Can the U.S. Expropriate Your Matrimonial Home?

Published on 29 August 2022, 07:22:56 AM

Snowbirds beware. Your U.S. property can be expropriated, just like any American citizen. You could lose your matrimonial home and your investment.

Using Eminent Domain to Take Your Property

Startling but true, the U.S. government can take your property any time they want to. Eminent domain, or expropriation as it’s called in Canada, allows governments to convert private property for public use. While expropriation is unlikely, the fact you’re a Canadian is of no concern to U.S. municipalities intent on having your share of American soil. 

Making Way for Growth

Expropriation is hardly new to Canadians. Public works that create roads, public utilities or government buildings can all override your right to private land. Ontario farmer Frank Meyers spent seven years fighting Ottawa when CFB Trenton decided it wanted 200 acres of his prime farmland (photo courtesy Facebook). His online petition, 18,000-member Facebook page and letter to Queen Elizabeth were all in vain. He caved in 2013. 

A Case of Redevelopment

Giving your property to a private developer can also be an excuse for municipalities to interfere with your property rights. Eyesores, blighted properties that drag down property values or land standing in the way of redevelopment may  be converted by the private sector if the project brings in municipal revenues. Connecticut landowner Susette Kelo fought and lost to the U.S. Supreme Court when the City of New London took her property. The court upheld the city’s argument that giving her lot to a private developer was a permissable public use because the whole community would enjoy the economic benefits.  

Public Good Trumps Profit in Caifornia

A California city threatened to use eminent domain in 2013 to seize 624 underwater mortgages in danger of mortgage default. The mayor argued preventing mortgage lenders from foreclosing and selling the homes at a profit would stabilize the community. The city planned to buy the mortgages at fair market value and help homeowners get federal mortgage loan insurance. Newark and a New York City housing coalition were keen to follow, but most fell by the wayside when federal housing agencies Fannie Mae and Freddie Mac turned it down.

Billionaire Fights City Hall

New York oil and real estate mogul John Catsimatidis is still quarrelling with Amherst, NY, for condemning a vacant concrete pad it wants to turn into a public park and bus stop. The city is offering $81,000 for the former gas station site, empty for two decades. He wants $300,000. “That little town already has 41 parks. Why do you want a 42nd?”says Catsimatidis,     

Bizarre But True

U.S. Congress can seize private property through an Act transferring property title directly to government. Be ready for a court battle if that happens. You will have to sue for compensation in the U.S. Court of Federal Claims. 

What Happens If Your Property is Expropriated

Property expropriated by U.S. agencies is compensated at fair market value. An appraiser will assess your property and a low ball offer will follow. You can take it to court, but the municipality usually wins. Talk to your mortgage lender before you sign anything — they have first rights in property deals that affect your home. Better yet, before you take out a mortgage, check if there is a U.S. branch of your Canadian bank. Cross-border mortgages can be easier to manage at a distance and you may want a familiar face in your corner if your mortgage loan is on the table.

Paying Capital Gains on Expropriated Land

When you dispose of a property stateside, your first tax obligation is to the U.S. government. Gains or losses are reported on the U.S. Non-Resident Income Tax Return (form 1040NR). Compensation for costs, expenses or losses from being moved off your property isn’t usually great, but you could have a capital gain if you got more than you paid for your property. Remember, you can claim U.S. capital gains as a foreign tax credit on federal and provincial income taxes. Non-U.S. residents also pay a 10% non-resident withholding tax and if you applied for it to be subject to a net capital gain, that may also affect your tax position.

Any Home Can be Matrimonial

Any property you and your spouse live in together for any part of the year may be a matrimonial home. Your house, cottage, boat or vacation condo all qualify, as long as you spend time there while married. Yes, you can have multiple matrimonial homes. 

Your Rights to Your Matrimonial Home

Legally married couples who divorce have a right to a 50% share of all their matrimonial homes, even if the deed is one spouse’s name or you owned it before you married. Before you agree to compensation for expropriating a U.S. property, talk to a Canadian family lawyer about your matrimonial rights. 

Get Legal Advice on a Foreign Matrimonial Home

Axess Law’s Ontario family lawyers advise you on disposing of a matrimonial home on U.S. territory. Make a video call online anywhere in Ontario, 7 days a week, day or evening, at times that fit your schedule. Dial 1-877-522-9377 or in Greater Toronto 647-479-0118 or use our online booking form. Experienced family lawyers meet with you in person at our Ottawa, Toronto, Scarborough, Vaughan, Etobicoke, Mississauga Winston Churchill or Mississauga Heartland law offices. 

Click here to learn more about Axess Law’s family law services.