Mortgage 101 – The Real Cost of Ending a Marriage

Dan Ahlstrand and Clinton Wilkins welcome on Derek Sonnichsen from MDW Law to discuss on protecting yourself during divorces, especially regarding property division.

Dan Ahlstrand
Welcome back to Mortgage 101. I’m Dan Ahlstrand with Clinton Wilkins, and it is the month of love and and we’re focusing on what happens when the love runs out, at least for the nest a little bit here on the program Clinton and we have our friend Derek in here, who’s is a lawyer, and he’s been telling us a little bit about common law and and and ways that we can protect ourselves if we’re in a common law relationship. Derek, I guess that’s the question to start with, is, what is the first step? What is the first step in protecting yourself when you’re going to enter into the biggest debt of your life, which is your house with a common-law partner?

<strong>Protecting Yourself in a Common Law Relationship</strong>

Derek Sonnichsen
Well, certainly, if you’re not contributing to it equally, you’ll want to put that in writing, because otherwise the presumptions are going to be mostly in favour of 50/50. So if that’s not what you guys are, And by you guys I’m referring to the couple that are buying this house, if they’re not planning on dividing at 50/50 whoever is going to be lose out of that should put that in writing as soon as possible, because you may have agreement when you’re buying the house five years later, someone may conveniently forget that agreement, and you’re never going to be able to prove it, and you’ll be out of that, that down payment, if that’s how you’re dividing.

Clinton Wilkins
It’s so much, so many times. My parents gave this gift, so that’s come off the top, and then we’re splitting the rest. I’m like, Well, do we have this down on payment? I’m like, I’m not the one making the decision. I’m just asking the questions when we go and start doing these transactions. But it does come up.

Derek Sonnichsen
Oh, for sure, grandparent or other generational loans come up all the time, too. It was a loan, after the fact. But yeah, for the most part, unless you have that in writing very clearly, courts are interpreted as a gift to the couple, not something one particular couple is going to get back.

Clinton Wilkins
And I could almost see this happening more now, especially if you bought a house in 2020, or before, because, as we know, these property values have really, really gone up over the last four or five years. So, the people that are having these matrimonial breakdowns, whether they’re married or whether they were common law, or whether they were whatever, and they break down, and then this real estate needs to be divided one way or the other, where the value has just gone up so much, I can see this really becoming a more contentious issue, where people might actually want to go to court over potentially hundreds of thousands.

Derek Sonnichsen
And especially when this starts to pale compared to the legal fees, it’s worth fighting over. If 20,000 legal fees will get you another 60,000, if people are willing to roll the dice over, so that’s where you see these go into court.

Clinton Wilkins
Now, I’m sure the bulk of the files that you’re working on are people who are married, and the marriages are dissolving, and I think kind of that’s the elephant in the room here. They talked about common law, but most of the breakdowns are probably that you’re seeing are probably marriages for people that are wanting to potentially start to get separated. Recommendations do you have for them to start getting ready before they even come and engage with a lawyer?

<strong>Handling Property Division in Marital Breakdown</strong>

Derek Sonnichsen
Well, as unfinished as it is, my first question is, if there are any kind of safety concerns, because a lot of times, a breakdown is the most vulnerable time in a relationship. So if you’re concerned about that at all, there’s things we can do to help people come with plans, safe places to go, how to prepare your assets and your possessions, and just basic self protection things, other things with kids are a bit messier, but as far as your property goes, documents, you don’t realize how vulnerable you are if you leave all of your documents back home, especially a lot of older couples don’t know how to get on their CRA account. They struggle to get their banking information, especially if one person in the couple is always the one who was doing it, which you often see.

Clinton Wilkins
Even my mom and dad. My mother paid every bill for probably 40 years. My dad, I don’t even think, would have probably logged on to online banking before my mom passed away. So I know this even personally, like there’s usually one person who’s kind of owning that.

Derek Sonnichsen
So if you can try to collect that information, it’s not stealing anything. You’re just getting copies for yourself. It’s way easier to get the ball rolling when you have the information you need to get the ball rolling right. The last thing you’d want is three months after your separation, and you’re trying to start a court application, for example, and you don’t have any of the information, and the other side is just being difficult. ,’s not as easy as you think to go get access to your old home and get your stuff.

Dan Ahlstrand
Is it as simple as just getting a photocopier and grabbing the documents that you have in your house? And then there is the explanation tough when you’re with your spouse, says, why are you copying all that stuff.

Derek Sonnichsen
Wow, I can’t really help. Maybe do it while they’re not home. We’ll give lessons on espionage like that.

Clinton Wilkins
But like, what do they need? Do they need, like, income documents for both spouses, like, copies of asset statements and stuff?

