Assets of Couples (3:IX)
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 12, 2021.|
The FRA only applies to proceedings started prior to March 18, 2013 and to agreements made before the FLA came into force. Please view an older version of this manual if the FRA applies to your matter.
The division of property on marriage breakdown is dealt with in Part 5 of the FLA. When the FLA replaced the FRA, it significantly changed the property law regime in British Columbia and reduced judicial discretion. It is a simpler model designed to help parties achieve resolutions out of Court. It operates on the presumption that spouses are equally entitled to family property and equally responsible for family debt (s 81). It also provides that unmarried spouses (who have lived together in a marriage-like relationship for at least two years) may avail themselves of the property and liability provisions of the FLA in Parts 5 and 6.
1. Divorce Act [DA]
The DA does not deal with property division.
2. Family Law Act [FLA]
Section 81 of the FLA outlines that each spouse is entitled to an undivided, one-half interest of family property and is equally responsible for debt upon separation (Stonehouse v Stonehouse, 2014 BCSC 1057; Joffres v Joffres, 2014 BCSC 1778). However, the FLA substantially changes what is considered to be family property, essentially allowing spouses to keep property they bring into a relationship and share only in the increase in value of that property and the net value of new property obtained after cohabitation or marriage.
The FLA carves out a category of excluded property under section 85. Section 85 (1) of the FLA reads as follows: The following is excluded from family property:
- (a) Property acquired by a spouse before the relationship between the spouses began;
- (b) Inheritances to a spouse;
- (b.1) Gifts to a spouse from a third party;
- (c) A settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for
- (i) Loss to both spouses, or
- (ii) Lost income of a spouse;
- (d) Money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for
- (i) Loss to both spouses, or
- (ii) Lost income of a spouse;
- (e) Property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;
- (f) A spouse's beneficial interest in property held in a discretionary trust
- (i) To which the spouse did not contribute, and
- (ii) That is settled by a person other than the spouse;
- (g) Property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).
Any increases in the value of the excluded property that occur during the relationship are considered family property and are not excluded from division. The spouse claiming that the property in question qualifies as excluded property is responsible for demonstrating that it fits the definition under s 85(1) (Bressette v Henderson, 2013 BCSC 1661).
This property division regime applies to all married spouses as well as all unmarried common-law spouses who have lived in a marriage-like relationship for at least two years. The date of separation will be the relevant date used to identify the pool of family property to be divided. However, it is the date of the hearing or agreement which determines the date of valuation of property. Spouses may choose to opt out of these property division rules but must make these different arrangements through an agreement.
Family property, is defined at s 84(1):
- (a) On the date the spouses separate,
- (i) Property that is owned by at least one spouse, or
- (ii) A beneficial interest of at least one spouse in property;
- (b) After separation,
- (i) Property acquired by at least one spouse if the property is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either, or
- (ii) A beneficial interest acquired by at least one spouse in property if the beneficial interest is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either.
3. Supreme Court Family Rules [SCFR]
The Supreme Court Family Rules contain a number of procedural provisions for dealing with property. For example, Rule 12-1 allows for the detention, preservation, and recovery of property that is the subject matter of a family law case. Rule 12-4 allows for a pre-trial injunction. Rule 15-8 permits the Court to order a sale of property if it appears necessary and expedient that the property be sold. Where a dispute arises, an application can be made to the Supreme Court to settle the matter, but clients should be advised that a court action is costly and a negotiated settlement is generally to their advantage because courts have a wide discretion to distribute family property. For example, a court could order the sale of property at a time when the housing market is poor, resulting in a low sale price. Sometimes, a spouse should consider selling their interest in a property to the other spouse.
C. Types of Assets
1. Family Property
Under section 84 of the FLA, family property includes all real and personal property owned by one or both spouses at the date of separation unless the asset in question is excluded, in which case only the increase in the value of the asset during the relationship is divisible. It is no longer relevant whether an asset was ordinarily used for a family purpose in deciding if it is family property.
