Tag: real property
When speaking of the gifts left in a Will, people often hear the terms “legacy”, “bequest” and (less frequently) “devise” thrown around interchangeably. But what specifically do these terms refer to?
A “bequest”, which can be used interchangeably with “legacy”, refers to testamentary gifts of personal property. While both terms are used, the Succession Law Reform Act uses the term “bequest” in referring to these types of gifts. There are three types of bequests: general bequests, specific bequests, and demonstrative bequests.
General bequests refer to gifts that are to be provided out of the estate generally. It does not refer to any particular thing. Thus a gift of “$10,000.00 to my friend F” is a general bequest. The money is to be raised from any of the general assets of the testator.
Specific bequests refer to gifts of particular property or which are to be funded by particular assets. For example, gifts of “my car” or “the cash held in bank account X” are both specific bequests as they refer to particular property which the recipient is to receive. Where the asset is no longer in the possession of the testator at the time of death, the gift will fail.
A demonstrative bequest is a hybrid between general and specific bequests where a gift of money is left with the intention that it is to be funded primarily out of certain assets. But where the assets are insufficient to meet the gift, the gift is to then be funded out of the general estate. A gift of “$10,000.00 to be paid first from the proceeds of sale of my car” would be a demonstrative bequest.
Unlike a “bequest”, a “devise” refers to a testamentary gift of real property. Society and the law have long distinguished between real property and personal property. This can be seen, for example, in the traditional availability of specific performance as a remedy for breaches of contracts involving real property. In such situations, real property was accepted as something unique enough to require specific performance, rather than mere monetary damages.
The primacy of real property over personal property can equally be seen in estates law in situations where there are insufficient assets in the estate to satisfy all debts, bequests, and devises. In such a situation, the principles of abatement provide the following order of abatement: general bequests, demonstrative bequests, specific bequests, and finally devises.
To learn more about the principle of abatement, see this recent blog.
With the continuing distinction between real property and personal property, the difference between devises and bequests remains important. Which brings us back to the title of this blog; Can you bequeath your home to a stranger in Ontario? Nope, that would be a devise.
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Today on Hull on Estates, Jonathon Kappy and Umair Abdul Qadir discuss vacant possession of real property belonging to an estate and the recent decision in Filippelli Estate v Filippelli, 2017 ONSC 4923.
You can read more about this decision on our blog here.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
We have previously blogged about the limitation period that applies to claims for dependant support under Part V of the Succession Law Reform Act (“SLRA”), and the circumstances in which the Court will exercise its discretion to extend the period.
In the recent decision of MacDonald v Estate of James Pouliot, 2017 ONSC 3629, the Honourable Justice Nightingale considered whether the limitation period could be extended for a dependant’s support claim where the real property owned by the deceased had already vested in a beneficiary, by operation of section 9 of the Estates Administration Act.
Limitation period for dependant support claims
Under subsection 61(1) of the SLRA, no application for dependant support can be made more than six months after probate has been granted.
However, subsection 61(2) provides the Court with the discretion to allow an application to be made at any time “as to any portion of the estate remaining undistributed at the date of the application.”
As we have previously blogged, the Court has generally interpreted section 61(2) to allow claims that are made more than six months after probate as against the assets that remain undistributed as of the date of the application. In one recent decision, the Court granted leave even though the assets of the estate had been distributed due to the conduct of the estate trustee.
The issue in Pouliot
In Pouliot, the Applicant (“Mary”) was in a common-law relationship with the Deceased for 22 years. The Deceased died intestate on September 10, 2013.
The primary asset of the Estate was a house (the “Home”) that Mary and the Deceased purchased together in 1999. Although each contributed to half of the cost of the Home, title to the Home was in the name of the Deceased. The Court found that Mary and the Deceased shared the expenses of the Home during their relationship. Following the Deceased’s death, Mary continued to live at the Home and made all of the monthly mortgage payments on the Home.
As the Deceased died intestate, and given that common-law spouses do not inherit on an intestacy, the Deceased’s son was the sole beneficiary of the Deceased’s Estate. The Deceased’s son (the “Estate Trustee”) obtained probate on June 8, 2015. Mary commenced her Application on November 10, 2016, seventeen months after probate was granted.
