Who owns a property is solely purchased by one spouse but is held jointly by both spouses? 

Who owns a property is solely purchased by one spouse but is held jointly by both spouses? 

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In the recent decision of Kennedy v. Smith, 2002 BCSC 1622 the court addressed this question. In this case, one party (Ms. Kennedy) claimed that she was in a spousal relationship for 20 years. The other party (Mr. Smith) denied that the parties were in a spousal relationship.

Interestingly, however, Mr. Smith had purchased a home using a $25,000 down payment sourced from his own funds, and he also solely paid the deposit. The purchase price of the home was $490,000 and a mortgage was taken out against the home in the amount of $488,982.58. The title to the home and the mortgage was registered to both parties. Mr. Smith claimed that he made all mortgage payments on the home. Ms. Kennedy testified that she paid some utilities to the home.

Ultimately, the court found that the parties were not in a spousal relationship which meant that Ms. Kennedy was not entitled under the Family Law Act to make a property division claim.

The court also helpfully summarized the law on the topic of this blog post as is seen below: 

[78]       When a property is purchased by one party but title is held jointly by two parties, there is a presumption that the party providing the purchase funds intended to retain the entire beneficial interest, including the right of survivorship, unless there is evidence to the contrary: McKendry, at para. 36; and Bergen v. Bergen, 2013 BCCA 492 at para. 42.

[79]       The presumption is only invoked if there is insufficient evidence to determine the intention of the transferor on a balance of probabilities: Fuller v. Harper, 2010 BCCA 421 at para. 47.

[80]      In Petrick, I reviewed the three legal scenarios that may arise when a gratuitous transfer of property into joint tenancy is made:

[40]      Not all jointly owned property is subject to a true joint tenancy. Pursuant to the Supreme Court of Canada’s decision in Pecore v. Pecore, 2007 SCC 17 [Pecore], property that is held in joint tenancy can give rise to three potential scenarios in terms of the beneficial interests of the title holders:

a)         A true joint tenancy, in which the joint tenants are each owner of the whole. Each enjoys the full benefit of property ownership and the ultimate survivor will enjoy the whole title for him or herself.

b)         A resulting trust, wherein only one joint tenant has any beneficial interest in the property and the other joint tenant, usually a gratuitous transferee, holds title in trust for the other and has no beneficial interest in the property.

c)         A scenario which is sometimes referred to as a “gift of the right of survivorship,” wherein a joint tenant is gratuitously placed on title and has no beneficial entitlement to the property during the lifetime of the donor, but if the donee survives the donor, the donee will receive the entire property by right of survivorship. In Bergen v. Bergen, 2013 BCCA 492 at para. 37 [Bergen], Newbury J.A. described a gift of the right of survivorship in a joint account as “an immediate gift of a joint interest consisting of whatever balance exists in the account on the transferor’s death, assuming he or she dies first.”

There has been some debate as to whether the inter vivos gift of a right of survivorship as described in Pecore is a new kind of gift, or whether Rothstein J. was simply describing an implied trust when discussing the beneficial entitlement that arose on the facts in Pecore: Michael Welters and Emma McArthur, “Pecore’s Troubles”(2010) 29 Est. Tr. & Pensions J. 139 at 156–157; Donovan Waters, “Sawdon Estate v. Sawdon: The Ontario Court of Appeal Rejects the Existence of Any Pecore Confusion” (2015) 34 Est. Tr. & Pensions J. 113 at 117–118. Either way, post-Pecore, it is possible for a donor to make a gratuitous transfer into joint tenancy which will be an immediate inter vivos gift but will allow the donor to retain the whole beneficial interest during the donor’s lifetime, and have the property pass to the surviving joint tenant on the donor’s death.

[81]       Mr. Smith gave clear, credible and uncontroverted evidence as to his intentions when he registered the property in joint tenancy with Ms. Kennedy. He did not wish for Ms. Kennedy to have any ownership interest in the Home during his lifetime, but he wished for Ms. Kennedy to inherit the Home on his death. Mr. Smith’s wish to retain beneficial interest in the Home during his lifetime is consistent with the actions of the parties. He was the sole party responsible for making the Mortgage payments, and for negotiating with the bank with respect to the Mortgage, both at the time of the purchase of the property and when the Mortgage came up for renewal. He did not consult Ms. Kennedy before he decided to purchase the Home. Both parties referred to and treated the Home as Mr. Smith’s property, not their collective property.

