Pre-nups | Marriage Contracts (Part 2)

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to cohabitation, prenuptial or marriage contracts and agreements, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact me directly if you need a lawyer.

This is the second of a series of blog posts about prenup or prenup agreements in Ontario. In my first blog, I talked about how property is usually divided when married couples separate under the EQUALIZATION OF NET FAMILY PROPERTY REGIME under the Family Law Act.  Here, I’m going to talk about how pre-nups, marriage contracts, and separation agreements can change the way that property is divided when married couples separate.

So under the Family Law Act, couples can enter into written agreements called DOMESTIC CONTRACTS to change the way the Act would normally apply to the division of property between married spouses when they separate.  Indeed, the Act could take a back seat to what the couples specifically want and agree to!  Now, there are different kinds of domestic contracts for married spouses:

• Prenuptial Agreements (entered into before the couple marries);
• Marriage Contracts (entered into after the couple marries); and
• Separation Agreements (entered into when the couple separates).

Basically, all 3 types of domestic contracts allow the parties to agree on their respective rights and obligations under the marriage on or separation to deal with ownership in or division of property.  That’s what sections 52(1)(a) and 54(a) say.  To be valid and enforceable, the contract must (among other things) be in writing and signed by the parties and witnessed: section 55(1).  Now also keep in mind that the agreement itself must be substantively valid (i.e. it must be clear, complete, and certain enough to be enforceable) and procedurally valid (i.e. it must be entered into without undue influence, duress, misrepresentation, fraud, etc.).   These are standard principles of contract that apply to all agreements – including family law agreements such as domestic contracts.

Now, recall in the previous blog I wrote that something a spouse can EXCLUDE from their NET FAMILY PROPERTY through a DOMESTIC CONTRACT is PROPERTY.  That’s exactly what section 4(2)6 says: the value of property that the spouses have agreed by a domestic contract is not to be included in the spouse’s net family property does NOT form part of the spouse’s net family property.  So, for example, if one of the spouses owns the matrimonial home, he or she can agree with the other spouse not to include that value in his or net family property.  As I’ve previously blogged about, while you can address ownership issues of a matrimonial home in a domestic contract, you can’t contract out of a spouse’s right to possess the home after the breakdown of the marriage.

Remember: if you need help with your divorce concerning the division of property, support (child / spouse) or other matters, make a post on Dynamic Lawyers. We have family law lawyers who can help you!

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Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to getting a prenuptial agreement, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. We will soon be offering Prenuptial Agreements in our Legal Forms + Video Guides section. You can contact me directly if you need a lawyer.

This is the fourth of a series of blog posts I’m writing about prenups or prenuptial agreements for Ontario. In the first blog, I discussed what they are, when are they used, and what is required for them to be valid and enforceable. In this blog, I’ll discuss how they can be challenged. In the second blog, I reviewed Loy v. Loy – a Ontario Superior Court of Justice case which reviewed the jurisprudence concerning how prenuptial agreements (and other domestic contracts) can be challenged. In the third blog, I’m discussed some tips that will help mitigate against future challenges to prenups.  In this blog, I’m going to talk about what happens if a prenup is set aside (in other words, what will govern the division of property, spousal support, etc.)?  I’ll also discuss the doctrines of UNJUST ENRICHMENT, CONSTRUCTIVE TRUST, and RESULTING TRUST – which all doctrines based on equity which can be used by a party to claim that they are entitled to certain property.

What happens if a prenuptial agreement is set aside?
If a court sets aside a Prenuptial Agreement, then that Agreement will not apply to the termination of the parties’ relationship.  So what COULD govern the ownership or division of property and support obligations?

