Post-separation increase in value of matrimonial property-Who Benefits

BY: VALERIE DYE 

The issue of increase in the value of matrimonial property becomes relevant when parties try to deal with the sale and division of their assets years after their divorce or separation. Given the rapid increase in property values a property valued at $500,000 at the date of separation may be valued at $800,00 at the date when the parties actually decide to sell the property and split the proceeds. Who benefits from the increase in value?

For the purpose of property division, each party calculates his or her Net Family Property (NFP) by subtracting the value of property owned at the date of marriage from the value of property owned at the date of separation or divorce (V-day), whichever is earlier. The party who has the higher NFP pays half of the difference to the other party.  In some cases, where property value has increases after separation the courts allow the property to be divided at the post-separation value.

In the case of Cerenzia vs Cerenzia (2015 ONSC) the wife owned the matrimonial home prior to marriage. Despite this, the fact that it became the matrimonial home meant that the husband was entitled to a share. At V-day in 2008 the home was valued between $470,000 and $535,000. By the trial date in 2015 the home was valued $800,000. The husband claimed a share of the post-separation value. The wife argued that he was only entitled to a share of the V-day value. The court decided that since the husband was not the beneficial owner of the property, he was only entitled to a share of the V-day value of the property.

A different determination was made in the case of Korman vs Korman (2015 ONCA 528). In that particular case, the home was in the wife’s name only. The home was valued $725,000 at V-day and in excess of $940,000 by the date of trial. Despite the fact that the husband was not on the title the Court of Appeal determined that he was entitled to a share of the post-separation value of the home. The basis for the Court of Appeal’s decision was that, despite the fact that the husband was not on the title he was still a beneficial owner of the property as a joint tenant with his wife by virtue of the fact that he contributed to the acquisition of the property but had his name removed for business reasons.

The principle that comes out of the cases is that if the property is owned by both parties then both parties share in the post-separation increase in the value of the property.  However, if the property is owned only by one person, the division will be of the V-day value and the owning party will benefit from any post-separation increase.

It is extremely important to note that beneficial ownership of a property is not determined solely by whose name is on the title. If someone has contributed to the acquisition of a property but has chosen to remain off the title for various reasons, then that person may still be considered an owner for the purposes of property division. As such, that person will be entitled to share in the post-separation value of the property as opposed to the V-day value.