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She’s a Barbie girl in a Barbie world, and she owns an iconic pink mansion with a pool. If Barbie lived in Toronto, she’d be sitting on an extremely valuable piece of real estate. So what would happen if Barbie and Ken broke up? And what exposure would Barbie have in terms of the Dreamhouse? In this blog, we’ll examine the various claims Barbie and Ken may have against each other in the event that life in plastic turns out to be less than fantastic.
Equalization Payments Versus Joint Family Ventures
When it comes to property division in Ontario, there are two distinct frameworks that apply depending on if the parties are married or not. Married spouses are entitled to what the Family Law Act refers to as an “equalization payment”. This payment is a statutory entitlement, meaning that the presumption in family law is that married spouses have a right to this payment. This means they do not have to convince the Court they meet the test for an equalization payment.
Conversely, unmarried spouses seeking to divide family assets are not entitled to an equalization payment, and instead have to make a claim for a joint family venture. A joint family venture is a common law principle, which means that does not exist in the Family Law Act, but is accepted as a claim by the Courts. Importantly, it is not a presumptive entitlement, which means that a person claiming a joint family venture has to convince the Court that they meet the criteria for it.
The impact of this is that, generally speaking, it is harder for unmarried spouses to claim an interest in their partner’s assets following separation. In Barbie’s case, this means it may be harder for Ken to claim an interest in her Dreamhouse, as explained below.
Equalization Payments for Married Spouses
While Barbie and Ken never tied the knot, it’s helpful to understand the framework for married spouses, and imagine what exposure Barbie would have if she and Ken were to get married.
As mentioned, for married spouses, the law entitles them to an equalization payment. A mathematical formula is used to calculate the growth of the spouses’ respective net worth from the date of marriage to the date of separation, and the difference between them is equalized.
To do this, each spouse must calculate their “net family property” (“NFP”), which is their net worth on the date of separation less their net worth on the date of marriage. Next, the spouses subtract the lower NFP from the higher NFP, and divide it in half to determine what the spouse with the lower NFP should receive. This formula essentially requires the spouse with the higher NFP to share in their increased net worth with the other spouse, while giving them “credit” for the net worth they had entering into the marriage.
Importantly for Barbie, though, this date of marriage reduction for the NFP does not apply to property brought into the marriage that is the matrimonial home (i.e. the home the spouses ordinarily lived in together). Therefore, even if a party owned a house before marriage, if they lived in that house with their spouse at the time of separation, it would be a matrimonial home and would not be included in their date of marriage net worth.
So what would this mean for Barbie if she married Ken and they split up? Well, let’s assume that the Dreamhouse is worth $2,000,000 at the date of marriage, and Barbie never changed title to it once she married Ken. When she and Ken separate 10 years later, let’s assume the value has increased to $3,000,000. Under the equalization framework, this will have a significant impact on Barbie’s equalization payment owing to Ken.
For the purposes of this exercise, let’s assume Barbie also had assets such as her sports car, her extensive wardrobe, and her furniture, worth a total of $200,000 when she married Ken. Let’s also assume that Ken, on the other hand, had no car or furniture, and his assets totalled $20,000 when they got married. When Barbie and Ken separate, Ken has acquired savings, making his net worth $50,000. Barbie’s assets, not including the Dreamhouse, have also increased to $250,000.
Applying these numbers to the equalization payment framework, Barbie has a date of separation net worth of $3,250,000 because she owns the Dreamhouse that is now worth $3,000,000. However, her date of marriage net worth is only deemed to be $200,000, because she isn’t allowed to include the date of marriage value of the Dreamhouse.
|A. Separation Date Net Worth||$3,250,000||$50,000|
|B. Marriage Date Net Worth||$200,000||$20,000|
|C. Net Family Property (A – C)||$3,050,000||$30,000|
|Equalization Payment Owing||($3,050,000 - $30,000) / 2 = $1,510,000|
Under these circumstances, even though Barbie had a pre-existing asset worth $2,000,000 at the time that she married Ken, the value of the Dreamhouse isn’t credited to her because it was their matrimonial home. If Barbie had been allowed to include the date of marriage value of the Dreamhouse in her NFP, it would reduce her equalization payment to Ken by $1,000,000.