• Well, the Family Law Act would govern the ownership and division of property, while the Divorce Act would govern spousal and child support issues.
• Under the Family Law Act, absent a valid domestic contract (such as a Prenuptial Agreement), the net worth of the couples during the course of their marriage is equalized (i.e. split in two).  Essentially, you take the value of spouse’s property at the date of separation, subtract the value of their property at the date of marriage, and split that amount between the two spouses.  This is called EQUALIZATION OF NET FAMILY PROPERTY.
• Finally, if the Prenuptial ends because one of the parties dies, then the Succession Law Reform Act could impose support obligations on the deceased party’s estate.  That Act COULD apply if the parties were spouses (as defined above under the Family Law Act) and the deceased spouse was providing support or was under a legal obligation to provide support immediately before his or her death. Here, if the deceased spouse failed to provide proper support for the remaining spouse, the latter could apply to the court for proper support.

In addition to these statutes which could govern the ownership and distribution of property, there are other arguments which parties could make if the statutes didn’t apply for some reason.  For example, absent an agreement that says otherwise, gifts and inheritances are typically excluded from NET FAMILY PROPERTY under the Family Law Act.  But under an equitable doctrine such as Unjust Enrichment, Constructive or Resulting Trust (discussed below), the other spouse could claim an interest to such property.

UNJUST ENRICHMENT
The doctrine of unjust enrichment is not found in any statute.  Rather, it is an old judge-made law that allows one party to claim compensation from another party on the basis of an unjust enrichment.  3 requirements must be met in order for a spouse to claim unjust enrichment:

(1) an enrichment enjoyed by the other spouse;

(2) a corresponding deprivation suffered by the complaining spouse; and

(3) the absence of a juristic reason for the enrichment.

Now, it these 3 elements exist, then a spouse may be entitled to damages. Where simply having the other spouse pay money is not enough, then the doctrine of CONSTRUCTIVE TRUST comes into play.

CONSTRUCTIVE TRUST
If there was an unjust enrichment and there was a link between the contribution that founds the action and the property in which the constructive trust is claimed, then the complaining spouse may receive an ownership interest in that property. To recap, the idea behind a constructive trust is as follows.  The marriage ends.  Only one spouse holds title to property.  If there was an unjust enrichment and monetary damages would not be a sufficient remedy, then the complaining spouse may receive an ownership interest in the other spouse’s property.

RESULTING TRUST
When married spouses separate and only one of the spouses own a property, the Court will ask whether or not there was an agreement or COMMON INTENTION that the other spouse was to take a beneficial interest in that property.  The court will look to the facts and circumstances surrounding the acquisition, or improvement, of the property. If the spouse with no title in the property has contributed, directly or indirectly, in money or money’s worth, to acquire or improve the property, the doctrine of resulting trusts is engaged. An interest in the property is presumed to result to the one advancing the purchase moneys, or part of the purchase monies.

So when will a Court find COMMON INTENTION if there is no agreement? The Court will have to gleam this from the conduct of the parties if it is not expressly made.  The Court will look at financial arrangements in acquiring or maintaining the property.  The Court may also look at who benefited from the property (either directly or indirectly).

So, there you have it: UNJUST ENRICHMENT, CONSTRUCTIVE TRUST, and RESULTING TRUST.

What about the matrimonial home?
Even if a prenuptial agreement deals with the matrimonial home (e.g. it will be owned solely by one person upon termination of the marriage, etc.), that Agreement cannot supersede each spouse’s right to possess the matrimonial home under the Family Law Act.

Part II of the Family Law Act deals with the “Matrimonial Home”.  This is the home that either a spouse has an interest in or, if the spouses are separated, was at the time of separation “ordinarily occupied by the person and his or her spouse as their family residence”.  OK, so what’s so special about the matrimonial home?  Well, section 19(1) of the Act says that BOTH spouses have an EQUAL right to POSSESSION of a matrimonial home.  Section 19(2) goes on to say that, when only ONE spouse has an interest in a matrimonial home, the other spouse’s right to possession ends when they cease to be spouses (unless a separation agreement or court order says otherwise).

So what does this mean for you?  Well, even if a Prenuptial Agreement says that only ONE spouse will be the owner of the matrimonial home, the OTHER spouse will still have a right to possession.  This means that the ONE spouse who owns the matrimonial home CANNOT dispose of (i.e. sell, transfer, gift, etc.) or encumber (e.g. mortgage, use as collateral, etc.) any interest in a matrimonial home UNLESS:

• the OTHER spouse signs the paperwork;
• the OTHER spouse consents to the transaction;
• the OTHER spouse has released all rights under Part II of the Family Law Act by a Separation Agreement;
• a court has authorized the transaction or has released the property from Part II of the Family Law Act; or
• the property is not designated by both spouses as a matrimonial home and a designation of another property as a matrimonial home, made by both spouses, is registered and is not canceled.