Mary’s Application sought a declaration that she had an equal interest in the Home by way of a constructive or resulting trust. Mary also sought support as a dependant pursuant to Part V of the Succession Law Reform Act. The Estate Trustee opposed Mary’s Application, arguing that it was statute-barred due to section 61 of the SLRA and section 9 of the Estates Administration Act.
Under section 9(1) of the Estates Administration Act, real property that has not been disposed of, conveyed to, divided or distributed amongst the persons who are beneficially entitled to it within three years after the death of the deceased owner automatically vests in such persons. Mary’s Application was commenced more than three years after the Deceased’s death.
In the circumstances, although Mary was successful in her claim that she held an equal interest in the Home, Justice Nightingale held that “the applicant’s SLRA claim in this proceeding is barred as it relates to the only property of the estate that has already vested in the respondent….”
The Court concluded that there were no assets in the Estate against which an order for support could be made in Mary’s favour.
Thank you for reading,
Umair Abdul Qadir
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The recent Ontario Superior Court of Justice decision of Zecha v Zecha Estate, 2017 ONSC 1972, 2017 CarswellOnt 4882, raises the issue of how separation agreements ought to be interpreted in circumstances where one party to the contract has predeceased the other.
In this case, a separation agreement was entered into by the plaintiff and her husband, who had since died. With respect to the sale of the couple’s matrimonial home, the separation agreement, dated May 31, 2012, stipulated as follows:
- The plaintiff and the deceased would advise one another of all offers to purchase the matrimonial property;
- If the plaintiff received an offer to purchase the property for less than $1,500,000.00, the deceased could require that the plaintiff accept the offer, but, upon compelling her to do so, would be responsible for paying any shortfall between the sale amount and $1,500,000.00;
- If the property had not been sold within 18 months of the date of the agreement (and the plaintiff had not declined an unconditional offer to purchase the property for a price higher than $1,500,000.00):
- The deceased would assume carriage of the sale;
- The plaintiff would cooperate with the sale process and sign any documents to give effect to the sale; and
- If the property sold for less than $1,500,000.00, the deceased would be responsible for any shortfall between the purchase price and $1,500,000.00.
The plaintiff listed the matrimonial property for sale on October 29, 2012. On April 30, 2014 (23 months after the execution of the separation agreement), the plaintiff entered into an agreement of purchase and sale, and sold the property for $1,180,000.00. There was no evidence before the Court that the plaintiff had advised the deceased that she had received or accepted an offer to purchase the property for less than $1,500,000.00. The deceased died on November 28, 2014, and the plaintiff commenced proceedings against the deceased’s estate for the difference between the sale price of $1,180,000.00 and $1,500,000.00, relying upon the terms of the separation agreement.
At trial, the plaintiff submitted that, pursuant to the terms of the separation agreement, she was entitled to $320,000.00, representing the difference between the sale price of the property and $1,500,000.00, because the property had been sold more than 18 months from the date of the separation agreement. The deceased’s estate asserted that the plaintiff could not enforce the terms of the separation agreement, as she had not complied with its terms as to which party would control the sale of the property if it took place more than 18 months after execution of the separation agreement. Pursuant to the separation agreement, the deceased was only responsible for paying the shortfall if (a) he had compelled the plaintiff to accept an offer to purchase the property for less than $1,500,000.00 within 18 months of the date of the separation agreement, or (b) he had assumed control of the sale of the property 18 months after the date of the separation agreement and accepted an offer to purchase the property for less than $150,000.00.
The Court found that the separation agreement was a properly executed contract and should be interpreted as a whole, giving meaning to all of its terms and avoiding an alternative interpretation that would render a term ineffective (in a manner consistent with commercial law principles). Accordingly, the Court dismissed the action, declining to order payment of the $320,000.00 shortfall by the estate to the plaintiff. The Court stated that the plaintiff had interpreted the terms of the contract too narrowly, in an attempt to obtain a greater payout from the proceeds of sale of the matrimonial property. The Court found that, pursuant to the separation agreement, the deceased had a clear right to decide if an offer to purchase the property for less than $1,500,000.00 would be accepted at the time of its sale, being more than 18 months after the execution of the separation agreement, and the plaintiff could not rely upon the corresponding provisions of the separation agreement.
