One of the first questions that many family lawyers are asked in a consultation where there is a jointly owned matrimonial home is: “Who will keep the house?” If one spouse is particularly attached to the home and has the means to purchase the property what follows are a series of Offers to Settle exchanged between counsel containing onerous “right of first refusal” clauses allowing their client to purchase their spouse’s interest in the matrimonial home.
Generally, a right of first refusal clause allows a party to purchase the matrimonial home at fair market value (that’s if the fair market value can be agreed upon which is a whole other issue) without placing the property on the open market. Alternatively, if the matrimonial home is placed on the market, a right of first refusal clause may allow a spouse to purchase the home at the same price offered by the first external purchaser. The non-legal explanation of this concept is that it essentially allows a spouse to “call dibs” on the matrimonial home at the most favourable price.
In the recent Ontario Court of Appeal decision, Barry v. Barry, 2020 ONCA 321 (CanLII), the Court reminds us that in the absence of consent, the right of first refusal cannot be granted by the Court. Relying on its previous decision, Martin v. Martin, [1992] 8 O.R. (3d) 41 (C.A.), the Court explains that a right of first refusal “is a substantive right that has economic value” and “distorts the market for the sale of the matrimonial home by eliminating the need to compete against any other prospective purchaser, thus potentially reducing the amount the joint owning spouse realizes on the sale”. Therefore, unless both parties agree to a right of first refusal, the spouse seeking to purchase the matrimonial home must compete with any other interested purchasers.
This decision provides not only a reminder but also a practice note to counsel in preparing any formal Rule 18 Offers to Settle with regards to the sale of the matrimonial home. Presenting an Offer to Settle containing right of refusal clauses with regards to the matrimonial home will very likely attract undesired cost consequences. If your client is highly motivated to retain the matrimonial home, it is best to resolve this issue outside of the court process.
Please feel free to reach out to the lawyers at Goodman Halioua LLP with respect to any property division issues. We are highly experienced in assisting our clients with the resolution of their property disputes.