[82]      The circumstances described by the authors of Waters' Law of Trusts in Canada, 5th Ed. (Toronto: Thomson Reuters, 2021) at Chapter 10.II(6) are an apt description of the legal relationship that arose between Mr. Smith and Ms. Kennedy with respect to the Home, in which Mr. Smith is Party A and Ms. Kennedy is Party B:

If A supplies the purchase money and a legal conveyance is taken in the joint names of A and B, then B during the joint lives will presumptively hold B’s interest in trust for A; B will also presumptively hold his or her right of survivorship — again by way of a resulting trust — for A’s estate, because that right is merely one aspect of B’s legal interest.⁷¹In other words, the presumption (which is rebuttable) is that B holds all of B’s interest on resulting trust for A, or A’s estate if A dies first.

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Alternatively, it may be proven that A’s intention was that B would hold B’s interest for A during the joint lives, but that it was also A’s intention that, should A predecease B, B should take the benefit of the property. The presumption of resulting trust would then be partially rebutted, in relation to the situation of A dying first. Were that to happen, B would not hold his or her interest (now a sole legal interest and not a joint tenancy) on resulting trust. Rather, B would hold it for B’s own benefit; that is to say, after A’s death there would be no trust. If this is the correct interpretation of A’s intention, then during the joint lives, neither party should be able to alter unilaterally the equitable interests that have been created.

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[83]       This arrangement is the third scenario described in Pecore: Mr. Smith intended to retain all beneficial interest in the Home during his lifetime, but wished the Home to pass by right of survivorship to Ms. Kennedy on this death.

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[86]       Notwithstanding these challenges, in this province there is clear Court of Appeal authority for the proposition that one consequence of a transfer of legal title into joint tenancy is that an immediate, inter vivos gift is made of the right of survivorship in property, with the donor of the gift retaining all remaining right and interest in the property during their lifetime: Herbach v. Herbach Estate, 2019 BCCA 370 at para. 39. These are the circumstances that have arisen in this case. Mr. Smith did not create a true joint tenancy when he gratuitously placed Ms. Kennedy on title as a joint tenant. He made an immediate inter vivos gift of the right of survivorship.

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[90]       When the gift of the right of survivorship was made to Ms. Kennedy, she was given the right to receive whatever was left of Mr. Smith’s interest in the Home if Ms. Kennedy succeeded in the “ultimate gamble” and survived Mr. Smith. Nothing remains of that right at this point as the Home has been sold. Much as would be the case if Mr. Smith had given Ms. Kennedy the gift of the right of survivorship in a bank account, and then drained the funds during his lifetime, there is at this point nothing left to pass on to Ms. Kennedy. The gift of the right of survivorship in the Home has no value.

[91]       To be clear, this is not to say that Mr. Smith was entitled to revoke the gift of the right of survivorship in the Home. Like any perfected gift, the gift of a beneficial interest in the Home was not something Mr. Smith could take back. However, what was conveyed to Ms. Kennedy when she was placed on title, the gift of the right of survivorship, is a gift whose value is contingent on a specific series of events occurring. In the circumstances of the events that have occurred in this case, the gift does not have any value.

[92]       As such, I conclude that the entire proceeds of sale of the Home equitably belong to Mr. Smith. No amount is payable to Ms. Kennedy on account of her legal interest as a joint tenant on title to the Home.

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To put it simply, even if the court had found that Ms. Kennedy was a spouse and therefore  entitled to make a property division claim, the court concluded in this case that Ms. Kennedy's claim to the home was only that of the "right of survivorship" which had no value as the house had already been sold.

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If you would like to discuss your family law case, then please feel free to contact me to schedule an initial consultation.

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Link to the full case: https://www.canlii.org/en/bc/bcsc/doc/2022/2022bcsc1622/2022bcsc1622.html