Importantly, if only ONE spouse owns the matrimonial home tries to dispose or encumber the matrimonial home without falling under one of the above situations, then that transaction may be SET ASIDE by a court.  Finally worth mentioning is that, regardless of who owns the matrimonial home or its contents, and despite a spouse’s right of possession, a spouse can ask the court for exclusive possession of the home (among other things).  In determining whether an order for exclusive possession is appropriate, a court must consider the following factors under sections 24(3) and (4):

• the best interests of the children affected (i.e. possible disruptive effects of a move to another home and the child’s  views and preferences – if they can be ascertained);
• any existing orders under Part I (Family Property) and any existing support orders;
• the financial position of both spouses;
• any written agreement between the parties;
• the availability of other suitable and affordable accommodation; and
• any violence committed by a spouse against the other spouse or the children.

Interestingly, even if a court orders that ONE party be given exclusive possession of the matrimonial home, it can still direct that party to make periodic payments to the other spouse (among other things), pay for all or part of the repair and maintenance of the matrimonial home, and keep or remove certain contents of the matrimonial home.  Finally worth mentioning is that under section 25, if a court is satisfied that there has been a material change in circumstances, it can discharge, vary or suspend any order made concerning possession of the matrimonial home (as noted above).

written by admin \\ tags: constructive trust, matrimonial home, prenup, prenup agreement template, prenup sample, prenup template, prenuptial agreement, prenuptial agreement lawyer, prenuptial agreement ontario, resulting trust, unjust enrichment

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice on your Agreement of Purchase and Sale, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to review your agreement of purchase and sale and advise accordingly.

Brace yourself…this is a long blog!

Here are some of the common terms in OREA’s a standard form Agreement of Purchase and Sale (remember: there are many more terms which can be included and you should speak with a lawyer about your particular situation!):

• Parties

For an Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the parties be identified. The Ontario Real Estate Association‘s standard form Agreement of Purchase and Sale begin with some basic information about the buyer and seller.

Worth noting is that, even after the Agreement of Purchase and Sale has been signed, additional buyers can be added (e.g. so as to be on title) through a direction provided to the sellers.  No amendment is necessary.

The buyer can be a trustee who purchases in trust on behalf of a beneficiary.

The seller is referred to as the “vendor”.  It is extremely important that the proper legal names of all of the registered property owners be stated in the Agreement of Purchase and Sale. For example, absent a marriage contract to the contrary, a married spouse not registered on title has a proprietary interest in a matrimonial home.  If that spouse does not sign the Agreement of Purchase and Sale, the buyer may only be acquiring the interest of the other spouse.

In some situations, the legal capacity of the seller will need to be included in the Agreement of Purchase and Sale where they are not the registered owner of the property.  This may be the case, for example, where the bank is selling the property pursuant to a power of sale or where a sheriff is selling the property to satisfy an outstanding judgment.

A party can represent a corporation in the purchase and sale of property. In these situations, directors and officers of the corporation generally have the power to bind it. A buyer or seller dealing with a corporate party on the opposite side should:

• Require the agreement to be signed by an officer or director;
• Include a representation and warranty in the agreement stating that the person executing the agreement has the authority to bind the corporation and that all necessary steps to authorize the purchase have been completed;
• Include a statement under the signature of the person signing the agreement on behalf of the corporation saying “I have authority to bind the Corporation”; and
• Require immediate delivery of a resolution of the corporation’s Board of Directors approving the agreement.

