Helping your kids buy their first house? Read this first!
The Vancouver housing market is out of reach for many millennial who increasingly rely on their parents to help finance their first home purchase. In Villeneuve v. Agnew, 2018 BCSC 546, Mr. Justice Verhoeven highlighted the risks that a parent faces when helping a child purchase their first house.
In Villeneuve, an ex-girlfriend filed a family law claim seeking a share in property registered in her mother-in law’s name. The ex-girlfriend and her spouse, Mr. Agnew, resided in the property from 2014 – 2016, raising their two children there.
The mother in law brought an application to court to dismiss the ex-girlfriend’s claims against her and require the ex-girlfriend to pay security for costs in the event she is not successful at trial.
The mother in law’s position was that the spouses were simply tenants of the property while the ex-girlfriend contended that she was led to believe they would have an ownership in the property and that they contributed to the construction of a house on the property.
The parties applied for a determination of the issue by way of summary trial on affidavit evidence alone.
Mr. Justice Verhoeven held that there were significant disputes about the facts that could not be determined on the materials before him. He found that a significant body of evidence must be considered before a decision could be made.
The mother in-law also sought security for the costs associated with going a 5 day trial in the amount of $33,460. Mr. Justice Verhoeven reaffirmed the BC Supreme court’s holding in Siddoo v. Siddoo, 2006 BCSC 445 that security for costs against plaintiffs other than corporations is only ordered in special circumstances. He ultimately held that security for costs is not warranted and that if the ex-girlfriend was required to pay the costs sought, her claim would not be heard. He held that when the relevant considerations are balanced, the factor of access to justice outweighs the concern that the mother will not recoup her costs if she successfully defends the action.
Mr. Justice Verhoeven dismissed the application for summary trial and security for costs, necessitating a full trial on the merits.
The take away message from this case illustrates the importance of seeking independent legal advice before entering into an arrangement with a child to help finance their first home purchase. Often these arrangements are entered into without thought as to what might happen when the relationship breaks down.
A previous decision from the BC Court of Appeal also provides a sobering look at a parent’s contribution to a child’s first home. In Cabezas v. Maxim 2016 BCCA 82 where a spouse’s parents made a significant contribution to discharge a mortgage on their son’s family home. Later, the parents tried to argue that the contributions were in fact an advance on their son’s inheritance and should be excluded from the division of family property.
In Cabezas, the Court of Appeal held that the question of whether the money advanced for the purchase of the home was a gift or a loan depends on the donor’s intention at the time the money was advanced. A three panel of justices from the Court of Appeal held that the decision of the mother to treat the contribution to the mortgage as an advance on inheritance did not nullify her initial intention to make a gift. Essentially, in-laws cannot claim later that the initial gift to the spouses was in fact a loan when they spouses later separate. The appeal of the judge’s decision to divide the family property equally without considering the mother in law’s contribution was upheld.
Before helping your children with their first asset purchase, its important to get legal advice and get an agreement in place to make sure all parties to the transaction understand the legal consequences of the contribution. Without that, parents may find themselves involved in a prolonged family conflict.
For more information, check out our free consultation form.