Costs Associated with Dividing Matrimonial Homes
Home is where people live. The home is bought for family to live together and grow. Sometimes things don’t go as planned and couples need to separate. This is a very tough moment and a big move of separation should be handled with proper care. Most divorcing spouses are focused on property split, support and child custody. It is important to park one’s emotions on the side when making these important decisions, including how to divide their equity.
Often couples end up selling their matrimonial home and dividing their equity and then end up buying two separate homes or condos. When you look at this situation from the numbers perspective things might not look very profitable. In Ontario, when a marriage ends, the equal contribution of each person to the marriage is recognized.
Here is what experts say about the options available to each partner in case of an impending divorce. Of course answers are unique as per each family situation, there are some standard rules about dividing assets and dealing with the family home when a marriage ends.
But first one needs to understand the process leading to divorce
Divorce is the moment when the legal union between two people is officially and legally dissolved. The process starts with separation. This is defined by a specific date, which is critically important. It is used to determine the fair market value of the family home (“matrimonial home”) and the value of any other assets a married or common-law couple holds.
It is also the start date that is used for the start of at least 365 days when you can legally file for divorce. Couples who are separating can stay under the same roof as long as they establish separate lives, like separate bedrooms, and to notify your spouse in writing that you wish to end the marriage. This notification must be in must be dated, for use in courts. Setting up your own bank accounts, bill payments, separate tax return filing further establishes a specific separation date. However, if the couple revives their relationship for more than 90 days (or for separate shorter periods of time equalling 90 days), then the separation date becomes void. If they still wish to go for a divorce, they will have to restart the separation date and terms. The purpose of this is to allow the couple a chance to work on saving the marriage without the fear of delaying a possible divorce.
Keep in mind that while some some separations leading to divorce and division on assets are less contentious, but some can be more complicated and harsh. In extreme cases the divorce costs that could go up $500,000 in legal fees.
Let me explain to you some of the costs associated with selling & buying homes when separating.
Main costs when selling a property while getting a divorce or separation can include: lawyer’s fee, real estate commission, moving cost etc. Costs towards buying a property can include: land transfer tax & lawyer’s fee.
Based on selling a home valued at $1.2 million and buying two homes for $550,000 each, can be:
- Selling commissions: Approx. $65,000
- Contested Divorce Cost: Approx. $10,000- $15,000 or more. If not contested fee can be under $2,000.
- Real estate lawyer fees on buying & selling: Approx. $3,000
- Land transfer tax on two homes of $550,000 each: approx. $15,000 or more for Toronto properties
- Moving costs for two separate homes: $5,000
- Other misc. costs: $1,000
Total: $ 100,000 or 8.4% of home’s price!
How can one minimize these costs?
See if one of the partners can buy the other partner’s share individually or jointly with some 3rd person (family or friends).
Get your home evaluation done from a reputed appraiser / Realtor. The partner who is moving out can be given some extra money that they might need in order to pay for their new home closing costs & moving expenses.
End of the day, you need to be fair to each other and end the relationship on a nice note where division of matrimonial home is concerned.
As per one of the experienced family lawyers, partners who amicably divide assets and opt for an uncontested divorce can end up paying as little as $2,000 in Ontario. Divorce with low legal fees can only be possible when couples reach an agreement on property division, spousal support (or lack thereof), child custody and support etc. Divorce is granted after filing documents with the court within 12 months of separation.
Team Kalia has experience working with couples wishing to sell their matrimonial home, and/ or other real estate assets while working through a divorce. We understand the stress that both partners are going through and handle all matters professionally, fairly and sensitively.
Importance of Family Lawyers
It may be in your best interest to mutually and amicably divide real estate and other assets between yourselves and or using services of an experienced lawyer specializing in family law, without involving an expensive court process. Divorce can get very expensive when a couple can’t agree on all of those things with each other, and one or both decide to go to court to let a judge decide on what’s fair. The costs associated with a contested divorce will simply eat into your hard earned and accumulated wealth, leaving you with much less in hand.
Experienced Family Lawyers have the benefit of working with hundreds of clients in their profession. Doing it yourself, you would need to figure out how to get it right the first time. And that’s just not easy. And it can become even harder to claim one’s rights when one of the partners is up against a spouse who has a lawyer.
Disclaimer: Above blog post is not to be construed as expert legal, financial, tax, or other professional advice. Couples seeking a divorce should consult a professional family lawyer.