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Muskoka chairs sit on a dock looking over Boshkung Lake, in Algonquin Highlands, Ont., on Oct. 5, 2020.Giordano Ciampini/The Canadian Press

During the breakdown of a marriage, many couples are determined to remain reasonable – until it comes to a hallowed family cottage.

Soaring prices in Ontario’s cottage country have only intensified the conflict and legal tangles for some partners currently going through separation or divorce.

The pandemic has also added a new twist as families shifted to living at the cottage during long stretches of remote work.

Divorcing spouses are often shocked to discover that a long-held family cottage can be deemed a second matrimonial home in Ontario, says Laura Paris, associate lawyer at Toronto-based Shulman & Partners LLP.

Some people find out about that aspect of the law when their estranged spouse goes after a share of the lakeside cabin that may have been in a family for generations.

“Many clients are surprised to learn that even if the cottage was a gift from a family member prior to marriage, it may also be included as net family property and have to be shared during a divorce,” Ms. Paris says. “It happens more often than people like to think.”

A matrimonial home is a legally defined concept and is subject to specific treatment under the Ontario Family Law Act in the event the couple split up. According to Shulman & Partners, it is the home that is “ordinarily occupied” by the couple as their family residence at the time of separation; both spouses have equal right to possession of the home, and its full value must be equally shared after separation, regardless of whether both spouses are on title.

Also, a matrimonial home cannot be sold unless both spouses consent to the transaction, Ms. Paris adds.

Any vacation property – including a mobile home, ski chalet or renovated Victorian farmhouse – can be deemed a second matrimonial home, which makes it subject to different treatment under the law, she explains.

Case law has established many precedents, Ms. Paris says. One example comes from a young Ontario couple who married in 1983. They moved into his mother’s rustic Quebec cottage for a time and used cash they received as a wedding gift to bring electricity to the property.

The couple went on to raise their two children in Ottawa, but they spent lots of weekends and summer vacations at the cottage over the years. In the 1990s, the husband’s mother transferred ownership of the cottage to his name.

A couple of years after that, the improvements began: The cottage was lifted off its foundation, a basement dug and radiant in-floor heating installed. Later the couple fixed up a log cabin on the property for their daughter.

In 2006 the parents separated and ended up sitting before a judge, battling over child support and other matters. One of the most contentious disputes centered on that beloved family cottage: The wife claimed that the property registered in the husband’s name was a second matrimonial home at the time of separation.

The Ontario Superior Court judge agreed.

“It is well known that parties may have more than one matrimonial home and that a cottage property may be a matrimonial home as defined in the Family Law Act,” the justice said in a written decision.

In Ontario, the rules are blurry: there is no established percentage of time that a vacation home must be occupied in order to qualify, Ms. Paris explains.

“It is quite a grey concept,” she says.

In the case of the Ottawa couple, the husband argued that his wife had largely stopped visiting the cottage in the later years of their marriage. He added that his mother had “verbally” promised the cottage to him when he was only 16.

The wife’s claim stemmed partly from the fact that they had used a line of credit registered against their Ottawa home to pay for the new basement and other renovations.

Even the neighbour across the street was brought in as a witness: She testified that she had seen the family packing up the car on weekends and called the couple at the cottage to wish them a Merry Christmas the December before they separated.

Based on the evidence, the judge found the cottage was a matrimonial home at the time of separation. The thorny part came in determining how much the property had risen in value since the husband took possession in 1994 – and how much the wife would therefore be entitled to in a lump sum payment. The judge declared that the vaguely written documents presented as evidence were no help at all.

Ms. Paris says the most likely outcome when a vacation home that one spouse owned before marriage is deemed a matrimonial home is that a financial settlement will be made.

She adds that case law suggests a vacation property is more likely to be deemed a second matrimonial home if it is somewhere the couple visited consistently, year after year.

In another case that came before the courts, the details of a couple’s marital breakdown were widely reported in the media after a shocking incident that occurred while the husband and wife were on vacation in Jamaica.