Circumstances like these, in which one party to a separation agreement has died and the assistance of the Court is required in interpreting the contract for the purposes of considering a claim made (or if an entitlement is apparently limited) under the contract, are not uncommon. It can be important for estate lawyers who may encounter this issue to understand how separation agreements are most likely to be interpreted by the courts.
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In a recent decision of the Queen’s Bench of Alberta, Verhulst Estate v. Denesik, 2016 ABQB 668, the Honourable Madam Justice Shelley considers whether a tenant in common can acquire another tenant in common’s interest through adverse possession.
Given the limited case law on this issue in Alberta, Madam Justice Shelley reviews the existing case law in the other Canadian provinces, including Ontario.
Mr. Denesik and Mr. Verhulst, were business associates who acquired three parcels of land as part of a joint venture in 1995. The parcels consisted of a 159 acre woodlot (the “larger parcel”), and two smaller river lots totalling 96 acres (the “river lots”). Denesik and Verhulst held title to all three parcels as tenants in common.
Denesik and Verhulst began logging the three parcels, and the proceeds from the logging operation were used to pay off the mortgage secured against the parcels. The logging operation ceased in or around 1996. Shortly thereafter, Denesik moved a mobile home onto the larger parcel. Denesik did not pay anything to Verhulst for his use and occupation of the property, however, he did pay the property taxes up until 2015. Verhulst lived in the city with his family, and held his interest in the parcels as an investment without in any way occupying the parcels.
Verhulst passed away in 2008. Verhulst’s Estate applied for an order of partition and sale in relation to the three parcels. Denesik then applied for a declaratory judgment for title to the land, based on a claim in adverse possession.
At First Instance
The matter was heard at first instance by Master Schlosser, who concluded there was no time at which Verhulst was dispossessed and Denesik ’s action of putting a trailer onto a portion of the larger parcel in 1996 was insufficient to establish a claim to the entirety of the larger parcel, much less the river lots [See, Denesik v Verhulst Estate, 2016 ABQB 36].
Denesik appealed the decision. The main issue for consideration on the appeal, not specifically addressed by the lower court, is whether a tenant in common can acquire another tenant in common’s interest through adverse possession.
Justice Shelley noted that Alberta was the only province in Canada (with the exception of Quebec) which did not have specific legislation enabling an adverse possession claim.
In Ontario, s. 11 of the Ontario Real Property Limitations Act, R.S.O. 1990 c L-15, provides a legislative scheme, which sustains adverse possession claims as between joint tenants or tenants in common [para 32]. See, Zigelstein v. Stobinski (1985) 51 O.R. (2d) 562.
In the absence of legislation enabling adverse possession in Alberta, Justice Shelley was required to consider the issue in the context of the Torrens land titles system. Ultimately, she found that given Alberta’s lack of explicit authorization for a claim between tenants in common, it would be extremely difficult if not impossible, to establish such a claim in Alberta [para 51].
Citing the Ontario decision in Zigelstein, Justice Shelley went on to say that even if an adverse possession claim is possible, for it to succeed, it is likely that the actions of one tenant in common would need to arise to the level of something akin to ouster. Not wishing to make use of the property does not equate to an intention to abandon ownership.
Justice Shelley dismissed the appeal, stating that Verhulst’s indifference arose out of his intended use of the parcels of land as an investment vehicle, and was not an indication that he had given up possession or an ownership interest.
Find this topic helpful? Please also consider these related Hull & Hull LLP Blogs:
- Joint Tenancy, Survivorship and Adverse Possession
- Severance of a Joint Tenancy by Course of Dealing
- Partition and Sale
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Proposed Changes to the Land Transfer Tax Act
The Ontario government introduced Bill 70, Building Ontario Up for Everyone Act (Budget Measures), 2016 (“Bill 70”) for first reading on November 16, 2016. It is currently in its second reading. Bill 70 is an omnibus act that includes significant changes to the Land Transfer Tax Act (LTTA). This change applies only to the Ontario legislation, and does not affect Toronto’s Municipal Land Transfer Tax by-law, which imposes a tax on Toronto transfers in addition to the Ontario land transfer tax.
