Many couples in Alberta build wealth by purchasing rental homes, vacation properties or small commercial buildings. These investment properties can provide long-term security, but when a relationship ends, they can also be among the most complicated assets to divide. Mortgages, rental income, tax issues and market conditions all need to be considered when negotiating a fair settlement.
If you own investment real estate in Edmonton or elsewhere in the province, understanding how the Family Property Act treats these assets can help you make informed decisions. Speaking with an Edmonton family lawyer early in the process can also help you avoid common pitfalls.
Are Investment Properties Considered Family Property?
The Family Property Act governs how property is divided between married spouses and most adult interdependent partners when a relationship ends in Alberta. In general, property acquired during the relationship is presumed to be family property that should be divided equitably, which often means equally, unless there is a good reason for a different division. Investment properties purchased during the relationship, whether held in one name or both, are usually treated as family property for this purpose.
This can include rental houses, condominium units purchased as investments, vacation cabins used part-time, or small commercial or mixed-use buildings. The fact that only one person’s name appears on the title does not automatically remove the property from the family property pool. The court looks at when and how the property was acquired and how it was used during the relationship.
Exemptions And Pre-Existing Property
Not all real estate is divided in the same way. Under Alberta law, some property may be exempt from equal division, such as assets brought into the relationship, certain inheritances or gifts from third parties. Often, the increase in value of an exempt property during the relationship is still shareable. For example, if one partner owned a rental duplex before moving in together, the original value may be exempt, but any growth in equity during the relationship may be divided.
Tracing exemptions can be complicated. Inheritances that are used as down payments, for example, may need careful documentation to show what portion of the equity came from exempt funds and what portion came from joint efforts or mortgage payments made over the years. This is one reason why investment property cases sometimes require both legal and accounting input.
How to Value Investment Properties
Before investment properties can be divided, they need to be valued. This often involves professional appraisals, particularly for higher-value or unique properties. Mortgage statements, property tax assessments, rental records and information about repairs and upgrades are also important. The valuation date can be a point of disagreement, especially if market conditions in Edmonton or other local areas have changed significantly between separation and settlement.
When several properties are involved, or when one partner has managed them as a business, a more detailed analysis may be required. In some situations, a real estate or business valuation expert may be engaged to help provide the court or the parties with a reliable picture of value.
Options For Dividing Investment Properties
Once values have been determined, there are several ways to structure a settlement involving investment real estate:
- Selling one or more properties and sharing the net sale proceeds
- Having one partner buy out the other’s interest (often with a refinance or with other assets used to equalize)
- Offsetting interests so that one person keeps the investment properties while the other receives more pensions or savings
- Agreeing to keep a property in joint names for a limited period of time, with a clear plan for managing rent, expenses and a future sale.
The best option depends on factors such as cash flow, borrowing capacity, the overall property portfolio and each partner’s long-term goals. It is often helpful for your family lawyer to work alongside your tax advisor and financial planner so that you understand the income tax and risk implications of each choice.
Mortgages, Tenants, And Practical Issues
Dividing investment property is not simply a question of who gets the title. Mortgage obligations must be addressed, and the lender must agree to remove a borrower if only one former spouse is going to remain responsible. Rental deposits, prepaid rent and existing leases also need attention, particularly if a property is being sold while occupied or transferred to one spouse who intends to keep it as a rental.
Agreements should be specific about who pays ongoing costs such as property taxes, insurance, repairs and property management fees, both before and after the final division. Where disputes arise about unpaid expenses or unreported rental income, they can quickly overlap with civil litigation issues.
Negotiated Settlements, Mediation, And Court for Investment Properties
Many couples are able to resolve investment property issues through negotiation or family law mediation. A negotiated settlement can allow for creative solutions, such as staggered sales or buyouts over time, which may not be as easy to achieve through a court order. Mediation and collaborative processes can also reduce conflict and cost in comparison with a full trial.
If agreement is not possible, the Alberta courts can apply the principles in the Family Property Act, order the sale of property, direct title transfers, or, in some circumstances, order an unequal division. Complex property disputes may involve detailed evidence and expert reports, which is another reason why early legal advice can be very helpful.
How Verhaeghe Law Can Help With the Division of Investment Properties for Clients
At Verhaeghe Law Office, our team works with clients who own rental and investment properties in Edmonton, Whitecourt, Athabasca and across Alberta. We can help you understand how the law applies to your specific properties, gather and organize financial information, coordinate appraisals and explore settlement options that align with your long-term plans. When necessary, we can also represent you in court.
To learn more about dividing investment properties after separation, contact our Edmonton family lawyers or call (587) 410-2500 to book a consultation.
Please note, the information in this article does not constitute legal advice. It is intended as a general overview of an area of family law and real estate law. For legal advice, please consult with a lawyer.