Should house price spike stop divorced dad's spousal support?
Lawyers say rapid rise in Lower Mainland real estate prices makes divorce settlement challenging
He got the RRSPs, and she got the East Vancouver house.
But the rapid rise in the worth of his ex-wife's primary asset led divorced dad Darren Stafford Lamont to ask a B.C. Supreme Court judge to drop his spousal support.
The judge said: No.
"The increase of the value of the house does not change the present day financial circumstances of the wife in the slightest," Justice Frits Verhoeven wrote in a decision released this week.
"No argument is made that she could or should sell it. It is her residence and that of the two children of the parties. It is the same modest house the parties bought together in 2004. The value is in the land, not the house."
'Beyond what anybody could have expected'
Lamont's request to cancel or vary spousal support underscores a factor lawyers say looms increasingly large in Lower Mainland divorce cases these days: the out-of-control cost of real estate.
According to the decision, 55-year-old Lamont and his ex-wife Arlene Mae Johnson, 52, were divorced in September 2008. He pays $842 a month to support her and their two children.
The court calculated Lamont's income at $114,000 from his work in the construction industry. Johnson's income was valued at $44,000 — from rental income and her work as a teacher's aide.
At the time they split, Johnson retained sole ownership of the matrimonial home and Lamont kept $130,000 in RRSPs.
But that was in 2008, when the home's appraised value was $700,000. By last September, the home was appraised at $1,180,000.
Who knows what it's worth now.
Lamont, who has since remarried and moved to Sweden, argued his ex-wife had undergone the type of material change in circumstances (MCIC) needed for a judge to vary spousal support under the Divorce Act.
"The husband's argument for MCIC rests very largely on a single fact: the increased value of the wife's East Side Vancouver home," Verhoeven wrote.
"He argues that his financial circumstances have deteriorated significantly and the financial circumstances of his wife have improved beyond what anybody could have expected."
'Aside from the house, she has nothing'
The judge said a change in circumstance has to essentially be something neither party can foresee when they draw up a settlement.
And no matter how unpredictable, the price of a house in East Vancouver doesn't meet that bar.
"It is an obvious fact that the value of real estate will likely change over the course of time," Verhoeven wrote.
"More importantly, the increase in value of the house does not materially change the 'conditions, means, needs or other circumstances of either former spouse.'"
Lamont argued that Johnson could take equity out of the house, but the judge said it was hard to see how that would help her.
More importantly, the 1,877 square foot home is her only real asset apart from a 15-year-old Toyota.
And she still pays a mortgage.
"Aside from the house, she has nothing," Verhoeven wrote. "And she has very little likelihood of accumulating other significant assets to rely upon in retirement."
A 'panic' to settle
Though she wasn't involved in the case at bar, Connect Family Law partner Leisha Murphy says the issues involved are front and centre in Lower Mainland divorce cases right now.
She says skyrocketing prices mean ex-spouses are having trouble buying each other out. As a result, they're putting their homes up for sale despite the fact that one or the other might have liked to stay put with the kids.
Murphy says lawyers are also scrambling to reach settlements for clients before prices rise again in a market where even one or two months can make a difference of tens of thousands of dollars.
"I've never had this before in my practice, where we're in a panic to get the settlement done so we can stop that price in time," she says.
"The property appraisers are probably really busy right now because everyone is just trying to get their files settled."
Murphy says most of her home-owning clients are still highly leveraged in debt when they get divorced, even though they may be millionaires on paper.
But she says those who settle or give up a home only to watch an ex benefit from a windfall will generally find themselves out of luck.
The same logic applies to houses as to shares in mining companies or unsuccessful businesses that suddenly explode.
"The court doesn't really want people to be able to go back in time and rejig the settlement. That would be really messy," Murphy says.
"People have come to a decision at a certain point in time. They've agreed that that's fair, and whatever happens after, it is what it is."