Once passed, Bill 70 will change the Land Transfer Tax (LTT) rates for commercial property transactions after January 1, 2017 for property exceeding the value of $400,000. The increased rate will not apply to single family homes. Bill 70 does include a grandfathering clause, so the new rates will not apply to agreements of purchase and sale made before November 14, 2016.
Will these changes affect estate administration?
Most simple estates, which may include properties such as a family home or a cottage, will remain unaffected by these changes. Estates with commercial properties may be affected by the increased rates.
Not all transfers of estate property attract LTT. If the real property is gifted directly to one or more beneficiaries under the terms of a will, then no land transfer tax is payable under the LTTA. Likewise, if real property is transferred to a beneficiary to satisfy an interest on an intestacy, no tax is paid pursuant to the LTTA. It is important to note that whether or not land transfer tax is payable under the LTTA, a Land Transfer Tax Affidavit must be completed.
If real property is sold to a third party for the purpose of paying debts or distributing the proceeds between one or more beneficiaries, land transfer tax must be paid under the LTTA. After January 1, 2017, the value of commercial real property over $400,000 will be taxed at 2%, up from 1.5%. If the estate is in a position to close a commercial property transaction before the year end, it may possible to avoid this rate increase.
You can read the proposed changes to the LTTA and to check on the status of Bill 70 at the Legislative Assembly of Ontario website.
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The transfer of real property is one issue that often arises in estate matters. However, it is when real property has not been transferred to entitled beneficiaries within three years of the date of death of the owner of the property that the beneficiaries may require the assistance from an estate lawyer to have the property transferred to him or her.
Section 9(1) of the Estates Administration Act (the “ETA”) provides that real property not disposed of, conveyed to, divided or distributed among the persons beneficially entitled to it within three years after the death of the deceased shall vest in the persons beneficially entitled to the property. Simply put, if an estate trustee does not deal with real property owned by an estate within three years of the date of death then the real property will vest in the beneficiaries of the estate or in those who the testator specifically gifted the real property to in his or her Last Will and Testament.
While vesting can occur automatically where the deceased died intestate, that is not the case where the deceased died leaving a Will. Where the deceased died testate, Section 10 of the ETA provides:
- Nothing in section 9 derogates from any right possessed by an executor or administrator with the will annexed under a will or under the Trustee Act or from any right possessed by a trustee under a will.
A review of the case law on this issue suggests that where an estate trustee has the implied or express power to sell or convert real property at such times and in such manner as he or she sees fit, section 10 of the ETA will prevail and render section 9 of the ETA inoperative. However, consideration must be given to whether the deceased intended for the estate trustee named in their Will to have the authority to deal with the real property beyond the three year limit set out in the ETA.
Accordingly, when considering whether to seek a vesting order on behalf of a beneficiary, it is important to review the terms of the testator’s Will to determine what authority was granted to the named estate trustee with respect to real property and whether the testator had any specific intentions regarding the estate trustee’s discretion to delay the exercise of such authority.
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The doctrine of constructive trust was recently applied earlier this year to register a transfer of a parking space to an applicant who entered into an agreement of purchase and sale of a condominium in 1997.
In Chopra v. Vincent, 2015 ONSC 3203, the Applicant Chopra agreed to purchase a condo from the Respondent Vincent on June 30, 1997. The Agreement of Purchase and Sale between the parties expressly provided for the purchase of a condominium unit and a related parking space. Since 1997, the Applicant Chopra lived in the condo unit, parked in the parking space, and paid related expenses such as common area charges and property tax.
18 years later, the Applicant discovered that the lawyers for the vendor and purchaser neglected to include a transfer of the parking space which has a separate PIN from the condominium unit. Once discovered, the Applicant Chopra sought a declaration of his ownership of the parking space in order to sell the parking space along with the condominium unit while the Respondent Vincent could not be located.