Derek Sonnichsen
For the most part, the point of a maximum property division is to get a crystallized image of everything you owned. Is it the date of your separation? Some people have a bit of control over that. Most people don’t. It’s Christmas Eve, something goes wrong, a Super Bowl party, sometimes it’s sometimes you’re just out, you’ve caught someone’s phone, something you didn’t like, and that’s the end of it. Some people know it’s happening and try to be a bit more diligent about it. And then you’re just trying to gather bank statements, FSA statements, and your taxes from the previous year. If you don’t have easy access to those, these are things that the court’s going to want to even start a court application. Tell us what’s on the table? What are we fighting about? In so many cases, people are just unwilling to be cooperative, especially at the start. I will say that if you’re a year into your divorce, usually the temperature’s la ot lower than the price.

Clinton Wilkins
And the other side is probably lawyered up by this point. So you’re talking to a lawyer on the other side, you’re not just talking to an individual.

Derek Sonnichsen
And things go a lot smoother when there are two lawyers in the file, because the other lawyer is saying, What are you doing, wasting your money, not giving someone their documents, like they’re gonna get them eventually.

Clinton Wilkins
Let’s bring it back to real estate. Obviously, the Matrimonial Property Act here in Nova Scotia would apply to married people. Can you kind of give us a rundown on what that act is?

<strong>Understanding the Matrimonial Property Act</strong>

Derek Sonnichsen
I mean, it covers a lot of different things. The house certainly is one of them. It covers possession. Exclusive possession is a big one. Who’s actually going to live there during the dispute, until the house has decided who’s going to get it right, which, a lot of times, will be factored heavily by the parenting schedule. Okay, in the ideal sense, depending on the circumstance.

Clinton Wilkins
Like, who the primary caregiver is for the children, is that kind of what you’re getting at?

Derek Sonnichsen
Yeah, exactly. If, and typically, it’d be in the best interest of the kids to try to keep their lives as similar as possible through a separation. So if you can keep them in their home, especially if two parents can’t live together, there are all kinds of crazy, creative solutions parents can do where they can see them subbing in and out like that. Seems to be the new, yeah, nesting. Yeah, yeah. I’ve never seen it last long. It’s certainly attractive at the start, because neither parent has to really upheave their whole life, but I’ve never seen it last long. They start to get on each other’s nerves, especially when they’re taking lawyers’ calls, the other ones right next to them. It starts like this guy is making me mad. It doesn’t last long, but you can see why people try it anyway. And the kids, I think it’s probably keeping them forefront. But the,n if they start to be around toxic conflict, it starts to no longer be. The balance starts to weigh on the other side.

Dan Ahlstrand
What’s the typical timeframe? I mean, obviously, each case is different. But is it a year? Is it two years? How long does it take?

Derek Sonnichsen
If you’re going to go all the way to trial, in my mind, I would say set your expectations for three years. But, again, this depends on how complicated your life is. If you guys are just fighting about the kids, a lot less evidence goes into that. You can go to trial a bit sooner, but still expect the court to force you to try to settle things. You’ll be going to a settlement conference. They’ll be giving you time to sort of get used to your new life. They’re not going to rush people into a very damaging trial, because it only really makes things worse. Going to trial, sometimes you just need an end, and a trial is the only thing that can give you that finality. So some people need that, but it’s really only going to make everyone more upset at each other.

Clinton Wilkins
Would you ever recommend mediation before you get to that kind of situation, and then they would engage with a lawyer to kind of drop the separation agreement? Like, is that something that’s recommended?

Derek Sonnichsen
Yeah, for sure. I think it depends on the client, if they’re coming in saying, we are so close, we are so close, and then this happened, I’ll say, give it another go. But our job, anyway, is to be very sensitive to what’s going on, to try to be alert to domestic violence, to power imbalances. We don’t want to put people in a position where, like in mediation, they don’t have an advocate. They have someone who’s basically trying to do the math for them and keep them impartial. Sometimes they need an advocate, and sometimes even just take their emotions out on it. A lawyer is better at saying, I hear you. thThisll makes sense, but it’s not helping you sort of move past this.

Clinton Wilkins
Well, you have the shoulder to cry on, probably, like there’s probably been a lot of tears in your office over the last nine years.

Derek Sonnichsen
Yeah, I say stress relief and emotional support are a huge part of the benefits of a lawyer.

Dan Ahlstrand
How often do we get all the way to trial? Does it? Does it normally happen in a boardroom, somewhere that people finally agree, once we’ve been down that process? To do what do we go to trial?

Derek Sonnichsen
Lots of divorces. It’s rare. Yeah, for sure. The judges will tell you, probably 1% of cases that get started go to trial, and they’ll probably tell you 50% of them that go to get resolved at a settlement conference, and then the other ones.