Pursuant to section 85 of the FLA, certain property is excluded from family property, including the following:
- Property acquired by a spouse before the relationship between the spouses began;
- Gifts (from a third party) or inheritances to one spouse, unless the gift or inheritance was transferred into the parties’ joint names or the other spouse’s sole name, in which case there is an argument that it was gifted to the other spouse and becomes family property;
- Most damage awards and insurance proceeds, except those intended to compensate both spouses and loss of income of one spouse;
- Some kinds of trust property;
- Under s 85(e), property that is described in s 85(a) to (d) and is held in trust for the benefit of a spouse
- A spouse’s beneficial interest in property held in a discretionary trust to which the spouse did not contribute, and that is settled by a person other than the spouse are also excluded from family property under s 85(f)
Family property is presumptively divided equally unless it would be significantly unfair to do so (ss. 81 and 95 of the FLA).
Family debt, which is new in the FLA, is divided equally, unless equal division would be significantly unfair to one spouse. The value of all property is calculated at either an agreed date, or at the date of a court hearing respecting the division of family property and family debt. Any increases in the value of the excluded property that occur during the relationship are considered family property and are not excluded from division.
Under the FLA, all money held by one spouse in a financial institution is considered family property and equally divisible, unless that spouse can prove that it is excluded property.
3. Pensions and RRSPs
Rights under an annuity, pension, home ownership, or registered retirement savings plan are considered family property, including each party’s Canadian Pension Plan (CPP) credits.
The division of pensions is clarified in the FLA. Unless the pension is proven to be excluded property, it will be divisible. The presumption is equal division unless it would be significantly unfair based on the considerations in s 95 of the FLA. If a spouse is to receive benefits at a later date, they may become a limited member of the plan. If they cease to be a limited member then their share is transferred. A spouse can generally either choose to have a lump-sum payment of their share, to have a separate pension payment issued to them (s 115), or a hybrid of both (s 116). This decision may be made at any time (either before or after the pension commences) but the division will only occur after the pension has commenced (s 115).
If an agreement or order regarding the benefits of a pension provides that the benefits are not divisible or is silent on entitlement to benefits, a member and a spouse may agree to have benefits divided before the earliest of the following:
- Benefits are divided under the original agreement or order,
- The member or spouse dies, or
- Benefits are terminated under the plan.
If an agreement or order provides that the member must pay the spouse a proportionate share of benefits under a plan where the member’s pension commences and the member’s pension has not commenced, the member and spouse may agree, by the spouse giving notice to Division 2 of Part 6 of the FLA, to divide the benefits in accordance with the Part, and unless the member and spouse agree otherwise, the original agreement or order must be administered in accordance with the regulations.
NOTE: BC is one of the few provinces that allow spouses to enter into a written agreement to waive the equalization of their pensionable credits under the CPP.
4. Real Property
It is often necessary to take early steps to secure the title to real property when there is a separation. In fact, it is recommended for clients to file as soon as possible to avoid missing any limitation dates and preserve their claim. This is particularly so where property is registered in the name of only one spouse, and there is a risk of that party disposing of or encumbering the property, or where judgments are likely to be registered against one party’s interest, which might prejudice the other party. Under section 91 of the FLA and Rules 12-1 and 12-4 of the Supreme Court Family Rules, one may request an automatic restraining order to prevent the sale or disposal of family property including real property. There are several ways of protecting a spouse’s interest:
a) Certificates of Pending Litigation and Caveats
Caveats and Certificates of Pending Litigation are warnings to potential purchasers and establish claim priority over the property from the day the Caveat or Certificate of Pending Litigation is filed. This document will defeat the presumption of claim priority given to the bona fide purchaser for value. Entitlement to a certificate of pending litigation is limited. See the Land Title Act, RSBC 1996, c250 and Annotated Land Title Act by Gregory and Gregory for the procedure and forms. Note that Caveats have an expiry date and are therefore a temporary measure to protect a party’s interest.
b) Land (Spouse Protection) Act, RSBC 1996, c 246
This Act applies where a party has elected not to commence legal proceedings but needs to protect their interest in real property. It provides an alternative to a Certificate of Pending Litigation for a married spouse (not common law) where the “property” was the “matrimonial home”. The Act allows a charge to be placed on land that will prevent disposition of the property without the written consent of the applicant for the charge (refer to the Land (Spouse Protection) Act and the Land Title Act for the registration procedure). Note that this only applies while the parties are legally married. The charge may be struck out on the death of, or final divorce from, the applicant.
