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What Happens When a Parent Transfers Real Property to an Adult Child in Joint Tenancy?

Kent v. Kent, 2020 ONCA 390[1] http://canlii.ca/t/j89th

In this case, the question before the Ontario Court of Appeal was: what happens when a parent transfers real property to their adult child in joint tenancy, and following the transfer, the child and her husband occupy the property for a lengthy period? The Court of Appeal had to determine how to reconcile the rebuttable presumption of a resulting trust in favour of a parent who gratuitously transfers a property to an adult child, having regard to  the Supreme Court of Canada decision in Pecore v. Pecore,[2] and the provisions of the Family Law Act (“FLA”), namely, sections 18 and 26 (1).[3]

Facts of the case[4]

In 1983, Marian bought a property (the “Property”) and was the sole owner. In September 1996, Marian transferred title from herself alone, to herself and her adult daughter, Janice, as joint tenants for nominal consideration. However, Marian continued to live at the property alone.

At the time of the 1996 Transfer, Marian had a will dated July 24, 1978 (the “1978 Will”). Under the terms of the 1978 Will, Janice was the beneficiary; if Janice predeceased Marian, Janice’s issue alive at Marian’s death were the beneficiaries; and, if Janice predeceased Marian and had no issue alive at the time of Marian’s death, Gordon (Janice’s husband) would be the beneficiary.

In 2008, Janice, Gordon and their two children moved in with Marian. Janice died in 2014, and named Gordon the beneficiary of her estate. Gordon continued to reside with Marian on the Property after Janice’s death.

In 2015, Marian moved into a long-term care home, and continued to pay for all of the costs and expenses of the Property until she died in 2016. Marian also made a new will in 2015 (the “2015 Will”). In terms of the 2015 Will, Marian named her grandchildren as the executors and trustees and she bequeathed her Property to Gordon and to her grandchildren in equal shares. Marian also registered a survivorship application on title to the Property in her name alone. She then registered a transfer deed to the Property in which she conveyed the Property to herself, her grandchildren, and Gordon as joint tenants.

At no time did Janice or Gordon pay rent while living on the Property.

After Marian’s death, Gordon brought an application for a declaration that he owned a two-thirds share of the Property. The Respondents (the grandchildren and Marian’s Estate) opposed the Application.

Applicant’s position[5]

Gordon maintained that when he and Janice moved in with Marian, the Property became their matrimonial home and it was their matrimonial home at the time of Janice’s death. He argued that based on section 26(1) of the FLA, the joint tenancy in the Property was deemed to have been severed immediately before Janice’s death with the result that, as the beneficiary under Janice’s will, he became a one-half owner of the Property with Marian as tenants-in-common.  After Marian’s death, based on her 2015 Will, Gordon argued that he became entitled to an additional one-third share of Marian’s one-half interest in the Property. Hence, he claimed to be entitled to a two-thirds interest in the Property.

Respondent’s position[6]

The Respondents argued that the 1996 Transfer raised the presumption of resulting trust, therefore, Janice did not have a beneficial interest in the Property, and therefore,  26(1) of the FLA did not apply, and Marian’s 2015 Will operated to give each of Gordon, and the grandchildren a one-third interest in the Property.

The application’s judge agreed with the Respondent’s position, that there was a resulting trust in favour of Marian, and found that there was no evidence to rebut the presumption. The application judge determined that section 26(1) of the FLA does not apply since Janice did not have a beneficial interest in the property and only held title in her capacity as trustee in favour of Marian.[7] Therefore, her legal interest could not be transferred to her estate and thereafter to Gordon, pursuant to the terms of her will.

Issues to be determined by the Appeal Court:

  1. Whether the 1996 transfer was a gift to Janice and whether the application’s judge erred in his finding;
  2. If the 1996 transfer did raise the presumption of resulting trust, Marian’s 1978 Will in which she named Janice as her residuary beneficiary rebuts the presumption of the resulting trust; and
  3. Marian, by allowing Janice, an owner by joint tenancy and her family to move into the property, created a “matrimonial home circumstance” and therefore section 26(1) of the FLA is applicable.

The Court of Appeal analyzed each of the questions, facts and evidence submitted by the parties in the application and determined that the application Judge was correct to determine that the transfer by Marian to Janice in 1996 was a gratuitous transfer and that there was no evidence to rebut the presumption. Notably, the 1978 Will was created prior to the 1996 transfer, and therefore, could not be used as evidence to show that Marian gifted the property to Janice.

In considering whether the property was a matrimonial home of Janice and Gordon, the Court of Appeal reviewed section 18(1) of the FLA to determine whether Janice had an interest in the Property. Section 18(1) of the FLA states:

 “Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.”

The Court of Appeal determined that Janice did not have an interest in the property. Janice became a joint tenant as a result of the 1996 transfer, which raised the presumption of resulting trust, which presumption was not rebutted.

The Court of Appeal decided that Janice held title to the property as a trustee and not in her beneficial capacity. The Court cited the case of Spencer v. Riesberry, wherein it stated:

it is self-evident that the duties and powers of a trustee are not an interest in the property within the meaning of s. 18(1) of the FLA because those powers and duties are held not in a personal capacity but in the fiduciary role of a trustee. [8]

The Court of Appeal went on to state that Gordon did not have an interest in the property within the meaning of section18 of the FLA and rejected Gordon’s submission that section 26(1) of the FLA applied.

The court stated the following:

 “It is correct that when Janice died, she appeared on title to the Property as a joint tenant with Marian, a third person. However, as I have just explained, as Janice was on title to the Property in the capacity of a trustee, she did not have an interest in the Property within the meaning of s. 18(1) of the FLA. Thus, when Janice died, she did not own an interest in a matrimonial home as a joint tenant with Marian, a third person. Consequently, s. 26(1) does not apply and Gordon cannot claim an interest in the Property pursuant to it.”[9]

The Appeal was dismissed.

[1] Kent v. Kent, 2020 ONCA 390 (CanLII) found at: http://canlii.ca/t/j89th

[2]Pecore v. Pecore, 2007 SCC 17 (CanLII), [2007] 1 SCR 795

[3] Family Law Act, RSO 1990, c F.3

Matrimonial home

18 (1) Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.

Joint tenancy with third person

26 (1) If a spouse dies owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse, the joint tenancy shall be deemed to have been severed immediately before the time of death.

[4] Kent v. Kent, 2020 ONCA 390 (CanLII), at para 3-16

[5] Kent v. Kent, 2020 ONCA 390 (CanLII), at para 17

[6] Kent v. Kent, 2020 ONCA 390 (CanLII) at para 18

[7] Kent v. Kent, 2019 ONSC 6873 (CanLII), at paras 12-17

[8] Spencer v. Riesberry, 2012 ONCA 418, at para 45

[9] Kent v. Kent, 2020 ONCA 390, at para 48

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