When spouses separate an argument can arise over who gets to keep the family home. Sometimes spouses want to register a right of first refusal against the title of the property which would allow them the right to purchase the home if the spouse who retains the home wishes to sell it in the future.
The Ontario Court of Appeal made it clear in a decision called Martin v. Martin (1992) O.J. No. 656 that the court had no jurisdiction to order a right of first refusal to the registered as it would decrease the value of the family home.
The reason that a first refusal decreases the value of a property is that it becomes very difficult to market the property as any prospective purchaser knows that their offer may be matched by the holder of the right of first refusal.
When one spouse wants to keep the family home, the selling spouse wants the highest price for their interest and the purchasing spouse wants to pay as little as possible. It’s difficult to determine the “fair market value” as the price a property might sell for can be greater than an appraised value, particularly in a rising market as appraisals are based on past sales.
One solution is to list the property for sale and to let the purchasing spouse compete with any third party offers which are received. The downside of doing this is that a real estate commission might have to be paid. Also if the fact that one spouse has the right to match or beat an offer is disclosed to third party purchasers this may reduce the amount a purchaser is willing to offer.
If a spouse wants the right of first refusal to purchase the property at some future date this is something that can only be achieved if both spouses agree to it in a negotiation.
Deborah A. Todd