Separation and divorce
Co-ownership of the family home: What happens after a breakup?
If you and your ex co-own your residence, several options are available to you if you break up. Whether you’re married or de facto partners and co-owners of a house, a condo, a plex, or a cottage, here are the most common scenarios.
Buy out the other co-owner’s share
What’s involved?
One of you pays financial compensation to buy the other’s share. This means that whoever sells his or her share is no longer an owner and can no longer make decisions about the property.
This option might be attractive if one of you wants to keep the residence and can afford to buy the other’s share.
How is it done?
You and your ex must first agree on the price before making the purchase.
To do so, you need to determine the property’s market value, that is, how much you could sell it for on the market.
The law does not provide any specific method to determine a property’s market value. What’s important is that you agree on the amount you’ll use to calculate the value of your shares. To help you estimate the market value, you can:
- have your property evaluated by a certified appraiser
- ask for a real estate broker’s opinion
- look up the value on the municipal assessment roll
- use the value determined by your financial institution the last time you renewed your mortgage
- use the value determined by the financial institution that will finance the purchase of the other’s co-owner’s share
Then deduct the debts attached to the property, such as the mortgage, to find out the net value.
Once you have agreed on the property’s net value, you can assess the value of your respective shares.
Consult your co-ownership agreement to find out what percentage represents the the seller’s share and multiply it by the property’s net value.
Property’s net value: $250,000
Percentage of seller’s share: 60%
Value of seller’s share: $250,000 x 60 ÷ 100 = $150,000
In addition to the price, you must also agree on other terms for buying out the other’s share, such as:
- the transaction date
- the splitting of the transaction costs
- each person’s responsibility for everyday expenses until the transaction is complete
The buy-out price can be paid in money or by transferring property of equivalent value. If you choose the second option, don’t forget to take the tax implications into account to avoid any unpleasant surprises.
If you’re married, be sure to comply with the rules of partition applicable in a divorce.
If a mortgage is still attached to your property, it must be modified. You have two options:
- Terminate your mortgage contract and get a new one. In this case, the co-owner who buys the other’s share of the home becomes solely responsible for the loan. This option can result in mortgage penalties, and there is no guarantee that the person applying for a new loan will get the same rates or terms.
- Transfer the mortgage by reaching an agreement whereby the purchaser will pay the loan. This allows the purchaser of the property to keep the same mortgage. The person selling his or her share is still ultimately responsible for the mortgage loan, however, even though he or she is no longer the owner.
Before making your decision, talk to your notary, your financial institution or mortgage broker for more information.
Did you know?
Someone buying out his or her ex’s share of the home does not have to pay the transfer duties (“welcome tax”) on the transaction if it is conducted within 12 months after the separation.
Selling the property
What’s involved?
You and your ex sell the property and share the proceeds of the sale.
This option might be attractive if you do not want to keep the residence or if you can’t afford to do so.
How is it done?
You and your ex must agree on all the terms of sale, for example:
- the conditions of sale (e.g., asking price, date of taking possession, etc.)
- the splitting of the transaction costs (e.g., real estate broker, mortgage discharge, updated certificate of location, etc.),
- the sharing of the proceeds of sale
- each person’s responsibility for the everyday expenses related to the property until the transaction is completed
Once you’ve agreed on everything, you can put your home up for sale. The next steps will depend on whether or not you choose to use a real estate broker.
Can’t reach an agreement?
If you can’t reach an agreement, you can see a mediator to help you find a solution that works for both of you.
If you still can’t agree, you can file an “Application for partition of an immovable property held in undivided co-ownership” before a judge, who may then order that the property be put up for sale and determine the terms of sale (e.g., date of sale, listed sale price, choice of real estate broker) and how its proceeds will be shared. The judge may also allow one of you to buy the other’s share and determine the applicable conditions.
Generally, the “Application for partition of an immovable property held in undivided co-ownership” can be integrated into the main written application relating to your separation (e.g., application for divorce, originating application for custody and support, etc.).
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ANG - L’information présente sur cette page ne constitue pas un avis ou un conseil juridique. Nous vous indiquons ce que dit la loi au Québec de manière générale. Pour obtenir un avis ou un conseil juridique concernant votre situation personnelle, consultez un professionnel du droit.
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