In British Columbia, couples who are separating often wonder what property to get valuations for, and what date is the right date for valuing family property and debt at divorce and separation. There are many situations where a couple separates, one stays at the family home and pays for all its expenses and the other moves out. At the time of divorce, it is not unreasonable for the person who maintained the property to ask that the increase in the value of the property should belong to them since they were the only ones who took care of the asset which ended up going up in value.
Date of Valuation under the Family Law Act As per the BC Family Law Act, the date of significant importance for valuing family property and debt at divorce is primarily the trial date or when the spouses mutually agree to resolve their disputes. Spouses are however allowed to argue otherwise or ask for another valuation date, for example, valuation as of the date of separation. Section 87 of the Family Law Act states: 87 Unless an agreement or order provides otherwise and except in relation to a division of family property under Part 6, (a) the value of family property must be based on its fair market value, and (b) the value of family property and family debt must be determined as of the date (i) an agreement dividing the family property and family debt is made, or (ii) of the hearing before the court respecting the division of property and family debt. Spouses can however argue under s.95 of the Family Law Act, that another date of valuation should be used.
Scenarios in Valuing Family Property and Debt at Divorce: Examples of Equal and Unequal Division If one wants to argue that the assets should be valued as at the date or separation or another date, they would be effectively asking for an unequal division of property under s.95 of the Family Law Act. For example: Spouses own a property which was worth $1,000,000 at the time they separated; Between separation and the date of agreement/trial, the property increased in value by $500,000. One of the spouses paid for the property’s mortgage and other expenses post-separation and the other moved out and made no contributions. The contributing spouse may ask the property to be valued as at separation or at $1,000,000. The non-contributing spouse may ask for equal division based on the current value or $1,500,000. In the above situation, the Courts could: Order equal division based on $1,500,000, meaning each spouse would receive $750,000. In some situations, adjust the non-contributing spouse’s share to provide half of the expenses the contributing spouse paid since separation; or Order the property to be valued as at separation such that the contributing spouse would receive half of $1,000,000 or $500,000 plus post-separation increase which is another $500,000. The non-contributing spouse would receive $500,000. If the court proceeded with option #3, it effectively means that the property was divided unequally, because one spouse would receive $500,000 and the other would receive $1,000,000. To do the above, the court must follow and pass a legal test.
Arguing Exceptions Relating to the Date of Valuation under the FLA, British Columbia If you wish to ask the court to value property as at a different date, you must satisfy the test under s.95 of the Family Law Act which means you have to prove using the current value of the property would be ‘significantly unfair’. You would have to have a compelling argument to succeed at this argument and your situation must be special and convincing enough for the courts to pass the ‘significantly unfair’ test.
In Kumagai v. Campbell Estate, 2018 BCCA 24 at para. 76, the Court of Appeal held as follows: A departure from the presumptive date for valuation of family property is effectively a reapportionment or unequal division of the family property, which can only be done under s. 95 of the FLA. Section 95 expressly provides for the reapportionment of net family property if an equal division would be “significantly unfair.” Under the former FRA, a change in the valuation date from the date of the hearing was determined to be an effective reapportionment of the family assets. … The same reasoning, in my opinion, should be applied to the comparable provisions of this Act. Any departure from the presumptive equal division of net family property under s. 81 of the FLA must therefore be made pursuant to s. 95(1) of the FLA, which imposes a threshold finding that an equal division of the net family property would be “significantly unfair” before any- reapportionment of the net family property can be ordered.
Conclusion: Securing Expert Legal Assistance in Valuing Family Property and Debt at Divorce Departing from the valuation date as of the date of trial or agreement is difficult but doable. An increase in value due to market forces and one spouse maintaining the property post-separation are not sufficient reasons to depart from the standard valuation dates. In order to succeed in compelling the courts to value property as of another date or the date of separation, you must make a compelling case which may include: A short marriage or cohabitation; Increasing the property’s value due to your own efforts, not just by market forces Having an oral or written agreement regarding using a different date for valuations between you and your spouse If you need help with evaluating property at separation or with drafting a cohabitation agreement that would address valuation issues, contact our award-winning lawyers at 604-974-9529 or get in touch.