Joint Family Ventures for Unmarried Spouses
Luckily for Barbie though, if she and Ken do not get married, she may not have to equalize the Dreamhouse whatsoever. As mentioned, unmarried spouses are not entitled to an equalization payment.
This does not mean Ken has no rights though. While Ontario family law does not automatically provide for property sharing for this in common-law unions the same way it does legal marriages, it does provide that unmarried spouses can seek to equally divide family assets under the doctrine of unjust enrichment and a joint family venture.
To establish a claim for a joint family venture, the party seeking the claim must demonstrate that the parties lived together in a “marriage-like” relationship, made significant contributions to the relationship, and combined their efforts and resources. The idea behind a joint family venture is that both parties intended to form a family unit and mutually benefit from it.
The basis of the claim lies in the principle of unjust enrichment, which asserts that if one partner is significantly enriched (i.e. they benefit) at the expense of the other partner's contributions and efforts, it is unfair. In such cases, the disadvantaged partner may have a right to claim a share of the accumulated wealth, even if the assets are legally owned by the other partner.
The test for unjust enrichment has three steps: first, the person claiming it must show the other party was enriched (i.e. they benefitted from the relationship in a tangible way); second, the person claiming it must show they suffered a corresponding deprivation (i.e. they suffered a loss or setback); and third, they must show there was no juristic reason for the enrichment, i.e. there is no valid legal reason for the enrichment, such as a contract.
Applying this to Barbie and Ken, this means that Ken would have no claim to Barbie’s Dreamhouse unless he could demonstrate that he and Barbie were engaged in a joint family venture, and Barbie was unjustly enriched as a result.
Given what we know about Ken, this could be difficult to make out. As Ken himself says in the new film, “My job is just… beach”. Under these circumstances, Ken may find it hard to show that he pooled his financial resources with Barbie or that he made a significant financial contribution to the relationship. Virtually everything in the Dreamhouse appears to be purchased by Barbie, and it does not appear Ken is doing much domestic labour for Barbie. They do not have children together, and Ken does not appear to be supporting Barbie in financial or non-financial ways (i.e. doing housework for her, etc.). Moreover, given Barbie and Ken do not appear to be routinely living together, Ken likely could not show they were in a marriage-like relationship. Typically, a joint family venture claim is relied on for non-married partners where one party took on the majority of the domestic labour, or raised children, while the other partner accumulated wealth to financially support the family. That isn’t the case with Ken and Barbie.
In addition, Ken could likely not make out the test for unjust enrichment. Barbie purchased the Dreamhouse on her own, and appears to maintain it by herself. Put simply, she does not seem to have financially benefitted from her partnership from Ken, but rather she is financially independent as a result of her own work. For his part, Ken does not appear deprived either. If he and Barbie were to break up, he would likely be in the same financial situation he was in prior to their relationship.
Ultimately, Ken would have an up-hill battle to prove he has an entitlement to Barbie’s Dreamhouse if the two remain unmarried.
As seen in this case study, property rights vary drastically between married and unmarried spouses. For people like Barbie who own houses prior to a relationship, their exposure is significant if they marry their partner. Conversely, for people like Ken who are in a relationship with a partner who owns property already, they are at risk of having minimal protection unless they marry. In both cases, the parties can protect their interests through either a Marriage Contract or a Cohabitation Agreement.
In Barbie’s case, if she were to marry Ken, they could sign a Marriage Contract that allows Barbie to deduct the date of marriage value of the home from her equalization payment to Ken, or exclude the value of the home all together from her NFP. Likewise, if Barbie wants Ken to move in with her without getting married, she could also request a Cohabitation Agreement whereby Ken would waive his right to make a claim for a joint family venture.
In Ken’s case, he may want to protect his interests by asking Barbie to sign a Cohabitation Agreement agreeing to share in the increased value of the Dreamhouse once he moves in, to reflect any carrying costs he may begin to contribute to in relation to the home.
In either case, by seeking legal advice, Barbie and Ken and those like them can ensure their rights are protected.
At Lerners, we understand the delicate nature of domestic and family-related legal decisions and appreciate the emotional toll they can have on those involved. Our team, located in Southwestern Ontario and Toronto, will work tirelessly to protect your interests and achieve the best possible outcome to get the closure you deserve. With a successful track record that includes some of Canada's most complex family law cases, we dedicate ourselves to achieving results and helping you move forward with your life. Contact us today to see how we can help.