The woman was taken to hospital with her throat slashed and the husband initially told police that a man had attacked his wife on the side of a road. The woman accused the husband of attempting to murder her with a hunting knife. The husband was criminally charged in Jamaica and later acquitted by a jury.

The drama continued back in Canada during a tumultuous divorce case that included matters surrounding the custody of the couple’s children and the division of property.

One of the assets under discussion was the wife’s family cottage, which she shared in with her siblings, on a lake north of Parry Sound, Ont.

The husband informed the judge that he spent a lot of time at the cottage and helped to reshingle the roof with other family members. He did not contribute to the mortgage payments or operating expenses, but he did help in the purchase of a wakeboard and other toys.

The judge deemed the cottage a matrimonial home.

If he had decided it was not a matrimonial home, Ms. Paris explains, the court would have requested a valuation of the property as of the date the couple married. Then the wife, as the titled spouse, would have been able to deduct the value from her half of the shared assets.

The outcome of a tussle over property is most often decided with a financial settlement during arbitration, Ms. Paris explains. If the two sides can’t come to a consensus, one of the spouses may ask for a trial.

If the title is in one spouse’s name, they will be able to maintain legal title.

“We’ve been able to find compromise solutions,” Ms. Paris says. “We find a number that both parties can agree with.”

Ms. Paris stresses that a marriage contract, which can be drawn up before or after the actual nuptials, is the best way to prevent rancorous legal battles.

“Going through the court process is time-consuming, emotionally draining, and it takes a toll on your mental health,” she says. “There are a lot of costs to consider outside of the financial costs.”

Ms. Paris says emotions tend to run high when it comes to a beloved family cottage. The issue is different when the couple purchases a cottage after marriage because dividing the property’s value is more straight-forward.

In cases where a spouse has shared ownership – say a 25-per-cent stake in a property owned with siblings or parents, for example – that 25-per-cent chunk can still be declared part of a matrimonial home and divvied up.

Ms. Paris says that the marriage contract can save a lot of time, expense and bitterness down the road.

“If it has sentimental value to you, you don’t want it tied up in your marital separation,” she says. “There’s a lot of hurt and spite and people will try to get back at you through the thing that means the most to you.”

Alexis Victor, real estate agent with Royal LePage Signature Realty, works in Ontario cottage country, where many people have been living mainly at their vacation residence during the pandemic.

“People just up and moved to the cottage,” she says.

She has also seen many instances of owners who needed to sell because of family break-up or the illness or death of a family member in the past couple of years.

“It’s like literally being a therapist when you have to sell someone’s cottage,” she says. “People are so connected.”

During the pandemic, controlling the acrimony in splitting up has become a lot more difficult for lawyers, in Ms. Paris’s experience.

In less stressful times, spouses seem to be more reasonable about separating the vitriol from their finances and legal issues. Now tensions are higher.

“While people may understand the legal side, they’re not willing to let go of the emotional side.”

Looking ahead, she expects issues revolving around cottages and vacation properties to increase – especially given the surge in sales and prices.

“I do think in years to come we will see a lot more of it,” she says.

Anita Latner, broker with Anita Latner Realty Inc., in Ontario’s Muskoka region, has not seen a recent uptick in cottages being sold during divorce but she does wonder about the opposite scenario:

“I wouldn’t doubt that a lot of people stay married to keep the cottage.”

On Muskoka’s “big three” lakes of Joseph, Rosseau and Muskoka, properties sometimes change hands above the $10-million mark.

“The value of a cottage definitely enters into a divorce,” Ms. Latner say.

She does her best to stay clear of marital disputes when it comes to selling a property.

“I always tell people ‘talk to your accountant or talk to your lawyer.’”

In Ms. Latner’s experience, people feel a magical connection to a family cottage – regardless of the lake or location.

“I always say, ‘your house is your castle but your cottage is Camelot,’” she adds. “I think the cottage always has been the more emotional one.”

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