A party can also act as agent for a corporation that does not exist (i.e. that has yet to be incorporated). Here, the Agreement of Purchase and Sale should clearly state that the buyer has the right to transfer the agreement to the corporation. Within a reasonable time after coming into existence, the corporation must adopt that agreement. Failure by the corporation to do so will make the buyer liable for the obligations set forth in the agreement (unless the agreement says otherwise) as per section 21(1) of the Ontario Business Corporations Act, R.S.O. 1990, c. B. 16 or section 14 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44.

If a party is a partnership, it is prudent to have all the partners sign the agreement if the purchase or sale is outside the normal course of the partnership’s business.

• Property

For the Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the property be adequately identified. The description of the property that is being bought and sold using OREA’s standard form Agreement of Purchase and Sale includes:

• The municipal address (street number, street, city);
• The side of the street upon which the property is located;
• The dimensions of the frontage and depth; and
• The legal description of the land (i.e. lot and plan or concession number).

Using a survey can help ensure the proper location and dimensions of the property.

• Purchase Price

For the Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the purchase price be included or ascertainable. Whatever price is ultimately written in this section, be sure that the words and numbers coincide.  Confusion may arise where multiple amendments to the purchase price are made using the same Agreement of Purchase and Sale.  Remember that the amount of money indicated in this section is not the actual amount that the buyer must pay.  The purchase price is the starting point for which there will be adjustments (as per the statement of adjustments).  It is the adjusted amount which the buyer must ultimately pay.

• Deposit

There will also be an area to record the deposit paid by the buyer to the seller’s brokerage, which will hold it “in trust” until the terms of the agreement are met.  Once the agreement is completed, the deposit will be applied to and credited against the purchase price (as determined by the statement of adjustments).

Sometimes, the buyer will include a provision requiring that the deposit be placed in an interest-bearing account and that interest be credited or paid to the buyer on or after closing.

• Schedules

The next section is a blank area for the purchaser to identify any attached Schedules to the Agreement of Purchase and Sale which detail any special arrangements. For example, the buyer may agree to assume the seller’s existing mortgage rather than getting separate financing through a bank. The buyer may also make the sale conditional until a specified date on the happening of various events such as the sale of the purchaser’s current house, the purchaser arranging adequate financing, a home inspection being conducted to the satisfaction of the buyer, or municipal approval being obtained.

• Fixtures & Chattels

The next section typically deals with “fixtures” and “chattels”.  Fixtures are improvements made to a property that are attached or cannot be removed easily without causing damage to the property. Hot water heaters, built-in cabinets, interior doors, a dining room chandelier, and lights are examples of fixtures. Fixtures are assumed to be included in the sale of the home, unless they are specifi­cally excluded in the agreement.  While the rules for determining whether a certain item is a fixture are very confusing, some of the factors that will be used in making this determination include:

• the nature of the thing;
• the mode of attachment;
• the circumstances under which the item was attached;
• the purpose to be served by the item;
• the position of the rival parties;
• the degree of attachment to the land or building; and
• the ability to remove the item without causing serious damage to it or the land or building to which it is attached.

Chattels are moveable items of personal property contained on the property and must specifically be listed in the agreement if they are to be part of the sale of the home. For example, if the seller agrees to include a refrigerator, stove, or gardening equipment in the sale, these items must be specifically identified in the Agreement. If there is any doubt whether an item is included or excluded, it should be clearly specified in the agreement.

• Rental Items

The buyer will be asked to agree to assume rental contracts (if assignable) in respect of the property being purchased.  Classic examples of rental items include: hot water tanks, furnaces, and security monitoring systems. The price for the rental items is not included in the purchase price, but will be accounted for in the statement of adjustments.

• Dates, Searches & Requisition Date

Next, are a series of clauses dealing with relevant dates. The first of these is usually a clause establishing that the buyer’s offer will be void unless the seller accepts it before a certain date. It is not unusual for sellers to have only a few hours to consider the offer.

A deadline is also set in the Agreement for all searches to be done on the property. This is commonly referred to as the “requisition date”, which is the earliest of 3 dates:

• 30 days after a specified requisition date;
• 30 days after the date on which the conditions in the agreement are fulfilled or otherwise waived; or
• 5 days prior to completion.