Dan Ahlstrand
Or it could bring everybody together; there has to be something that will force you to make a decision.

Derek Sonnichsen
And a lot of times, the cost is what drives people to think straighter, and sometimes it’s literally just getting used to the new life. Because divorce is such a major shift for everybody, and it can start really rocky, and by the time you get to trial, you start to realize, okay, paying child support isn’t so bad at the start. It feels like the worst thing in the world to have to pay someone. You hate money, but when you start to realize, okay, well, they are paying for all their clothes, and you start to see, yeah, they’re supporting my kid, it’s like, okay, cool. Like, yeah. And it feels a bit less bad once you’ve been having to do it for so long. And people like, I’m not fighting over this.

Clinton Wilkins
A lot of files where we’re very dependent on spousal support or on child support for me to get my application approved. What happens in a situation where we have spousal support or child support, and I got the approval, it’s all great. We did the mortgage. The mortgage is funded, and a year down the road, that person decides they’re not paying any more. Is there a mechanism for that spouse to try to enforce that payment?

Derek Sonnichsen
There’s a whole provincial program called the Maintenance Enforcement Program, which you’ll hear people speak positively and negatively about. They’ve got their rigidity. They have to follow court orders, so specifically that if things change, they’re kind of useless. But they do have a lot of power. If they’ve got clear instructions. They can garnish people’s wages if they’re with, not a cash job. So there are some mechanisms, really, too. They can take driver’s licenses, tax returns, even passports. They have the power to put pressure on people to pay. Beyond that, if they’re not paying, after doing all those things, they’ll say, sue them in civil court.

Clinton Wilkins
You’re really kind of on your own. I mean, if Maintenance Enforcement is not going to get them, you’re probably not going to, t it’ssometimes hard to get blood from a stone or whatever, the same saying goes. But I’m always very curious, because if we’re so highly reliant on the spousal or child support to make my file work, and that’s how somebody’s paying their mortgage, let’s hope the person on the other side continues to be working and paying.

Derek Sonnichsen
Yeah, and that doesn’t even go into the fact that things can change. A lot of times, people negotiate these agreements to buy the house based on child support, and the kid turns 16 and decides that he likes to spend more time with dad now.

Clinton Wilkins
We are only using it if the child is, like, less than 13 years old, because we need to have a runway of payments built for them to build to afford to pay.

Derek Sonnichsen
But still, the point I guess I’m trying to make is that things in parenting change, and at that point,t that might be two years into their mortgage approval, and they’re not going to tell the bank that.

Clinton Wilkins
Hey, I don’t get I don’t have the support anymore. Yeah, no one comes back afterwards and tells anybody that their Situation’s changed. It’s only when they want to refinance or something again down the road.

Derek Sonnichsen
But it’s really unfortunate, from my perspective, just that so much hinges on that. I would love it if parenting arrangements could be decided purely on the children. Of course, so much hinges on the money, on the money, not just the support itself, but on even being able to keep your family home.

Dan Ahlstrand
Speaking of money, we’ve talked about it a couple of times during this segment. What’s it? What does a divorce cost is it? Is it extremely expensive?

<strong>Cost of Divorce and Property Division</strong>

Derek Sonnichsen
Well, there’s a range. Yeah, there’s definitely a range. If you and your partner already have a Separation Agreement, and you maybe you’ve been separated for five years, and you say, I want to get remarried, or it just feels symbolic to you, I want to. I want to get this divorce. I want to convert the separation agreement into a divorce. That’ll cost you about $2,000 it’ll be fairly straightforward, as long as your ex is willing to help you get the divorce, If there’s no help, and you’re needing to ask the court and prove to the court every step of the divorce, they’re Mia, If they’re Mia, well, that’s a bit easier, because,, as long as you well, if they’re Mia, gets hard, because you have to serve them, and we don’t want to get into that whole into that whole that’s a bucket of worms. But, yeah, if you’re going through a divorce where there’s classic negotiation exchange of disclosure, two lawyers on either side, I’d say probably $8,000 if it’s pretty simple. It gets more.

Clinton Wilkins
Sky’s the limit, I guess, depending on how, yeah, how complicated it becomes. Beyond that,

Derek Sonnichsen
Personalities drive the vast majority of costs. If you’ve got two people who are unwilling to budge on even the most unreasonable positions, you could spend $200,000 if you wanted to.

Dan Ahlstrand
So the best way to avoid that kind of cost is to protect yourself and have those conversations before we get down this road. Get a Co-hab.

Derek Sonnichsen
Get a Co-hab. Yeah, it’ll save you so much stress and heartache, and it’ll even just take a lot of the pressure off. Once you separate, you feel relieved. I know what’s gonna happen.