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Right of First Refusal to Buy the Family or Matrimonial Home

Angela Princewill

January 28, 2021

When parties who own a home together separate, often one person wants the home sold while the other would like to keep the home. It would ordinarily not be a big deal except often, the person who wants the home sold has one or more of the following reasons:

  • They believe they would get more money if they sold to an arms-length party;
  • They do not believe their ex-partner would be able to afford to buy out their interest in the home;
  • They believe it would take longer for their ex-partner to arrange financing than selling in the open market;
  • They are simply uncomfortable with the other party getting to keep the family home;
  • This list would not be complete without sweet old revenge being one of the reasons why a party refuses to sell to their ex-partner.

Unfortunately for the person who wants to keep the home, there is nothing the courts can do to ensure this. Too much time and money is spent on motions where a person is seeking a right to first refusal to purchase a property. Sadly, in some cases, trial judges do in fact grant this relief but, on an appeal,, it most certainly would be reversed as was the case in Barry v. Barry, 2020 ONCA 321

What is a right of first refusal?

In the context of a matrimonial home or a family residence, the right of first refusal gives one party the first opportunity to buy out the other party’s interest/ share of the matrimonial home, without the home being listed for sale. If the home is listed for sale, the right of first refusal means the party with the right of first refusal gets the first opportunity to buy the house.

According to the court in Martin v. Martin which was cited by the Ontario Court of Appeal in Barry v. Barry:

As this court explained in Martin v. Martin, [1992] 8 O.R. (3d) 41 (C.A.), a right of first refusal is a substantive right that has economic value. It falls outside the boundaries of what is ancillary or what is reasonably necessary to implement the order for sale of the matrimonial home. It distorts the market for the sale of the matrimonial home by eliminating the need to compete against any other prospective purchaser, thus potentially reducing the amount the joint owning spouse realizes on the sale. In the absence of consent, the right of first refusal should not have been granted in this case. If the respondent seeks to purchase the matrimonial home, he must compete with any other interested purchaser.

A few takeaways from the quote in the Martin’s case:

  1. A right of first refusal has economic value. It is separate and above the rights of a joint tenant to deal with their property.
  2. A right of first refusal distorts the market for the sale of the home in favor of the party who has that right.
  3. Parties can agree to a right of first refusal but it is outside the boundaries of what is reasonably necessary for a judge to order for the sale of the home.
  4. A joint owner is always able to compete in the open market and purchase the house by offering the best price.

In Barry v. Barry, the Court of Appeal held that the right of first refusal should not have been granted in that case. It allowed the wife’s appeal and vacated the section of the trial judge’s Order granting the right of first refusal. Because the wife’s appeal was successful, costs were awarded in her favor.

The lesson here is, if you will like to keep the matrimonial home or family residence, your best and only option is to negotiate and get the other party’s consent. I recognize this may range from unpleasant to impossible in some situations, but truly, there is no other way.