Canadian Lawyer

22 F E B R U A R Y 2 0 1 6 w w w . C A N A D I A N L a w y e r m a g . c o m house now occupied by his parents. Absent were documents outlining any agreement between the couple and the son in relation to the house. Dunphy ultimately decided the ex-wife was entitled to enforce the writ of seizure and sale against the house. Lee demonstrates the need for a clear delineation of the intention of those involved in a real estate transaction at the time it is made. For the lawyer, any men- tion of financial aid beyond the traditional mortgage should trigger a series of ques- tions. "The obligations of lawyers are for- ever expanding," says Fortis, who wants to know if the contribution constitutes a gift or a loan and what the expectations of the family member are. If it's a gift, he will ask the family to draft a letter. The lender pro- viding the mortgage could also require the solicitor to confirm that the down payment is not borrowed money. Fortis may have the purchasers sign a statutory declaration that the money used for the down payment is not borrowed. "If I don't ask the ques- tions, I promise you this: the litigators will." The best source of protection for everyone involved, including the lawyers, is getting it in writing. Yens Pedersen, of Regina's Pedersen Law PC, sees sever- al possibilities where parents help their grown children buy a home. And although it may seem like a pain, the best approach is to anticipate what could happen. That could involve drafting out the nature of the agreement between the family and the purchaser. "I would suggest registering a mortgage on behalf of the parents (if they have loaned money) because the parents should probably protect themselves," says Pedersen. "The parents should probably also include that in their wills." Parents may end up on the title because the child doesn't have enough income to support the mortgage pay- ments. A lender, which is financing a very high portion of the cost of the home, may demand that no other lenders be on title. That's where the gift letter comes in that is signed by all parties. Or the lender might ask for an affidavit that no second- ary financing is involved. That ensures they have legal recourse in the event of complications down the road. "The gift letter is usually done at the time that you're getting the mortgage approval," says Pedersen. When possible, a family member lend- ing money to someone buying a house should demand a secondary mortgage to protect himself or herself in case of financial difficulties or a change in circumstances, such as a divorce. "It's not as convenient. If the child goes to sell the house, that's one more set of signatures to get," says Pedersen. But the child buying the home needs to acknowledge that situations may develop and not expose his or her family members to the possibility of losing their investment. There are also tax implications for a family member going on title. In Ontario, a first-time homebuyer can skirt the land transfer tax, which can be eroded if a parent is on title, assuming they have their own home. In addition, they could be negatively affected by the capital gains tax when it comes time to sell. Fortis tries to minimize the impact of both by reducing the par- ent's share of the home to two per cent, if possible. Family members and the purchaser can plan for the possibility of divorce, REACH ONE OF THE LARGEST LEGAL AND BUSINESS MARKETS IN CANADA! With more than an average of 300,500 page views and 100,000 unique visitors monthly canadianlawlist.com captures your market. FOR MORE INFORMATION CONTACT Colleen Austin: T: 416.649.9327 E: colleen.austin@thomsonreuters.com www.canadianlawlist.com AVAILABLE ONLINE AND IN PRINT

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