Registration of a charge by one spouse under the Land (Spouse Protection) Act prevents the other spouse from selling or encumbering their share but is not protection against a creditor who could obtain an order for sale of the house. So long as one is legally married to their spouse, one may file against the property without the other spouse’s notice or consent, in order to prevent the transfer of the property.
c) Registration of a Notice Under the Land Title Act
A spouse who is a party to a cohabitation agreement, a marriage agreement, or a separation agreement may file a notice in the Land Title Office regarding any lands to which the agreement relates (FLA s 99). This applies to married spouses and common-law spouses who have lived in a marriage-like relationship for at least two years.
The information required in the notice includes the names and addresses of the spouses, the legal description of the land, and the provisions of the agreement relating to that land. The Registrar may then register this notice in the same manner as a charge on the land.
Once the notice is registered, there can be no subsequent registration of a lease, mortgage, transfer, etc., unless both spouses or former spouses sign a cancellation or postponement notice in the prescribed form. A spouse or former spouse may apply to the Supreme Court for an order to cancel or postpone a notice where the other party to the agreement cannot be found after reasonable search, unreasonably refuses to sign a cancellation or postponement, or is mentally incompetent.
The use of this notice also extends to mobile homes.
d) Supreme Court Family Rules Rule 12-1 and 12-2 and section 91 of the Family Law Act
Section 91 of the FLA and SCFR R 12-1 and 12-2 allow for temporary orders respecting the protection of property. On application by a party, the Supreme Court can:
- Make an order restraining the other party from disposing of any property at issue under Part 5 (property) or Part 6 (pension division);
- Make an order for the detention, custody, or preservation of any property that is the subject matter of a family law case or as to which a question may arise
- Make an order to allow the whole or party of the income of the property to be paid to a party who has an interest in it
- In the case of personal property, make an order that part of the personal property be delivered to or transferred to a party; and
- Make an order for a pre-trial injunction.
5. Business Assets
Business property is family property unless it is excluded property under the FLA.
D. Use of Assets
The Court can award one spouse exclusive use of assets pending further agreement between the parties or a Court order. This can include large assets such as a home and car; or smaller assets as may be required to operate a business, or for the departing spouse’s television, computer, or books, for example.
E. Unmarried Couples
Under the FLA, unmarried couples who have lived in a marriage-like relationship for at least two years are treated the same way as married couples. Unless an action was started under the FRA, the FLA now applies (as long as the time limit has not expired) and may apply even if proceedings have already been commenced.
The courts will recognize an equitable interest of a common-law spouse in all the property and assets acquired by the couple through the joint efforts of the two spouses, although registered in the name of the other spouse (i.e. a constructive trust). The scope of constructive trusts was greatly expanded in Peter v Beblow (1993), 3 WWR 337, 77 BCLR (2d) 1, in which the Court found a constructive trust arising from the contributions made by homemaking and childcare services, which allowed for the retention of money that would otherwise be paid for such services to be used as mortgage payments. Claims in trust may be constructive (as follows), resulting (implied trusts), or express. Constructive trusts are the most common type of trust claim, where the Court imposes a trust to remedy the unjust enrichment of one party at the deprivation of the other. However, there are limits, and a court will not interfere where the elements of constructive trust are not present. A causal connection must be found to exist between the contribution made and the property in question. Refer to a general text for a more comprehensive description of the elements of constructive trust. Because common law constructive trusts are relief granted by a court, spouses can make use of both the FLA requirements for equal division and common law constructive trust principles when seeking relief for unfair division of property.
F. Interim Relief
The Court may make a number of orders for interim relief under Part 5, Division 3 of the FLA. This means that prior to a trial on all the issues in the proceeding, the Court may:
- Order an interim distribution of family property that is at issue to provide money to fund (s 89):
- Family dispute resolution,
- All or part of a proceeding under the FLA, or
- Obtaining information or evidence in support of family dispute resolution or an application to a court.
- Order temporary exclusive occupation and possession of the family residence by just one spouse (s 90).
- Order restraining a spouse from disposing of any property at issue under Part 5 (property division) or Part 6 (pension division) until or unless the other spouse establishes that a claim made under Part 5 or Part 6 will not be defeated or adversely affected by the disposal of property (s 91(1)).
- Order the possession, delivery, safekeeping, and preservation of property (s 91(2)(a)).
- Prohibit one spouse from disposing of, transferring, converting, or exchanging into another form, property in which the application may have an interest, or vesting all or a portion of property in, or in trust for, the application (s 91(2)(b)).
G. Limitation Period
See Section XV Part B: Limitation Dates for the limitation periods for beginning property division proceedings for married spouses and common-law spouses.
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