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Who gets the cottage when couples divorce?

When the leading ladies of Netflix’s hit sitcom Grace & Frankie (portrayed by Jane Fonda and Lily Tomlin) found out their husbands had been romantically involved for the past 20 years, they decided to pack their bags and move into the gorgeous family beach house. But a pesky legal issue arose when the husbands claimed the holiday house belonged to them.

Many Canadians may also face a similar issue when they make the tough decision to separate from their partners. As the place where families often spend significant amounts of time together, the cottage becomes a prized possession that raises some difficult questions regarding who gets future access to this beloved space.

Naturally, this can be an emotional topic, as the cottage is often where many happy memories are made and special moments celebrated with family and friends. It’s also a peculiar asset when it comes to divorce, because under Ontario’s Family Law Act, the cottage may be considered a second matrimonial home. Here are some facts you should know about the post-divorce ownership and use of your holiday home.

Is my cottage a matrimonial home?

Under the Ontario Family Law Act, a married family may have several “matrimonial homes”. This is defined as any property that is habitually occupied by the family. In this case, if the family routinely spent time at a cottage located in Ontario (even if it is a seasonal cottage), it may be considered a matrimonial home.

For married couples, the value of the assets (minus the debts) that were accumulated during the marriage are divided equally. There are exceptions, including if an asset was received during the marriage as a gift from a third party or as an inheritance. A further exception is if the said gift or inheritance is a matrimonial home. This means that even if a cottage was gifted to a spouse, its value may have to be divided upon a divorce if the cottage is considered a matrimonial home.

In addition to having the right to share in the value of a matrimonial home upon a divorce, both married spouses have an equal right of possession of matrimonial homes. Neither can be kicked out, even if their name is not on title, nor can the property be sold without the others’ consent.

It is important to note that these legal rights don’t apply to common-law couples – even if they have children together. Common-law couples are encouraged to work together to respectfully transition through the breakup and minimize the negative impact on the family.

How do I protect my cottage?

A prenuptial agreement would be the first recommendation every lawyer makes to their clients to protect the family cottage. The agreement should specifically reference the family cottage and other property you wish to protect. This would allow the titled-owner of a cottage to exclude the value of the cottage from being shared if there was a divorce. However, all rights regarding possession and protection from the property being sold will continue to be available to the other spouse because of special protections in the Family Law Act.

However, if you’re already married without a prenuptial agreement, you may be able to protect the family cottage through a matrimonial home designation. You and your spouse can designate the city home you ordinarily reside in as your only matrimonial home. Any other property that is not registered by both spouses may cease to be a matrimonial home. Both spouses need to consent to this. Otherwise, a designation made by only one spouse has no effect.

When the divorcing spouses equally divide the assets that were accumulated during the marriage, the person who wants to hold onto the cottage will often need to relinquish more of other types of assets, such as an RRSP, bank account, a pension or other assets.

If the family can get along after a divorce, they may be able to enter into an agreement to “co-own” the cottage or rights to use the cottage may be given to the non-owner spouse. A family law lawyer can help draft an agreement outlining the use of the property for your children’s vacations, with either one or both of you.

What if it’s located outside the province, or even in another country?

Some families own property in other provinces and even other countries. In Ontario, the laws of a couples’ “last common habitual residence” govern matrimonial affairs. If a married couple separates while residing in Ontario, then Ontario matrimonial laws apply to their divorce, regardless of the location of the property. It follows that cottages or secondary residences located in other provinces or countries will be subject to this equal division.

However, property located outside of Ontario cannot be considered a matrimonial home and does not have the protections described above. This means the property must be divided equally under Ontario Law. Gifts and/or inheritances that are used towards these homes in other provinces can be considered excluded assets and property and will be excluded from an equalization payment.