Before this date, it is the buyer’s responsibility to do a number of searches to ensure there are no problems with the property. These include search­ing the registered ownership of the property through the land registry office, checking that the property complies with zoning regulations, and searching for outstanding municipal work orders, encumbrances, or builders’ liens. It is typical to see that the title search is conducted a number of days prior to closing so that, if an issue arises concerning title, there will be time to address that issue and/or extend the closing date (through mutual agreement).

The buyer and the seller also must identify a date for the closing of the transaction. This is the very important date when the sale is finalized and the buyer takes physical possession of the property.

• Conditions

Typical Agreements of Purchase and Sale establish so-called “conditions” that must be met before the sale can be completed. The party who is responsible for fulfilling the condition must use his or her best efforts to do so.

First, the buyer’s entire offer to purchase the home is usually condi­tional on the seller being the legal and registered owner of the property.

Second, if the buyer’s lawyer discovers any problems while doing the various document searches, the buyer (or the lawyer) must send a letter explaining the problem to the seller’s lawyer before the requisition dead­line. If the seller is unable to fix the problem, then the entire Agreement may come to an end unless the buyer specifically chooses to take the property with the particular defect.

Finally, the Agreement will state that, unless the buyer makes an objec­tion in writing before the requisition date, the buyer cannot complain later about any defects in the seller’s ownership of the property. For this reason, it is very important for the buyer’s lawyer to perform all the neces­sary searches to ensure there are no hidden problems that may arise at a later date.

Other clauses in the Agreement may deal with technical issues relating to future use of the property, production of documents, insurance, tax arrangements, adjustments, and spousal consent. Your lawyer or Realtor can provide a more detailed explanation of these terms.

Completing an Agreement of Purchase and Sale can be complicated and technical. Before the Agreement is final, it may change several times as the buyer and the seller negotiate its terms, and counteroffers are pre­sented. To be certain you understand all the terms, it is best to have your agreement reviewed by a lawyer before your purchase or sale of land is finalized.

• Agreement in Writing

This paragraph states that there is no agreement – oral or written – concerning the purchase and sale of the property by the parties except as set out in the Agreement of Purchase and Sale.  No representation, warranty, collateral agreement or condition affecting that agreement exists unless it is expressly included therein. Furthermore, if there is a conflict between the printed form and any clauses inserted in the agreement (including those inserted in a Schedule), the inserted clauses will govern to the extent of the inconsistency.

• Execution and Acknowledgment

In the standard form Agreement of Purchase and Sale, the legal representatives (e.g. heirs, executors, administrators, etc.) of the purchaser and seller are bound by the Agreement of Purchase and Sale.  This means that bankruptcy, death, mental incapacitation in some cases, etc. cannot allow a party to avoid their obligations under the Agreement of Purchase and Sale.  If a buyer or a seller, for example, died before closing, their estate trustee would be bound to close the transaction even if the beneficiaries did not want that to happen.

While not a legal requirement in Ontario, it is a good idea to have witnesses sign and date the Agreement of Purchase and Sale in order to establish who the parties are (this helps prevent against fraud).  Having witnesses also helps in case an issue arises concerning the mental capacity of one or more of the parties to enter into the contract.  Finally, witness testimony may become relevant if a party wants to avoid fulfilling their end of the bargain (and closing) based on misrepresentations, undue influence, duress, etc.

To deal with situations where a vendor has a spouse (e.g. common law or married) that has an interest in the property but is not on title, there is a section in the standard Agreement of Purchase and Sale requiring their consent.

When the final version of the Agreement of Purchase and Sale is accepted, whichever party accepted it must sign off. The buyer, for example, could be the last party to accept the seller’s counter-offer and would be required to sign off here. This provision was included to avoid difficulties in determining specifically when the Agreement of Purchase and Sale was finally executed.

Finally, there is an acknowledgment section that states that the parties acknowledge receiving a signed copy of the accepted Agreement of Purchase and Sale and authorize their Realtor to forward a copy to their lawyer.  This is a requirement on the brokerage under section 12 of the Code of Ethics.  This acknowledgment section also identifies the buyer and seller’s address for service of notice as well as their lawyer’s addresses, telephone and fax numbers.

