Mortgage 101 – Safeguarding Your Home and Heart

Dan Ahlstrand and Clinton Wilkins welcome on Derek Sonnichsen from MDW Law to discuss the importance of having open discussions about money and debts before entering into a relationship.

Dan Ahlstrand
Welcome back to Mortgage 101. I’m Dan Ahlstrand, and he is Clinton Wilkins, and it is the month of love. And we have a special guest in the studio today, Clinton. Tell me a little bit about Derek.

Clinton Wilkins
We have Derek from MDW law. He’s a family law lawyer here and practicing in Halifax, and I guess across the school. February is the month of love; that’s all we talk about. We think about Valentine’s Day, and we think about, I don’t know, flowers and chocolates and that we love our spouse or whatever. But like, what happens when there are no chocolates here, the love is lost?

Dan Ahlstrand
I know it’s it can be a tough time, and people will tell you that February can be a tough month because of that, because everybody’s celebrating love, and sometimes love just doesn’t work out.

Clinton Wilkins
No, sometimes it doesn’t work out. I’m sure we have all been through breakups in our in our life. If you haven’t, you’re probably a unicorn. I know some people have been married for like 40, 50 years. I’m telling you, they’re just fighting it out. I think, anyway, I have, I think, I think I always say, I’m like, Okay, I have 40,000 clients that, might be rounding up, who knows, or rounding down. But I always see every single week, every week I have a file that has a family law issue, whether they had a Separation Agreement, whether there’s a court order, or they’re becoming newly separated, or they’re getting divorced, or, like, whatever is going on. I have an issue that comes up. It is so, so frequent. And I don’t know, Derek, you maybe can speak to it. I don’t know what the percentage of marriages that don’t work out these days is. I think it’s still quite high.

Impact of Relationship Issues on Financial Decisions

Derek Sonnichsen
Well, yeah, in my business, I only see the ones that don’t work out, right?

Clinton Wilkins
You may see some people getting collabs, but then you may see them later.

Derek Sonnichsen
I don’t know. Yeah, those are the nice ones. But oftentimes they come at the end of a previous relationship. They say, by the way, thanks for cleaning that up for me, and I’ve got a new partner. Can you help me not make the mistakes from the previous time? I like that. That’s probably, that was probably the right decision, but it is funny because you see how people go into their new relationship with eyes wide open. They’ve learned from their mistakes, and they try not to make them going forward, and it’s a bit positive, but still, you can tell there’s a bit of a bitter taste in their mouth. They don’t want to be paying you any more than they just paid you.

Clinton Wilkins
But some people don’t learn from their mistakes. It’s kind of like when I’m giving people financial advice, it’s great when I’m giving it, but if you don’t do it like, why bother? And it’s sometimes hard. It’s a lot easier sometimes to hear it than actually put that into action.

Dan Ahlstrand
I think I would imagine that when you’re in a new relationship. You’re newly married, you’re getting through all of the weddings and and you’re and you’re now moving into home ownership. If that’s happening in that sort of order, then there are a million things on the go here. And sometimes, you’re kind of in that euphoric stage where you think, this is forever. We’re going to be together 50, 60, 70 years. But that is not the case in some cases. And here are likely ways that we can protect ourselves from a breakdown.

Derek Sonnichsen
Yeah, well, certainly, I would say waiting until you’re in that honeymoon phase is too late. You’re not going to want to have the conversation that you need to have about money, about what you’re bringing into the relationship, especially debts. These are the kind of conversations you want to have, maybe as you’re thinking of proposing to somebody, or in that period of time after the proposal, but before you actually tie the knot, you say, well, let’s put all the cards on the table, and that’s gonna have a lot more, in my opinion, a healthier relationship going forward. Talking about these things as life gets hard.

Clinton Wilkins
But because I assume a lot of these breakdowns happen because of personal finance.

The Cost of Legal Disputes in Relationships

Derek Sonnichsen
Oh, yeah. I mean, especially when people start to get embarrassed by their personal finances, keeping it hidden, having a set a credit card on the side, seeing if they can pay it. And then once it starts to get discovered, it’s my money, don’t talk to me about it. And then the walls start coming. Then you also start to see other things, like gambling addiction, alcohol addiction, it just, you become two islands, and you don’t talk about it, and it will, it will blow up eventually, at that point, you’re talking to lawyers.

Clinton Wilkins
And that becomes very costly. I see these clients all the time. I’m like, Okay, if you’re gonna buy your spouse, your equalization payments are gonna be $50,000, for example. Like, if you guys can make this equitable, maybe you can get your legal work done for $5,000, but if you don’t, you’re probably going to spend most of this equalization payment on legal fees. And I’m sure you see all the time.

Derek Sonnichsen
Yeah, it’s a huge part of the calculation that goes into my advice to the clients, to say, I can tell you I know their lawyer. I know me. This is what it’s going to cost you to really put it all together and take it to court, and you’re going to spend more than what you guys are arguing about by a long shot, and nobody.

Clinton Wilkins
Really wants to go to court. I assume maybe lawyers want to go to court. Maybe the customer doesn’t want you to go to court.

Derek Sonnichsen
And I’m always worried about the clients who say they do want to go to court. Say, what are we just, they just want to fight? Well, yeah, there’s so much emotion involved; they want to be proven right? They want to show the other person that they’re not backing down. A lot of pride on the line. Usually, by the time they get their second or third bill, it’s like, okay, pride only has you, let’s get this tied.

