It is natural for parents to want to help their children. This can be exercised in a number of ways, from helping children with education costs to helping them obtain a home. While it’s wonderful to be able to provide financial help to those you love, it is important to think of the legal implications that arise when money or given or lent to children or other family members. Two Ontario parents recently learned this the hard way in a case (Rotstein and Rotstein v. Magerman and Rotstein) heard before the Ontario Superior Court of Justice.

The loan

The defendants were married on March 28, 2004. They separated 11 years later on May 13, 2015. Before getting married they purchased their matrimonial home. The purchase was made on July 14, 2003. The mortgage was registered on the same date. The parents of the wife had loaned the defendants $318,000 for the purchase of the home by way of a mortgage without interest and payable on demand. The provisions of the loan were as follows:

(a) Provided that in the event the mortgagors sell, transfer or otherwise dispose of the charged property or any portion thereof or any interest therein, the principal sum hereby secured shall immediately become due and payable, together with any penalties set out herein.

(b) Provided that if both chargees should die, then this mortgage shall be considered paid in full and the estate trustee of the last surviving chargee should issue and register a cessation of Charge.

(c) Provided that the mortgagors, when not in default, shall have the privilege of paying the whole or any amount of the principal sum at any time or times without notice or bonus.

The defendants did not make any payments on the loan, nor was any written acknowledgement provided to the parents regarding it.

Demand for repayment

The parents did not demand repayment of the mortgage until July 31, 2015, two months after the couple separated. This was also 12 years after the loan had been made. The wife was in sole possession of the home at the time of the hearing. The wife’s argument was that the parents’ claim should be dismissed because it was statute-barred, having arisen more than 10 years after the mortgage was executed and registered. The wife sought summary judgment dismissing the action.

The law

Ontario’s Real Property Limitations Act states,

“No action shall be brought to recover out of any land or rent any sum of money secured by any mortgage or lien or otherwise charged upon or payable out of the land or rent, or to recover any legacy, whether it is or is not charged upon land, but within 10 years next after a present right to receive it accrued to some person capable of giving a discharge for, or release of it, unless in the meantime some part of the principle money or some interest thereon has been paid, or some acknowledgment in writing of the right thereto signed by the person on whom it is payable, or the person’s agent, has been given to the person entitled thereto or that person’s agent, and in such case no action shall be brought but within 10 years after the payment or acknowledgment, or the last of the payments or acknowledgments if more than one, was made or given.”

While there have been some exceptions to this rule, such as a mortgage explicitly not requiring repayment until 10 years have passed, nothing in the present case existed to convince the court that the parent’s claim should not be statute-barred.

As a result of the parents waiting more than 10 years following the cause of action (registration of the mortgage), their claim was dismissed via summary judgment.

At Arbesman Hamilton LLP we have a wealth of experience in helping our clients with their estate planning needs. We understand the importance and value of helping plan for the financial security of your family. We help our clients by proactively addressing areas of risk with the goal of reducing the likelihood of conflict down the road. You can contact us online or by phone at 416.481.5604 to get help with all of your estate planning questions.

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