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Unequal Distribution of Increase in Property Value

Sparrow v. Sparrow - 2006 ABCA 155

This decision is interesting because it demonstrates that parties are not always bound to distribute the increase in property value equally for exempt property under the Matrimonial Property Act. When property is purchased before the marriage, and not transferred into the name of the other spouse after the marriage, the value of the property on the date of marriage is exempt from distribution. The increase in value of the property between the date of marriage and the date of trial is shared.

This case stands for the proposition that if the increase in value is solely attributable to an increase in the value of the land, the 50/50 sharing rule for the increase in value of the property need not apply, and the percentage being gifted to the other spouse may be reduced. In this case only 30% of the increase in value was distributed to the spouse.

In this case the husband was a sole practitioner lawyer. The parties married in 1986, and separated in 2000. When the parties married, the husband and his brother jointly owned a cabin on lakefront property at Windermere Lake, British Columbia (the "Lake Property"). The Lake Property had been owned by the husband's parents since the early 1960s, but was transferred to the husband and his brother in 1982. During the marriage, the parties and their children shared the use of the Lake Property with the husband's brother. The husband and his family generally enjoyed the use of the Lake Property for approximately one half of each summer, and alternating weekends during the rest of the year.

The parents continued to pay the property taxes on the Lake Property. There were no renovations or additions to the Lake Property after the time that the husband and wife married. The husband, the wife, and the husband's brother and his family did nothing more than annual maintenance.

The value of the Lake Property as of the date of the marriage was $160,000. At the date of trial, the Lake Property had increased in value to $1,055,000. One half of the increase belongs to the husband, the other half to his brother. The appraisals showing the increase in the value of the Lake Property attribute practically all the increase to a rise in the value of the land. Neither the husband nor the wife had done anything significant to the land which would account for that increase. It was wholly attributable to market forces.

In this case the Court of Appeal noted that while s. 7(4) of the Matrimonial Property Act sets out a presumption that non-exempt matrimonial property is to be distributed equally, that presumption does not necessarily apply to increases in value of exempt property, such as the Lake Property.

The Court of Appeal overturned the Trial Judge's decision partially because the trial judge did not consider the fact that the increase in value of the Lake Property was solely attributable to increased land value.

In reaching its conclusion, the Court of Appeal reviewed the fact that the Lake Property was acquired by the husband from his parents, before the marriage. The Court of Appeal determined that although the wife had a role in the maintenance of the property, this did not contribute to the increase in value.

The Court of Appeal determined that an unequal distribution of the increase in value of this property, since the parties' marriage, was appropriate. They did grant the wife some of the increase in value as she was more actively involved in child rearing than the husband had been. They concluded that a just and equitable distribution of the increase in value of the husband's share of the Lake Property was 30% to the wife and 70% to the husband.

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