QUICK HITS

• An Ontario joint title holder sought a court order to sell a property registered in her name and her former sister-in-law’s.
• When respondent separated from her spouse and three mortgage payments were taken from the applicant’s account, the applicant first tried to be removed from title and mortgage, then applied to sell the property.
• The court found it unfair and oppressive to order a sale of the property since the applicant was not entitled to any of the sale proceeds and the respondent wanted to continue living there.

With the high cost of real estate in Ontario, homebuyers sometimes recruit assistance from friends and family members by agreeing to be registered as joint title holders for financing purposes. Depending on their particular situation and agreement,  they may be a “bare trustee” without any rights to sell the property if circumstances change later on.

In Weise v. Weise, the applicant sought a court order to sell a property in Sault Ste. Marie, Ontario that was jointly registered in her name with her former sister-in-law.

In 2006, the respondent began to rent the property, which backed onto her childhood home. She met the applicant’s brother (TW) in 2007, and he moved into the property with her. The respondent and TW married in September 2009.

In 2011, the respondent and TW sought out financing to buy the property from their landlords. However, they couldn’t get jointly approved for a mortgage due to their credit standing. The mortgage lender recommended TW ask his sister, the applicant, to assist.

Agreement made as joint owners

The applicant agreed to be the bare trustee of the property and that her sister-in-law would be the beneficial owner. The two parties entered into a written trust agreement and were registered as joint owners of the property.

The applicant and her sister-in-law also entered into a mortgage as joint mortgagors. The respondent was to be responsible for all expenses under their trust agreement.

TW and the respondent used a lawyer for the purchase. In his reporting letter, the lawyer stated that since the applicant was “a mere guarantor and not a trust owner other than for the purposes of the lender, we prepared a simple trust agreement between the parties to reflect this.”

After the purchase, the respondent and TW opened a joint bank account from which the mortgage payments were drawn during their marriage. The applicant made no financial contribution to the property during the respondent’s marriage to her brother.

A turn of events

In January 2021, the respondent and TW separated and TW vacated the property. The respondent remained responsible for the household maintenance and cost.

The applicant was unhappy after three mortgage payments were taken from her personal account by the lender when the respondent’s account had insufficient funds. She was repaid by the respondent but demanded that her name be removed from the title and mortgage.

The respondent contacted the mortgage lender about the required steps necessary to remove the applicant’s name from the mortgage and title. However, the mortgage company advised that they required a separation agreement to be drafted before such refinancing could be considered.

Not pleased with the delay, the applicant applied under the Ontario Partition Act for an order directing the sale of the property.

Bare trust formed even without signed agreement

Section 3(1) of the Partition Act states: “Any person interested in land in Ontario, or the guardian of a minor entitled to the immediate possession of an estate therein, may bring an action or make an application for the partition of such land or for the sale thereof under the directions of the court if such sale is considered by the court to be more advantageous to the parties interested”.

The respondent opposed the application as she had a connection to the property and wished to keep it. She had paid TW a “buy-out” for all joint property and had sought financing to ensure the home could be transferred into her name. She blamed the applicant for moving precipitously before a formal separation agreement and divorce from TW could be completed.

At the hearing in 2023, only an unsigned copy of the trust agreement was filed since a signed version couldn’t be found. However, the parties agreed that the trust agreement had been fully executed at the time of purchase in 2011.

Even though a signed copy of the trust agreement could not be located, the court noted that a bare trust may be formed without the requirement of a written document provided that the requirements to settle a trust are met: 1. intention to create a trust, 2. identification of the specific subject matter of the trust, 3. identified beneficiary of the trust and 4. transfer of the trust property to the trustee: White v Gicas.

Applicant not entitled to compel a sale

The court reviewed the wording of the lawyer’s reporting letter and found it was never intended for the applicant to have any beneficial ownership of the property and that her involvement was related to securing financing. The trust agreement gave no independent powers, discretion or responsibilities to the applicant, and she could not convey or encumber her interest in the property without written consent of the respondent.

The court also noted that the trust agreement provided that the respondent was the beneficial owner and the applicant would have no entitlement to possession and/or any of the proceeds of disposition concerning the property. The respondent was to be responsible for all expenses. The applicant’s relief from liability was indemnification from and to be saved harmless by the respondent only.

No term permitted her to seek partition and/or sale of the property. In the court’s view, it was the applicant’s choice to assist her brother and the respondent and she agreed to be a bare trustee rather than a joint owner with rights, powers and obligations. 

In the end, the applicant was not entitled to compel a sale since she was not entitled to the immediate possession of the property under 3(1) of the Partition Act. As well, the respondent was taking steps to resolve the issues arising from the breakdown of her marriage to TW. This was taking time, and there was no evidence provided to indicate that the time taken to date was unreasonable in the circumstances.

“Unfair and oppressive to order a sale”

The court also found that it would be unfair and oppressive to order a sale of the property in the circumstances since the applicant was not entitled to any of the proceeds of the sale and the respondent wanted to continue living in the home as she had since 2007.

The lender had advised that the applicant could be removed from title and the encumbrance once the separation with TW was finalized. In the meantime, the court did not consider a sale to be more advantageous to the parties, so the application was dismissed.

This decision demonstrates the potential issues that may arise when someone agrees to become a bare trustee. What may seem like a kind and generous gesture at the time may result in long-term commitments that are difficult to end. However, there wasn’t any evidence of incurred or anticipated harm to the applicant since no claims for indemnification were being made. In the application judge’s words, the applicant’s request for relief under the Partition Act was “putting the cart before the horse,” to potentially satisfy a judgment that did not exist.