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Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.  If you need legal advice with respect to getting an uncontested divorce in Ontario, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa family law lawyers registered on Dynamic Lawyers who can offer information, advice, and assistance with respect to your uncontested divorce matters.

There were a number of issues that YWCA members identified during today’s presentation which I would like to discuss in more detail over the next few blogs.  One of the issues that came up was getting an uncontested divorce in Ontario.

So we begin with the assumption that a couple has signed a separation agreement to settle all family issues between them (e.g. equalization, the matrimonial home, child and spousal support, etc.).  While separation agreements resolve family matters when you separate, they do not legally end your marriage. The only way to do this is to get a divorce and only a court can give you a divorce.

To proceed with an uncontested divorce, a party will need to complete and submit the divorce forms, pay the required court fees, and follow the court rules and procedures. It is always advisable to retain legal counsel to avoid potential pitfalls in obtaining a divorce that will not later be contested.

Divorce
The Federal Divorce Act governs divorces in Canada. The only ground for divorce in Canada is “breakdown of the marriage” [s. 8(1) of that Act]. A “breakdown of the marriage” includes having lived separate and apart for at least a year, the commission of adultery by one of the spouses after the marriage, or one spouse having treated the other with physical or mental cruelty of such a kind as to render continued cohabitation intolerable [s.8(2) of the Act].

Documentation
The Family Law Rules governs the process for getting a divorce. To start the process, either spouse can file an application [this party is called the applicant] naming the other spouse as a respondent or both spouses can file a joint application with no respondent [s. 36(1) of those Rules]. The following documents must also be filed: a marriage certificate and, if applicable, a report on earlier divorce cases started by either spouse [s. 36(4) of those Rules].

If the respondent files no answer, or files one and later withdraws it, the applicant must file an affidavit (Form 36) that confirms that all the information in the application is correct [s. 36(5) of those Rules]. Also, three copies of a draft divorce order must be provided (Form 25A) with a stamped envelope addressed to each party [s. 36(6) of those Rules].

Getting the Divorce Certificate
When these documents have been properly filed with the court, the court clerk will prepare a certificate (Form 36A) and present the documents to a judge for review. If the judge accepts the clerk’s certificate, then he/she shall sign and mail it out to the parties. The amount of time it takes to receive the clerk’s certificate depends on how busy the court is: estimates range from two weeks to five months, depending on the jurisdiction (i.e. city in which you live).

Once a divorce “takes effect” it has legal effect throughout Canada [s. 13 of the Divorce Act]. Unless special circumstances exist and a court orders otherwise, a divorce takes effect on the thirty-first day after the day on which the order granting the divorce is rendered [s. 12(1) and (2)]. Once the divorce takes effect and provided no appeal has been filed, either party can obtain a divorce certificate [Form 36B] for a small fee (e.g. $20). Parties can obtain this document on a same-day basis in most courts and will need this certificate in order to remarry.

Lawyer’s Duties
Every lawyer acting on behalf of a spouse in a divorce proceeding must follow the provisions of the Divorce Act that have as their object the reconciliation of spouses.  Lawyers must discuss with the spouses the possibility of reconciliation before the application is signed (including the availability of marriage counseling or guidance facilities that might be able to assist the spouses in achieving reconciliation).

The lawyer does not have to comply with this section where the circumstances of the case are of “such a nature” that it would clearly not be appropriate to do so [s. 9(1) of that Act]. The lawyer must also discuss with the spouse the advisability of negotiating matters that may be the subject of a support or custody order and to inform him or her of the mediation facilities known to the lawyer that might be able to assist the spouses in negotiating these matters [s. 9(2) of that Act].

Fees
According to our latest report on legal fees in Toronto (wherein we telephone interviewed 500 lawyers over a 3-month period about their legal fees), the typical legal cost (excluding government fees) for an uncontested divorce is about $1,000.  Government fees are about $400-$500 (in Toronto at the present time, for example, it costs $167 for the initial application, $280 for a judge to review the application, and $19 for the divorce certificate).

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