Clinton Wilkins
They can only get 60 swipe that credit card every month. I think there are so many moving parts. And we kind of talked about this coming up in the elevator, people get wild about two things. I think they get wild about money, and obviously, your real estate is a big part of that, oftentimes. But they also get wild about kids.

Derek Sonnichsen
Oh yeah. I mean, with kids is a whole other ballpark. People will remortgage their homes to fight for their kids. They’ll even bankrupt their parents. Grandparents get involved too, and there’s a lot of money often in that generation, for sure, and so many files go so long just because of the grandparents also knowing that they’re fighting for their relationship with their kids, too.

Clinton Wilkins
Yeah, of course. And I think it’s always better to try to come to some type of agreement before you even go to a lawyer.

Derek Sonnichsen
I mean, in the vast majority of cases, for sure. Because what I always tell my clients is, before you get to court, you and your partner, as much as you hate each other, still are the ones making the decision, and you guys know your kids and your lives and your schedules, you’re way better suited. And the judges will tell you this, too. They don’t want to make decisions about kids. It’s probably their least favourite part of the job, because they know that they’re only getting a sliver of everything that goes into what’s best for the kids.

Dan Ahlstrand
There are these amicable breakups, people don’t need to have lawyers, and it’s probably not good for your business model. But what kind of percentage do you use, or ballpark percentage, does that happen? Are they always in conflict? Or is there? Is it? Is it 60,40? What is it?

Clinton Wilkins
And Derek, before you answer, I can tell you, I see these customers. We still tell them the lawyer anyway, because oftentimes whatever they get generated is not acceptable, usually from what I see anyway.

The Role of Common Law and Domestic Partnership Agreements

Derek Sonnichsen
Yeah, well, there are different types of these types of files. I mean, I’ll say that there’s probably a whole shadow industry of people who are resolving things on their own, on their own, yeah, kitchen table agreements, we call them. And sometimes those fall apart and end up in a lawyer’s office, but I’m sure not recorded any stats anywhere. People are resolving their issues without any help. And then there are the ones where you technically can do that, like you could without a Separation Agreement. You could go and file for divorce. You would need someone to actually help you with. Like you can’t just divorce yourself. Okay, you can separate yourself if you want, and if you’re really clean with how you managed your life in your common law, you could, yeah, you could be fine. You’d be at risk if you had kids anyway. There’s a lot of risk there. But if you trust your partner, it’s possible to do it divorce. You can’t do it on your own, right? It’s the government of Canada.

Clinton Wilkins
That makes sense. We see so many folks in our office who are common law and common law in the eyes of the federal government. Now I know, obviously, that is something different when it comes to the Province of Nova Scotia. Obviously, if you’re becoming legally common law in the province of Nova Scotia, you basically are becoming domestic partners, where you need to go and swear that your domestic partner is informed.

Dan Ahlstrand
Probably pay a fee, really, and I’m in a common law and have been for a while, but you’re maybe not in a domestic partnership.

Clinton Wilkins
No, I’m not. So maybe talk to us a little bit for these people, tell us about what type of benefits the common law, as a federal idea, and what a domestic partner in the province of Nova Scotia means. What type of rights does that person have?

The Role of Legal Advice in Relationship Disputes

Derek Sonnichsen
Yeah, well, I don’t think I could break them all down for you just on this show. Probably take an hour. I will say that even the definition of common law is not erovincial or federal. It’s like per piece of legislation, okay? And different pieces of legislation, even within the province, have different definitions of common law, which is confusing if you go back to the history of the word common law, but basically, the definition of spouse is different depending on what piece of legislation you’re talking about. They all define spouse differently. Depends if you have a kid or don’t have a kid. Anyway, it’s all trying to get at how long you’ve been, sort of, how closely you’ve intertwined your families. The amount of domestic partnership agreements I’ve seen is laughably low, I think, maybe 1%? I’ve been practicing for nine years. May have seen a couple of them, right? I think it becomes becausthere are other ways to do it besides the Domestic Partnership Act, for example, just talking personally, what my wife and I did was we just did a cohabitation agreement, right? We just wanted to, kind of like custom, make our own rights of what will happen if we separate, not pick either the Domestic Partnership Act or pick the Marriage Divorce Act. So that’s probably what we see way more often, the cohabitation agreement, right? Domestic Partnership is kind of like a marriage, but you sign on to a whole province design, a whole list of rights and obligations.

Clinton Wilkins
And someone who would maybe become a domestic partner, maybe because they want to have access to, like, health or health decisions or health directives or like,e would they would the Matrimonial Property Act apply if you became a domestic partner in the province of Nova Scotia, you can opt in.

Derek Sonnichsen
Out of those types of provisions, but yeah, the main reason for the Domestic Partnership Act is to easily fall within the definitions of certain legislation. Like you are, so you’re good as married, but not married. Exactly, there’s like, because there’s a Supreme Court of Canada case that said, if you don’t get married, that’s not discriminatory to same sex couples, for example. After all, there’s this other option, you can do the Domestic Partnership Act, which gives you the same sort of opting-in rights.

Dan Ahlstrand
This is fascinating stuff, and I know lots of people are listening really closely to these common law relationships and what to do in the case of a breakup. You’re listening to Mortgage 101, he’s Clinton. I’m Dan, he’s Derek.