What Factors Will a Court Consider When Determining the Division of the Increase in Value of Exempt Property?

In a divorce some assets are exempt from family property distribution, including assets brought into the relationship. The increase in value of said assets, however, such as a home you had prior to marriage that increased in value due to market forces during the relationship, is potentially subject to division.

The question then becomes, what factors will a court consider when determining if an increase in value of exempt property should be shared with your ex-partner? In answering this question, a court will consider the full range of section 8 factors from the Family Property Act, Alberta including:

1. The contribution made by each spouse to the marriage and to the welfare of the family, including any contribution made as a homemaker or parent;
2. The contribution, whether financial or in some other form, made directly or indirectly by or on behalf of a spouse to the acquisition, conservation, or improvement of the property;
3. The income, earning capacity, liabilities, obligations, property, and other financial resources; and
4. Any fact or circumstance that is relevant (i.e. “upkeep and maintenance”; see for example Sumka v Ethier, 2022 ABQB 485).

The Alberta case law further demonstrates that a court will consider the following factors in making a final determination:

1. “Specifics of how the property was treated in the matrimonial regime” (Runsak v Covey, 2014 ABQB 390);
2. Where the exempt home becomes the family home, the increase in value in value should be shared equally (Runsak v Covey, 2014 ABQB 390);
3. Was the home treated as a “joint financial endeavor” i.e., an income property where profits went into a joint account? If so, the increase should be shared 50/50 (Hoskins v Hoskins, 2019 ABQB 651)
   1. If yes, was joint revenue used for the family? (see Peters v Peters, 1999 ABQB 874 – factor in favour of equal share).
   2. If it was a shared matrimonial/family home, at any point, then the spouse is likely entitled to 50% of the increase (see Bos v Bos, 2007 ABQB 604);
4. Where there is unjust enrichment because of a spouse’s contributions they will be entitled to 50% of the increase in value (see for example “provision of domestic services/devotion of free labour” Hughes v Hughes, 2006 ABQB 468); and
5. Financial contributions such as payments for renovations, payment of a mortgage, or payment on a line of credit. In Page v Teichgraber, 2014 ABQB 711, the party claiming an increased in value was re-imbursed for these expenses.

When determining the apportionment of the increase in value, the courts offer the following guidelines:

• 0% of the increase where the asset was never brought into the matrimonial regime (see Walker v Walker, [1989] BCJ No 2136 (QL) – held that the exempt property, in this case farm land, was never brought into the matrimonial regime OR where purchased after separation and the spouse claiming a percentage of the increase made no contributions, see for example Hornby v Hornby, 2007 ABQB 464);

• 15% of the increase where a parcel of land was vacant, no contributions were made by either party, and increase in value was due to market forces alone (i.e. JLC v RGC, 2013 ABQB 701);

• 25% of the increase where the party claiming the exemption maintained the property which was essential to retention of same (see Dowhaniuk v Dowhaniuk, 2014 ABQB 217);

• 30% of the increase in value where the home was inherited and the increase in value was due largely to market forces (see Sparrow v Sparrow, 2006 ABCA 155);

• 40% of the increase in value where neither party contributed substantially and the increase in value is almost solely attributable to market forces (see for example, Asselin v Asselin, 2000 ABQB 245); and

• 50% where the increase in value was largely due to market forces but the property was regularly used as a joint matrimonial asset -i.e., even if only one person did the renovations/upkeep but it was used by both parties, this is evidence that it was being used as a joint matrimonial asset (consider vacations, see for example, Nordholt v Nordholt, 2009 ABQB 600).

This is not a black and white issue, and consulting with a lawyer may assist you in determining the likely outcome.