accumulated assets of the parties.

CONCLUSION

Clearly, the Supreme Court has expanded property entitlement for non-married (common-law) spouses, but only in cases where a “joint family venture” is found.

Please feel free to contact me to discuss your case, if you have any questions about your common-law situation.

Jack Pantalone is a family law lawyer based in Ottawa Ontario.  He has been practicing law for over 22 years and has focused on  family law since 1998, which includes divorce, custody and access, child and spousal support, property disputes, domestic contracts (such as separation agreements), and variation applications.