As a general principle, the justice system emphasizes the timely resolution of legal matters; in fact, such is a foundational principle of the Alberta Rules of Court. Under these Rules, litigants and their counsel are obligated to take steps and act in a manner that furthers the following tenets:
However, efficient and timely resolution can never come at the expense of a client’s interests. In normal circumstances, a client’s interests can be upheld while advancing resolution by way of ensuring that financial disclosure and other relevant information is properly exchanged and that negotiation and any ensuing settlement reflects fairness and equity.
In the case of matrimonial property matters, fairness and equity are, most commonly, reflected in a division of the parties’ property that is equal and fully informed. However, the COVID-19 pandemic and the resulting economic fallout have created a situation in which both timely resolution and equal division may not represent true fairness for parties when dividing their matrimonial property.
With record numbers of job losses and the shutdown of businesses across a number of different industries, the COVID-19 pandemic has created stalls and uncertainty in the real estate market. Sellers are hesitant or unwilling to list their home and leave it open for public viewings, and buyers are equally hesitant or uninterested in viewing homes. In addition, lenders are now becoming reluctant to approve mortgages in the face of the rampant job losses amongst the population and many individuals will not qualify for mortgages in the face of their new unemployment, whether it is intended to be temporary or not. As a result, with a stalled real estate market, it is expected that, at least in the interim, the average value of a house will likewise be negatively impacted.
For parties who are attempting to resolve the division of matrimonial property in a way that includes one party keeping the matrimonial home, the recent negative impact on the real estate market will benefit that party keeping the house by reducing the overall value of the house and therefore reduce the amount of equity in the house that needs to be divided between the parties. Simply put, in this new Pandemic Market, it becomes much cheaper for one party to buy the other party out of their interest in the matrimonial home.
Similar to the matrimonial home, the equities market has also seen incredible drops in value over the last two months, with all the major stock exchanges registering record lows. For couples who have substantial assets in stocks, stock options, or other securities and equities, the massive losses in value have created a situation where it has become extremely favourable for one party to pay out the other party for their share of the matrimonial securities.
Where the securities are publicly available and can be transferred between the parties without any financial consequences, dividing these assets is not so concerning – each party can keep their own share of the actual securities and hold them until the markets recover. This puts both parties in the same state.
However, for those parties where one spouse holds substantial employment stock options, this can create a more difficult situation. In most cases, employer stock options cannot be transferred to non-employees (some companies allow transfers to spouses in the case of divorce, but this is not the standard). As a result, “division” of these stock options typically involves the holder paying out their spouse for the value of half of the securities. In the current economic environment, it is hugely beneficial for the holder of the stock options to seek settlement and division immediately and take advantage of the significant decrease in the value of the securities. As stated above, simply put, it is much cheaper for the spouse holding the stock options to pay out the other spouse for their share of those options.
The difficulty is that the current economic state is not expected to be permanent – it is the result of the pandemic. As such, the current price of houses and securities do not reflect what their value might be even six months from now, and they certainly do not reflect the value of those assets just one month ago. At Mincher Koeman, we recognize this and the fact that in this current state of economic affairs, adherence to timely resolution might not reflect our clients’ best interests if settlement will require them to accept a payment that is substantially less than they otherwise would have, were it not for COVID-19. The reality is that the current economic market benefits the holder of the physical assets as it places them in a position where they can attempt to buy their spouses share of the asset at a much lower price, with the potential that the market might correct itself in less than a year, providing the asset holder with a substantial economic benefit.
The lawyers at Mincher Koeman have been following the various economic markets and industries closely, and we have been considering our clients’ interests in light of these markets in order to ensure that they remain protected, regardless of what might happen. If you are in the midst of a divorce and seeking to divide your property, the lawyers at Mincher Koeman will be able to provide you with timely advice that is relevant to the current circumstances.
The family law lawyers at Mincher Koeman are exceptionally experienced with respect to support awards and the distribution of property following the breakdown of a relationship. We will work with you to ensure that you receive a support award that accurately reflects the true financial positions of the parties. Contact our office today by calling us at 403-910-3000 or contact us online.
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Calgary, AB T2P 3H6
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