The Court found that equitable title to the parking space was transferred to the Applicant, notwithstanding the inadvertence of the legal transfer of title, on the basis that the Applicant had paid the agreed purchase price in full consideration for a transfer of the condominium unit and the parking space.
According to Justice Dunphy,
“The right of a beneficiary of a constructive trust to enforce his or her title as against the trustee is governed by the Real Property Limitations Act, R.S.O. 1990, c. L-15 (the “RPLA”): McConnell v Huxtable, 2014 ONCA 86 (CanLII). Section 2(1)(a) of the Limitations Act, 2002 provides that it does not apply to a proceeding to which the RPLA applies. Under the RPLA, there is a ten year limitation period (RPLA, s. 4) for an action to claim an interest in land. However, where the interest in land claimed is an equitable title under a constructive trust, the limitation period is subject to the principle of discoverability (McConnell v. Huxtable, supra, at para. 53-54) or possibly is governed by s. 5(1) of the RPLA and only begins to run from the time of dispossession (which has not occurred). In either event, there can be no question of the limitation period having run since the applicant has not been dispossessed and only discovered the error in connection with preparing to sell his condominium over the past few months and has acted promptly.”
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Today on Hull on Estates, Paul Trudelle and Noah Weisberg discuss the recent Ontario Court of Appeal decision of Mroz v. Mroz, departing from the decision by the Superior Court of Justice, with respect to the application of Pecore in transfers of real property between a parent and their adult child.
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The Earl of Spencer (the late Princess Diana’s brother) recently sparked controversy when he announced his intention to leave his 90-room stately home, Althorp, to his son, Louis. Louis is the Earl’s only son, however, he is the youngest and but one of the Earl’s four children.
In leaving Althorp to his only male heir, the Earl of Spencer is keeping with the British tradition of primogeniture, being the practice of leaving one’s real property to the eldest male heir.
Historically, the principle of primogeniture was introduced to prevent the subdivision of large family estates and to reduce the sale of properties, for example, where two children inherited the family home but one child was unable to financially buy out the other child’s share. This ensured that large estates remained intact and within the family. Recently, however, the subject has become quite a controversial issue in Great Britain.¸More and more, aristocratic women are protesting the principle’s application, arguing that they are no less capable of managing the family’s fortune than their younger brothers.
Indeed, the royal succession rules were recently changed by the Succession to the Crown Act, 2013, which was passed by the Parliament of the United Kingdom. This act replaced male preference primogeniture with absolutely primogeniture for those born in the line of succession after 28 October 2011. This means that the eldest child, regardless of gender, will now precede his or her siblings to inherit the crown.
However, the principle of primogeniture still carries weight in relation to real property in the United Kingdom. As such, given the Earl’s announcement, it would appear that Louis’ older sisters, Lady Kitty, Lady Eliza and Lady Amelia, will miss out on inheriting the family estate.
In Canada, the principle of primogeniture was abolished by the 1852 Act of 14-15 Victoria, c. 6; (C.S.U.C., c. 82) commonly known as the Act Abolishing Primogeniture (the “Act”). Initially there was some confusion as to whether that Act applied only to determine who the heirs were upon an intestacy or whether it applied also to determine who the heirs were in the case of a testamentary devise to “heirs” (see Tylee v. Deal (1873), 19 Gr. 601). It was concluded, however, that the principle of primogeniture was abolished with respect to testamentary devises as well. As such, in Canada, “heirs” when used by a testator in his or her Will no longer refers only to the eldest son but to his brothers and sisters as well (see Baldwin v. Kingstone (1890), 18 O.A.R. 63).
Accordingly, no matter where the testator lived prior to death, if he or she leaves behind any real property (land and buildings) located in Ontario, that property will be subject to Canadian law and, in Ontario, the provisions of the Succession Law Reform Act. As it stands, this legislation does not expressly support the preference of one’s male heir over his or her female heirs.
While a testator does have testamentary freedom to leave property to a male heir by the terms of his or her Will, the Court does have discretion to alter the terms a Will where it does not make adequate provision for the testator’s spouse and/or dependants.
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