Going through a divorce or a separation can be a complicated process in terms of dividing a couple’s property and finances. For many couples, the matrimonial home is the most valuable asset they own. It’s typical for the home to either be sold to a third party or for one of the parties to the separation to purchase the other’s interest in it. This can be a time-consuming exercise when communication is healthy, and expectations are aligned. However, as we see in many of the cases we discuss, there can be variables in every situation that introduce complexity in reaching a resolution. In today’s blog, we look at a decision involving a husband who owns a contracting company that the parties “hired” to rebuild their home after a fire. The husband and wife found themselves at odds over how much the husband’s company should be paid for the work.
Parties Agree to Hire Husband’s Company to Rebuild Home
The husband and wife lived together in For McMurray. Their home was mostly destroyed in the wildfires that struck the area in 2016. They separated in early 2018, but still wanted to rebuild the home for one of them to live in.
The husband owned a construction company (“PSE”). After their separation, they agreed to take out a construction mortgage which would allow them to rebuild the home. They agreed that PSE would be hired to do the work, which would give the husband an opportunity to earn income for the company. Following the rebuild, they planned to divide the net equity equally between them. The parties were able to secure a construction mortgage in the amount of $483,116.
Husband Claims Cost of Rebuild Exceeded Expectations
At the time of the trial, all but $43,331 had been paid to PSE for the rebuilding of the home. The husband was looking for the remaining funds to be released, stating that the costs had exceeded what was made available via the mortgage. He told the court the cost of rebuilding the home had crept up to $586,893, and that as a result, PSE (or the husband) was owed just over an additional $100,000. Furthermore, he stated there was a penalty provision for late payment of any invoice of $500 per day.
The wife’s lawyer was responsible for holding the mortgage funds in trust. He and the wife argued that the $43,331 constituted marital property and should be divided between the parties accordingly. The husband told the court he wanted the money released to him. In the meantime, the wife argued the house was completed and had been appraised. She was looking for her share of the equity.
The appraisals also raised a point of contention. Two appraisals were performed. The first one reported the home’s value as $559,000 (less than the husband’s stated costs), while the second one came back higher with a value of $650,00.
What did the Agreement Stipulate?
The court looked at the separation agreement entered into by the parties, specifically the sections relating to the rebuild of the home. The agreement stated the husband was hired to rebuild the home, and that an amount of $483,000 had been secured to finance the construction.
Following the rebuild, the parties agreed to have the home appraised. Any appraised value above the mortgage amount would be equalized between the parties and the husband would maintain possession of the house. For example, if the home was rebuilt and appraised at $583,000, the husband would pay the wife $50,000 and keep the house.
The agreement went on to state that the husband was to keep an accounting of the cost of any extras over and above the specifications that formed the basis of the mortgage. Finally, it stated he would be solely responsible for all debts in relation to the house, including taxes, mortgage payment, utilities, and maintenance.
Court Says “a deal is a deal”
The court summarized the husband’s position, stating he,
“Essentially asks the court to relieve him of his obligation to make the payment required by the agreement, and rather require (the wife) to pay him instead. He seeks to do so by asking the court to ignore the formula that was arrived at and documented in the settlement agreement and to rewrite the formula. The formula proposed by (the husband), in effect, requires the court to disregard the mortgage amount of $483,000.00 as the debt owing on the house and replace it with a higher figure calculated by him.”
The court said the husband knew what the house was costing and introduced upgrades that would make it more valuable as well as more comfortable for him to live in. The wife had not approved any of the upgrades performed by the husband, and he failed to provide her with the details contrary to their agreement.
The court dealt with the difference in appraisals of the home by averaging the two and arriving at a figure of $589,500.
Turning to the holdback, the court ruled that the husband could have an opportunity to provide an accounting of costs. If he could do so, the holdback would be released to him. However, if the husband could not provide documentation related to the cost of rebuilding the home, the money still being held in trust would be divided between the parties. Finally, the husband was also responsible for paying the wife her half of $106,384, which is the difference between the amount of the mortgage and the average of the appraised values.
HMC Lawyers Can Assist with both Family Law and Construction Law Matters
At HMC Lawyers in Calgary, we are in a unique position to help clients with issues related to property division following a separation as well as issues concerning construction law. We understand the nuances of each area of law and the considerations our clients must make when working through disputes that fall into either category. Please do not hesitate to contact us online or by phone at 403-269-7220 to find out how we can help you today.