The Family Home After Separation in BC: Stay, Sell or Buy Out?

For many separating couples in BC, the family home is the largest asset and the hardest decision. Someone has to decide who lives there now, who pays the mortgage, and whether the home is kept or sold.

The Family Law Act sets the starting point for dividing it, but your options also depend on the mortgage, the market and what you can agree. Here is how the rules work and what each option involves.

How the Family Law Act treats the home

Unless an agreement or court order provides otherwise, section 81 of the Family Law Act gives each spouse, on separation, a right to an undivided half interest in all family property as a tenant in common. That applies whether title is in both names or only one.

Family property generally includes property owned by at least one spouse on the date you separate (section 84). The main exceptions:

• Excluded property. Under section 85, property a spouse owned before the relationship began, inheritances and gifts from third parties are generally excluded. If you owned the home before the relationship, it may be excluded, but any increase in its value since the relationship began is family property. The spouse claiming an exclusion has to prove it.
• Unequal division. A court can divide property unequally if equal division would be significantly unfair (section 95).
• Unmarried couples. These rules apply only if you were spouses under the Act. See our guide to property division when a common-law relationship ends.

Under section 87, family property is valued at fair market value as of the date of your agreement or the court hearing, not the date you separated. If prices move while you negotiate, you both share the change.

In the meantime: living arrangements and protecting the home

Separation does not change who is on title. Most couples need an interim arrangement that covers who lives in the home, who pays the mortgage, property taxes and insurance, and whether those payments will be credited later. Put it in writing. Our first-steps checklist for separating in BC covers the other early decisions.

If you cannot share the home, the Supreme Court can make an order under section 90 giving one spouse exclusive occupation of the family residence for a specified period. The order does not give that spouse an ownership interest.

Two registrations on title can protect your interest while things are resolved:

• Land (Spouse Protection) Act entry. If the home is registered in your spouse’s name and you lived there together, now or within the past year, you can apply to the Land Title Office for an entry on title. After that, a disposition of the home by your spouse without your written consent is generally void.
• Certificate of pending litigation. Once a Family Law Act proceeding for division of property has started, a party can register a certificate of pending litigation against land whose title could change as a result (Land Title Act, section 215).

Option 1: one spouse stays, for now

Some couples keep the home in both names for a period, often so children can finish a school year, and sell or buy out later. If you do this, your agreement should say who lives there, who pays what, how those payments and any change in value will be shared, and the date or event that triggers the sale or buy-out. Without clear terms, the delay can create a new dispute.

Option 2: one spouse buys out the other

A buy-out lets one spouse keep the home by paying the other for their share, usually based on an appraisal.

Example: the home is appraised at $1,300,000 and the mortgage balance is $500,000, leaving $800,000 of equity. If the home is family property divided equally, each share of the equity is $400,000. The spouse keeping the home would pay $400,000, adjusted for the other property and debts being divided.

• Refinancing. A lender has to approve any new or increased mortgage, and the spouse keeping the home will usually need to qualify alone. The departing spouse should be released from the mortgage, not just removed from title, or they may remain liable for it.
• Property transfer tax. A transfer to a spouse or former spouse under a written separation agreement or a court order under the Family Law Act can be exempt from property transfer tax. A copy of the agreement or order goes with the tax return.
• Income tax. If the home was your principal residence for every year you owned it, any gain is generally exempt. A rental suite, a second property or years when you lived elsewhere call for tax advice before you sign.

Option 3: sell and divide the proceeds

If neither of you can or wants to keep the home, a sale may be the cleanest result. Agree in writing on the listing agent, the price, how offers will be accepted, and where the net proceeds will be held, often in a lawyer’s trust account, until the division is settled.

If you cannot agree, the Supreme Court can order the property sold or partitioned and payments made out of the proceeds (section 97).

Deadlines and documents to update

• Two-year limit. Under section 198, married spouses must start a court claim to divide property within two years after a divorce order or an order declaring the marriage a nullity, and unmarried spouses within two years after separating. The time stops running while you are in family dispute resolution with a family dispute resolution professional.
• Your agreement. A written separation agreement usually settles who keeps the home and when. It should also deal with the mortgage, the transfer and who pays the costs.
• Your will. Under section 56 of the Wills, Estates and Succession Act, once you cease to be spouses, which generally happens on separation, a gift to your former spouse in your will and their appointment as executor or trustee are revoked unless the will shows a contrary intention. Beneficiary designations on insurance, RRSPs, TFSAs and pensions are separate, so review them and make a new will.

Deciding what happens to the house? Get advice before you sign or list

Our family lawyers can explain how the Family Law Act applies to your home, negotiate and draft the property terms of a separation agreement, and apply for interim or final orders. Our real estate team can then handle the transfer, refinancing or sale.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.