Creditors, such as banks, depend upon their priority as against the assets of the debtor. All creditors should be on notice that lending to a spouse always engages priority uncertainty. You lend the husband money, he does not repay. You obtain default judgment and register a writ of execution as against his otherwise unencumbered half of the matrimonial home. Your registration is the only item on the property abstract. You think you have, in effect, a first mortgage.
Wrong! Along comes the wife, (in Patton v Patton, (2008)) asks a judge for lump sum spousal support (ordinarily not granted). Section 21 of the Family Law Act RSO 1990, c.F.3 requires that the wife’s lump sum support right comes ahead of a prior-registered creditor right. Otherwise the intent of s.21 of the Family Law Act, that the matrimonial home is not encumbered without the consent of both parties, would be thwarted.
The takeaway for unwary creditors is essentially that when the spouse tells you how much ‘equity’ is in the unencumbered matrimonial home, implying that he owns half of it, look for another asset to attach. There is a reasonable chance that your first-registered execution will come behind the wife regardless of priority.
