Why you need your Spouse’s Consent to Mortgage your House
Under Ontario law, the home in which a married couple ordinarily resides is deemed to be the matrimonial home and with it comes various protections for both spouses during the marriage and upon separation.
One of these protections under s. 21(1) of the Ontario Family Law Act, is that a spouse cannot “dispose of or encumber” an interest in the matrimonial home unless the other spouse consents, or if a separation agreement or court order allows it. This means that no spouse is able to sell or refinance the matrimonial home without the knowledge and consent of the other spouse, even if only one spouse holds the title to the property.
There are some good reasons for this protection, in that if one spouse were to sell/transfer or mortgage/refinance the matrimonial home without the other’s knowledge, this could significantly impact both spouses and their financial and and/or occupancy rights. Banks and other lenders are well aware of these spousal consent requirements. It is common practice for mortgage brokers and real estate agents to ask your marital status, however, it doesn’t hurt to present this information yourself to avoid a sticky situation. If one spouse is able to get a mortgage on the matrimonial home without the other spouse’s consent, the courts will likely set aside the mortgage based on the lender’s failure to obtain the consent of both spouses.
For married couples, spousal consent to dispose of or encumber a property is only required in regards to the matrimonial home; all other properties (i.e. second homes, investment properties, etc.) may be dealt with according to ownership. For unmarried couples, the matrimonial home protections do not exist. Cohabitating or common law couples are not given this protection under law. Common law spouses who are not on title to the couples’ home, in some cases, are able to advance claims for a share in the property but it is always best practice to be well aware of your rights and protections before problems arise. For those in common law relationships whose common law spouse owns the house they both live in, it may be wise to enter into a Cohabitation Agreement to secure your rights before any issue arises.
Circumstances can vary and it is always wise to speak with a lawyer with respect to individual ownership and equitable interests.
By: Lindsay Hayes and Joanne McPhail (Partner)