Protection for the Family Farm under the Family Law Act
In May of 2012, I wrote an article in this paper that outlined the important place that the family farm holds in our society and in the lives of farmers. I discussed ways to protect inherited family farms from the division of property that occurs as part of the unfortunate experience of a divorce. This article is about some further protection provided to the family farm by the Family Law Act.
Section 11 of the Family Law Act protects an operating farm. This section limits the Court’s ability to make an Order which divides the spouses’ property. By this section, the legislature intended that operating farms should receive a measure of protection from the financial consequences of the breakdown of a relationship. As I indicated in my previous article, as part of their divorce, spouses have to divide the financial gain that was experienced by them during their marriage, including farm assets. If such a division would result in the sale of an operating farm or would seriously impair the farm’s operation, the Court must seek out a reasonable alternative method of satisfying the Order, before ordering the sale of the farm. This section goes on to outline that in protecting the family farm, the Court can order that one spouse pay the other spouse a share of the profits from the operation of the farm to satisfy the amount owing to the other spouse arising out of the divorce. Further, if the farm is incorporated, the Court may also order that one spouse transfer his or her shares in the farm corporation to the other spouse.
The prohibition against the sale of the farm is mandatory unless there is no reasonable alternative method of satisfying the award. As a result, the Court must look for a reasonable alternative before selling the farm. This could include a payment plan, deferring the payment to a later date (in whole or in part), transferring other assets or allowing the other spouse to share in the ongoing profits from the farm. However, if there is no other reasonable alternative, the Court does have the power to sell the farm.
The Court may also choose to sell part of the property to allow the spouse to continue the farming operation, although on a smaller scale, to ensure that both the spouses and the farm are able to remain financially viable.
Section 11 of the Family Law Act was not intended to prevent a joint owner from realizing his or her interest in the property. If the spouses are co-owners of the operating farm, the spouse that is leaving the farm will be entitled to have his or her interest purchased by the spouse that plans to continue with the farm. Barring an agreement between the parties with respect to the value of their respective interests, it is possible that the property would have to be listed for sale, with the co-owning parties dividing the net proceeds of sale.
In summary, the Family Law Act recognizes the importance of the family farm and tries to protect it through section 11. A spouse that operates a family farm and is going through a divorce should investigate reasonable alternatives to pay the amount owing with respect to dividing the financial gain that occurred during their relationship so that the family farm, and the income it provides, can be protected.