Husband to Manage Couple’s Valuable Real Estate After Divorce

During the marriage, one or more of the spouses may have accumulated a significant real estate portfolio that includes numerous high-value properties. By the time of divorce, the parties will need to split the value of the real estate if it is considered matrimonial property to be divided. If there are many valuable properties at issue, it can be a complex matter to divide them, including obtaining appraisals of the properties. One of the spouses may also wish to keep the properties and may need to provide an equalization payment for the other spouse’s share of the real estate value. 

This article will examine what types of real estate may be considered matrimonial property to be divided upon divorce. We will review a recent case, O’Kane v. Lillqvist-O’Kane, 2022 ABKB 661, which involved a significant real estate portfolio to be divided upon the parties’ divorce. In the end, the husband was to keep and manage the properties while providing an equalization payment for the wife’s share of the properties. Some properties were personally held, and some were corporately held. We will also provide key takeaways for parties needing to divide a valuable real estate portfolio after a divorce. 

What types of real estate are considered matrimonial property?

The court will follow 4 steps in determining what will be considered matrimonial property:

1. Determine all property owned at the date of trial;
   
2. Determine which properties are exempt from division under s. 7(2) of the Matrimonial Property Act or that can be traced to property unconnected to the marriage;
   
3. Determine what property falls under s. 7(3) (if the property is partially exempted or gifted); and
   
4. Equally divide the balance of the remaining assets unless it would be unjust and inequitable to do so considering the factors set out in s. 8.

The court can consider the following factors to determine if it would be unjust and inequitable to divide the property equally:

1. Each spouse’s contribution to the marriage and to the welfare of the family, including any contributions as a homemaker or parent;
   
2. A spouse’s contribution, whether financial or otherwise, directly or indirectly, to the acquisition, conservation, improvement, operation, or management of a business, farm, enterprise, or undertaking owned or operated by one or both spouses or by one or both spouses and any other person;
   
3. A spouse’s contribution, whether financial or otherwise, directly or indirectly by or on behalf of a spouse to the acquisition, conservation, or improvement of the property;
   
4. Each spouse’s income, earning capacity, liabilities, obligations, property, and other financial resources at the time of marriage and at the time of trial;
   
5. The length of the marriage;
   
6. If the property was acquired after separation;
   
7. Any terms of an agreement between the spouses;
   
8. If a spouse has gifted or sold the property to a third party;
   
9. Any division of property through a gift, agreement, or matrimonial property order;
   
10. Any previous court order;
    
11. Any tax liability that may be incurred by a spouse due to the transfer or sale of property;
    
12. If a spouse has dissipated (i.e. diminished the value of) property to the other spouse’s detriment;
    
13. Any other relevant fact or circumstance.

Real estate owned by the parties personally would fall under the category of matrimonial property to be divided unless it can be shown that it is exempt, as set out above. 

For corporately owned property, the court may consider “piercing the corporate veil” in a family law proceeding so that a spouse is not deprived of what should be regarded as matrimonial property because a separate entity, the corporation, technically owns it. Without piercing the corporate veil, the property owned by a corporation would not be considered owned by the spouse and, therefore, may not be part of the pool of matrimonial property to be divided. 

It is also possible for the court to find that piercing the corporate veil is unnecessary. If the companies holding the properties at issue are completely controlled by one of the spouses, then the court may find that the corporately held real estate is also matrimonial property, and there is no need to pierce the corporate veil to make such a finding. 

Husband built successful real estate business during the marriage 

The parties married in 1988 and separated in 2011. The husband was from Australia, and the wife was from Finland. The parties lived together in BC and then Alberta. The wife was a doctor who could not practice in Canada, so she cared for the children and primarily supported the husband’s business pursuits. On some occasions, the wife would travel back to Finland to practice medicine for 4-6 weeks at a time. The husband built up a successful real estate business during the marriage. 

Personally owned properties 

The parties owned several properties personally, some of which were held by their holding company. 

The first property was a series of condominium units. The court found that these were legally condominium units rather than rental units, and therefore the associated fees would be incorporated into the valuation. 

Another personally owned property was a rental property that was to be divided equally. 

The wife also owned some property in Finland, although a portion of one of the properties was exempt as it was purchased with funds inherited from the wife’s father upon his passing.  

Overall, the court reached conclusions similar to the expert valuations, and the personally owned properties were valued at a total of approximately $6.6 million. 

Corporately owned properties 

A numbered company owned several of the abovementioned condominium units, valued at approximately $2.1 million. The numbered company also held a 16-unit rental property valued at approximately $2.2 million. 

In addition, the numbered company owned interests in 2 joint ventures, which a majority owner controls. One of the expert appraisers applied a minority discount to the valuation. The court found that minority discounts are inappropriate for family corporations where the shareholders maintain good relations and would apply in situations where other shareholders could obstruct a minority shareholder. In this case, a minority discount was applicable, as the other shareholders could obstruct the sale of the interest held by the numbered company. A minority discount of 25% was applied for the interests in the joint ventures. 

A second numbered company controlled by the parties held another property called the “Canterbury”. Part of the value was held owned by the husband’s new partner’s son, and therefore his share was taken out of the value of this property at $2.25 million. 

Court finds wife gave up her medical career to assist husband’s real estate business, she is entitled to half of the value 

The court found that as the wife had given up her medical career to move to Canada and take care of the household and children so that the husband could build up his real estate business, dividing the property equally was just and equitable. 

The court determined that as the husband managed the properties throughout the marriage, he could maintain the properties and provide the wife with an equalization payment for her interest. 

Mincher Koeman Lawyers In Calgary and Canmore Can Assist With Matrimonial Property Division Involving Real Estate

Upon a divorce, the parties must divide the matrimonial property, which can include a valuable real estate portfolio. Both personally and corporately held property can be subject to division, which requires expert appraisals. Also, tracing exempted funds and property division is a complex matter that is highly specific to the circumstances of the case, so you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting parties with issues involving high-value property division. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online or by phone at 403-910-3000.