Selling the Family Home During Separation: Listing, Offers and Holding Proceeds

Many separating couples agree on one thing early: the house has to be sold. Agreeing to sell is the easy part. Choosing a realtor, setting a price, deciding on offers and dealing with the money at completion all require two people who may not be talking to each other to act together.

This article walks through that process in BC: what to put in writing before you list, who signs at each stage, how to handle offers when you disagree, and how the net proceeds are usually held in trust until the division of family property is settled.

Put the sale terms in writing before you list

Spouses in BC can make their own agreements about dividing property and debt (Family Law Act, s 92). A short written sale agreement, signed by both of you with each signature witnessed, sets the ground rules, and the court can set aside an agreement of that kind only on limited grounds (s 93). It should cover:

• The listing: which brokerage, the list price, and how price reductions will be decided;
• The home in the meantime: who lives there, who keeps it ready for showings, and who pays the mortgage, taxes, strata fees and insurance until completion;
• Offers: how offers will be accepted or countered (more on this below);
• Completion: which lawyer or notary acts on the sale, what gets paid out of the proceeds, and how the rest is held;
• Credits: whether either of you keeps a claim for post-separation payments, so that the sale does not quietly settle it.

If your spouse will not agree to sell at all, the steps are different; see when your ex will not sell the house. For the broader choice between selling, keeping and buying out, see our guide to the family home after separation.

Who has to sign

A buyer gets title only through a transfer signed by the registered owners. If you are both on title, plan on both of you signing the listing agreement, every offer or counter-offer you accept, any subject removal, and the closing documents. A buyer of the whole property needs both signatures.

If the home is in one spouse's name, that spouse can sign, but it is rarely that simple. On separation each spouse has a right to an undivided half interest in family property (s 81). If the home is a homestead in the titleholder's name, the other spouse may also have filed an entry under the Land (Spouse Protection) Act. Once that entry is on title, a sale by the titleholder without the other spouse's written consent is void (s 3), and the consent is filed with the transfer (s 7). The court can also restrain a spouse from disposing of property at issue (Family Law Act, s 91). In practice, a sale of the family home goes most smoothly when both spouses sign.

Handling offers when you do not agree

Offers often arrive with short deadlines. Disagreement at that point can cost you a buyer. A few arrangements help:

• A decision rule. Agree in advance, for example, that you will accept an offer with no conditions at or above a set price, or follow the listing agent's recommendation within an agreed range.
• One channel. Ask the agent to send every offer and every communication to both of you at the same time.
• Signing logistics. Confirm that both of you can sign electronically and quickly, including while travelling.
• Completion and possession dates. Agree when the spouse living in the home will move out, so you can offer a buyer a firm possession date.

If you reach a standstill, the court has power to give effect to a property division, including ordering the sale of property and payment out of the proceeds to one or both spouses in specified shares (s 97(2)(d)). That is slower and more costly than a decision rule agreed at the start.

Holding the proceeds in trust

On completion, the buyer's money goes to the lawyer or notary acting for the sellers. From it they pay the mortgage and any line of credit secured on the home, the real estate commission and the usual adjustments. What is left is the net proceeds.

Separating spouses commonly direct that the net proceeds be held in the lawyer's trust account until there is a written agreement on the division of family property, or a court order. Some agree to release an equal advance to each spouse at completion and hold the balance for disputed items such as credits or debts. Whatever you choose, the written direction should say who may authorise payment out; usually that means both of you, or a court order.

Holding the money keeps both claims intact. Family property and family debt are valued at the date of the agreement or hearing (s 87), and once the home is sold, what is being divided is the net proceeds. If one of you needs funds for mediation, legal fees or an appraisal before the division is settled, the Supreme Court can order an interim distribution of family property for those purposes (s 89).

Details to settle before the sign goes up

• Tax. Ask your accountant whether the principal residence exemption covers the whole period of ownership, particularly if one of you has moved out or owns another property.
• Debts on title. Get payout statements for every charge against the home, including any mortgage prepayment penalty, so the net figure is realistic.
• Contents. Agree what stays with the house, what goes to each of you, and what is sold or given away.
• Communication. Agree on how you and the agent will communicate, especially if there are safety concerns or a protection order.

Selling the family home? Set the terms and the trust arrangement first

Our family lawyers can draft the sale agreement between you and the written direction for holding the proceeds in trust, and coordinate the sale with the lawyer or notary acting on the conveyance.

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